June 5, 2017
“Efficiency is doing the things right; effectiveness is doing the right things”. – Peter Drucker
When it comes to practicing Process Excellence, organisations can simply not ignore the importance of the terms ‘efficiency’ and ‘effectiveness’. Both of these are essential for increasing productivity as well as improving customer service. While these two terms are often used interchangeably, they bear huge differences when considered in the context of process excellence. So, let’s distinguish these two factors and find out how they are related to business process excellence and implementation.
Effectiveness of a process is the measure of how relevant the final output is to the BPI objectives. In order to be effective, a process must deliver desired output while fulfilling the needs of customers in a satisfactory way. To be more precise, a truly effective process will make customers happy by providing everything right – the right results at the right place, time and cost.
Achieving process effectiveness is a thorough procedure that mostly involves:
- Knowing as well as understanding the requirements and desires of customers
- Turning them into measurable targets and expectations
- Making them into reality with proper data collection, drafting of measurement methods and execution
Once the customer needs and expectations are defined and quantified clearly in terms of certain specifications such as delivery format, delivery frequency, etc., it becomes much easier to establish the measurement criteria needed for delivering error-free, high-quality services with great customer experience through robust business process implementation steps.
Effectiveness of a business process can be measured with the following widely accepted parameters. These can help you analyze the effectiveness of your process the best possible way:
- Feasibility of Solution
- Reliability of Solution
- Timeliness of Delivery
- Presentation of Outputs
- Accuracy of Outputs
- Responsiveness of Outputs
- Post-delivery customer service
Process efficiency, on the other hand, is a measurable concept that acts as a vital factor in determining productivity. It is essentially the ratio of ‘useful output to total input’, which ensures resource (mainly cost and time) optimization along with maximum waste reduction.
Efficiency is regarded as a term of paramount importance throughout the business process management lifecycle. Every single process ends up with some issues or gaps over time, which can impact the process efficiency in a negative manner. However in order to get rid of them and be well-organized, a business process must be effective enough.
An inefficient process can affect the entire BPI initiative both externally and internally. While organisations mostly consider the experience of external customers for measuring their process efficiency, there are quite a few vital internal factors that should also be used as measures for this purpose. They are as follows:
- Proportion of Non Value-added activities
- Extended delay time
- Underutilised or over utilised resources
- Lack of skilled people
Recognition of these factors makes the identification of inefficiencies easier and companies can come up with a variety of resolutions:
- Outcome-related improvements (like digitalisation, harmonisation and separation of outcomes)
- Activity-related improvements (like elimination, automation, parallel routing of activities)
- Resource-related improvements (like integration of activities and assignment of resources)
It creates a more manageable environment for the processes to run and the organisations gain a better control over their businesses. As a result, the operational inconsistencies are eliminated and the customers get excellent services. Hence process excellence has been achieved.
A Comparative Approach
As mentioned before, both effectiveness and efficiency are must for an organization to enjoy the business process management benefits and improve the performance of the business as a whole. But to get a clearer view, the terms must be put side by side:
- Process efficiency signifies an optimal (in most of the cases, the fastest or the cheapest) way of operating processes. Conversely, process effectiveness implies executing the right processes and achieving the desired goals.
- Process efficiency is measured from the point of view of achieving the goal of optimal usage of resources (time, cost and effort) in execution of an organisation’s processes. On the contrary, process effectiveness is measured from the point of view of achieving the goal of customer (both internal and external) satisfaction with regards to accomplishment of the process objective.
Apart from these disparities, both efficiency and effectiveness can improve process speed, process flow, on-time delivery, reliability, operating costs, and other process baselines.
Therefore, organisations need to engage their people in doing right things that can turn out to be effective in meeting their functional needs:
- Removing wastes, optimising processes
- Aligning processes, people, systems, and governance
- Assisting in system implementation (gap analysis)
- Increasing accountability
- Determining capacity utilisation
- Reducing employee on boarding time
Then, they need to ensure that those things are done the right way by following appropriate approaches in order to reach their strategic business goals, which are:
- Reducing costs
- Increasing productivity
- Improving customer service
- Creating operational transparency
- Driving continuous business improvement
Thus, both efficiency and effectiveness can be achieved in a business process, which can help enterprises establish perfect baseline measures for the productivity and in turn achieve business process excellence.