Effectiveness & Efficiency

• Organisational performance can be seen as consisting of two dimensions:

– Effectiveness

– Efficiency

Effectiveness

• Effectiveness is the level of results from the actions of employees and managers.

• Employees and managers who demonstrate effectiveness in the workplace help produce high-quality results. Take, for instance, an employee who works the sales floor. If he’s

effective, he’ll make sales consistently. If he’s ineffective, he’ll struggle to persuade customers to make a purchase.

• Effectiveness also refers to a company’s ability to formulate and then achieve its objectives

Efficiency

• Refers to the use of resources (money, time, etc) in achieving objectives

• An organisation is efficient to the extent that it achieves its objectives at the lowest possible cost, using the minimum quantities of resources

• Both concepts can be used as bases on which to evaluate the performance of management

• Look at figure 1.7 on page 22 – ‘Evaluating organisational performance’

Performance Areas

• Performance area – refers to the activities performed by a business that can be measured

– Performance areas typically associated with effectiveness are towards the top of the list

– Those typically associated with efficiency are towards the bottom

• All performance areas can be approached from the point of view of effectiveness and efficiency

Your turn!

In your books define the terms:

– Effectiveness

– Efficiency

– Performance area

Performance Indicators

Performance Indicators

• The concepts of effectiveness and efficiency are a broad basis on which to evaluate organisational success

• More specific performance indicators can be identified in different organisations and for different types of productive activity

• Performance indicators provide more precise and measurable data to evaluate performance and improvement – THESE ARE REFERED TO AS KEY PERFORMANCE

INDICATORS (KPI’s)

• YouTube clip – KPI’s

• http://www.youtube.com/watch?v=4T629Fkq5Ps

• Key Performance Indicators, also known as KPI’s help an organization define and measure progress toward organizational goals

Where do KPI’s fit in the organisation

• Once an organization has analyzed its mission, identified all its stakeholders, and defined its goals, it needs a way to measure progress toward those goals.

• Key Performance Indicators are those measurements.

• KPI’s are also used for benchmarking– Benchmarking: a process in which an organisation compares its own

work outcomes with similar work in other organisations

• Your turn!• Define the terms;

• Key Performance Indicator p.23• Benchmarking p. 24

Complete Activities p. 24• Questions 1 -7 Finish for H/W