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Efficiency and Effectiveness Metrics

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  • #43418

    Pradeep Sharma
    Participant

    Is it important to classify metrics in efficiency and effectiveness metrics? If yes, then why? If no, then why do we need to have two different types of metrics, why can not we just go with efficiency metrics as it covers effectiveness as well?

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    #137698

    dangwal
    Participant

    Pradeep – It is generally needed for a process to have both efficiency and effectiveness metrics.
    Effiiciency metrics are from cost / resource optimization perspective (output /input) while effectiveness metrics check how effective the process was in meeting the customer (internal, external) requirements.
    This approach usually helps in striking a balance between cost of the process and extent to which csutomer requirements were achieved.
    Hope this helps, or you may take example of a specific process and we can discuss this further.
    Nitin

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    #137700

    Pradeep Sharma
    Participant

    Nitin, thanks for your inputs. Ok lets take post a process where in we make a sale and get signed contract form from the customer. In this porcess we are measuring 1. Cycle time for Sales Order Closure 2. Subscriber Satisfaction Index 3. % of completed contracts and 4. % of missing contracts. Which one can we classify as Efficiency Materics and Effectiveness Metrics? My second question would be is it important that we have to classify all the metrics in terms of efficiency and effectiveness? How about measuring “Increase in number of sales”?

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    #137701

    dangwal
    Participant

    Pradeep
    Increase in number of sales is not a metric, it is an improvement traget on metric – “number of sales”.
    “number of sales” for a constant number of sales resources committed into the process is an efficiency metric.
    effectiveness metric would need identification of customers (internal and external) for your process. For example if you consider fulfillment department as a customer to sales process then extent to which their requirements (again would need identification and definition) are achived by sales process can be an effectiveness metric.
    As regards to the four measurements you listed, appear to be effectiveness metrics , however you need to identify your customer(s) here, e.g. who gets adversely impacted in case missing % contarcts increases.
    nitin

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    #137702

    Pradeep Sharma
    Participant

    Thanks Nitin, things are taking shape now, but I am still confused, how the type of metrics depends on customer type. Customer might be internal or external, what matters is how efficiently or effectivly we have delivered. Sorry If I am acting dumb over here !!!

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    #137703

    dangwal
    Participant

    Pradeep – my answer must have lacked clarity.
    Actully any process is created to cater to one or more specfic needs of the customer(s). effectiveness is a measure on extent to which process is able to cater to these needs.
    processes do not exist without customers, hence we can not say “what matters is how efficiently or effectivly we have delivered” unless we know to whom the process is delieveing.
    I think GE Called this outside-in approach. COPIS/SIPOC is some more jargon on this concept

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    #137717

    Brit
    Participant

    Nitin’s replies were righ on the mark. We need both metrics.
    Let’s say you were making widgets.  You increased the efficiency of your process by 50%, saving millions in labor, machine, maintenance, and supply costs. But, the parts you made were unacceptable to the customer, so you sold none.  A very efficient process, but not effective.
    Effeiciently says how well your process is designed to make the product/service. Effectiveness is how well you product/service is accepted by the customer (internal or external)

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    #137860

    Romel
    Member

    Effectiveness refers to the internal and/or external customers needs
    Efficiency refers to how well you have optimized your resources in meeting the effectiveness indicators
    Productivity is the ratio of Effectiveness to Efficiency

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    #137879

    Pradeep Sharma
    Participant

    Hi Romel,
    Thanks for the input, would appreciate if you could explain the productivity as ratio of efficieny to effectiveness in more detail with example.
    Regards,
    Pradeep Sharma
     

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