Efficiency vs. Effectiveness

Developed by Heiðdís Ósk Pétursdóttir

Abstract

Projects, programs and portfolios are driven by or aligned with organizational strategies and each has their own purpose to achieve strategic goals. Relevant programs and projects are selected with portfolio management, the work is prioritized and required resources are provided. Organizational goals are achieved with project management. One of the keys to success when it comes to the achievement of project objectives is goal setting. When setting a goal, there are two important concepts that one needs to have in mind; efficiency and effectiveness.

Efficiency shows how productively resources are used to achieve a goal and effectiveness is a measure of the relevance of the goal. Efficiency is about doing things right and effectiveness is about doing the right thing.

When working on or managing a project, it is important to be aware of these two concepts in order for the project to be successful. There are five levels of success when working on a project. The project management success implies the efficiency of the project and the project success, or the portfolio management success implies the project effectiveness. The levels of projects effectiveness and efficiency can tell if the project is likely to thrive, or just survive, or if it is more likely to die/fail.

Though project efficiency and effectiveness is important when aiming for success, the concept among project management is somewhat unclear. The concepts are often used in the field of project management, but rarely defined. The scope of efficiency and effectiveness is wide and the two concepts can be used in a lot of different situations. The purpose of this article is to emphasize the importance of the awareness of efficiency and effectiveness when working on, or managing a project. It will dive deeper into the concepts and explain at what stage projects can thrive, at what stage they can survive or whether they are unlikely to survive. It addresses what is good to have in mind before starting a project and how to know if a project that has already been started is effective or efficient, along with ways to increase both effectiveness and efficiency if the project is lacking either one. The author of this article wants you to have in mind that the concepts are wide and can be used in a lot of situation and there is no one way efficiency and effectiveness when working on or managing a project.

Efficiency vs. Effectiveness

It is common to confuse the meanings of efficiency and effectiveness and they are sometimes even considered as synonyms, but the two concepts take on very different meanings. Efficiency and effectiveness are in a way measurements and are often used to measure performance, though they can be used in a lot of different circumstances. In principle, efficiency is about doing things right and effectiveness is about doing the right thing. When looking through the project management lens, efficiency can also be described by performing in the best possible way with the least resources, time and effort. Efficiency would be about achieving a purpose by producing an intended result. So, effectiveness is more about the long-term strategy and the goals, while efficiency is about the process.

How is it relevant for projects, programs and portfolios?

Organizational performance is measured by the effectiveness and efficiency of its managers' work of using available resources to satisfy customers and achieve organizational goals. Projects, programs and portfolios are driven by or aligned with organizational strategies and each has their own purpose to achieve strategic goals. Relevant programs and projects are selected with portfolio management, the work is prioritized and required resources are provided. Organizational goals are achieved with project management. The main purpose of projects is to fulfill objectives by producing deliverables. A project objective is the outcome that is aimed at and a deliverable is defined as "any unique and verifiable product, result, or capability to perform a service that is required to be produced to complete a process, phase, or project". One of the keys to success when it comes to the achievement of project objectives is goal setting and when setting a goal, it is important to have both efficiency and effectiveness in mind.

When working on or managing a project, it is important to be aware of these two concepts in order for the project to be successful. Projects have five levels of success, one of them being project management success, which implies the project’s efficiency. The other four levels; process, product, business and strategic success, will be referred as the project success. The project success implies the project’s effectiveness.

There are a lot of things that can affect the effectiveness of a project. First and foremost, the project must be relevant, i.e. its goals and objectives are aligned with the organizational strategy. Therefore, the project's effectiveness is also in the hands of the portfolio management.

Research shows that a lot of projects fail due do two reasons; project failures, i.e. not doing the project right, and portfolio failures, i.e. not doing the right project.

Why think about efficiency and effectiveness in a project?

There are great ideas everywhere. But one idea might be great for a certain location for example, but not so great for another location. The same goes for projects. A project can have objectives that are really interesting and considered as a great idea by someone, but that someone might not be a customer and the actual customers might not want to buy the outcome. No matter how "great" the objectives are, if they are not aligned with the organizational strategies and goals, they might not be great for this project. That is why it is important to think about project effectiveness.

One of effectiveness pros, is that it can lead to success. But when there are pros, there are usually cons as well. If projects objectives are aligned with organizational strategy and goals, but the strategy and goals are not relevant, the project will most likely not be effective, i.e. customers don't want it. That's why it is also important that the organizational strategy is effective. One example is Nokia's phones. They used to be very effective and efficient, but when they should have been focusing on software, they were focusing on hardware, and did not adopt to the market. Their strategy was lacking effectiveness, and even though they might have been doing things right in order to achieve their goals, they were not doing the right thing. What can be taken from this example? Projects objectives not aligning with the organizational strategy does not always have to equal low level of effectiveness for the project. Effectiveness should not prevent innovation or development. However, it might seem untrustworthy and unprofessional to develop a project that does not adjust the organizational strategy. Project managers should be able to trust that the organization's strategy is relevant, but it is good to have eyes everywhere, and if a project manager sees a new opportunity, there might be time to update the strategy.

For efficiency, if the project is relevant but it is not done the right way, the customer might not want the outcome. It might also be that the customers actually want the outcome, but it is too expensive so they won't buy it. As mentioned before, efficiency is about performing in the best possible way with the least resources, time and effort. If these factors are not taken into consideration, the outcome might be far from what the customer expected. Therefore it is important that the project objectives are clear, and followed thought.

Project efficiency and effectiveness levels

For a project to be at its best it has to be both effective and efficient as previously mentioned. But projects can also be only either one of those or neither. The following examples explain all four cases and it can be good to take a look at Figure 1 while going through the cases.

High effectiveness & high efficiency

Figure 1: Efficiency and Effectiveness, inspired from a lecture in Project Management in DTU.

For a project to thrive, it is important that it is both high in efficiency and effectiveness. In this case right things are being done and things are done the right way. The goals that are set are relevant and right and the resources are used well. This results in a quality output that the customers want and the price is affordable.

• In this case they are driving fast to the right place.

High effectiveness & low efficiency

If a project is effective but it is not efficient, i.e. the project is successful but the project management is unsuccessful, the project can survive. As in the example above, the right goals are set, but in this case things are not done right. The resources are not used quite well which results in an output that the customers want, but is too expensive.

• In this case they are driving slow to the right place.

Low effectiveness & high efficiency

If a project is efficient but not effective, i.e. the project is unsuccessful but the project management is successful, the project not last long and in fact it will die rather quickly. The goals that are set are not right or relevant, but the available resources are used well to achieve the goals, which results in a high quality output, but the customers do not want it.

• In this case they are driving fast to the wrong place.

Low effectiveness & low efficiency

When a project is both lacking effectiveness and efficiency, both the project management and the project are unsuccessful. They are pursuing the wrong goals and using resources badly to achieve those goals. This results in a low quality output that customers do not want.

• In this case they are driving slow to the wrong place.

Application

As mentioned above, project effectiveness reflects in the project success and its efficiency reflects in the project management success. When looking at the project efficiency, we are focusing on the process of the project which relates to the present. When looking at project effectiveness, we are focusing on the achievement of the project goals, or the value of the project, which relates more to the future. As the efficiency of the project has to do with the present, it is common that people find it easier to increase efficiency than effectiveness, as effectiveness is more about the outcome and has to do with the future.

What to think about at the beginning of projects

Efficiency and effectiveness are about comparing something to something else, and therefore comparability is key when applying the two concepts. As mentioned above, it is important to make sure that the project is relevant and the project objectives are aligned with the organizational strategies and goals. Projects need to be constantly monitored, but if the foundation is solid, it will most likely be easier to monitor the project and prevent a lack of efficiency and effectiveness. Following is one way to a foundation for achieving high efficiency level;

1. Objectives:
   The objectives of the project have to be clear to everyone working on the project. It has to be clearly outlined and aligned with organizational goals and strategy. The more clear the objectives are, the more effective they are. One way to make clear objectives is to use the SMART framework; where the objectives must be Specific, Measurable, Achievable, Realistic and Time-bound.
2. Communication:
   The communication has to be effective and the right approaches have to be used to ensure that the goals are understood.
3. Involvement:
   All team members have to be involved as much as possible. It can be really encouraging for the team to participate in decision making and planning when working on the project.

The objectives of a project describe the projects result. As objectives are often associated with metrics, they can be monitored. One idea to track the process when working on the project is using dashboards.

It is also a good idea for project managers to have in mind the PMI Talent Triangle, which focuses on three skill sets; technical project management, leadership and strategic and business management. Technical project management is about the technical aspects of performing the manager's role. Leadership is having the knowledge, skills and behaviors that are needed to guide, lead and motivate the project team and achieve organizational goals. Strategic and business management is about the knowledge of and expertise in the industry and organization that enhanced performance and better delivers business outcomes.

How to know if a project is efficient and effective?

As mentioned above, projects can be monitored by measuring the objectives. Objectives should contain KPI metrics, which should be monitored. KPI stands for key performance indicator and shows performance effectiveness and the efficiency in delivering the outcome. KPIs may vary by projects. One way to estimate project efficiency and effectiveness is to make an assessment table, like the one below, or similar. The table uses customer satisfaction to evaluate effectiveness and resources to evaluate efficiency. This tool makes it easier to see if either needs improvement.

Figure 2: Assessment table

How to increase project efficiency and effectiveness?

As efficiency and effectiveness are often used to measure performance, the performance may not be good if the project is lacking efficiency and/or effectiveness. The improvement depends on what is missing and there is no one way to increase efficiency and effectiveness. However, if the efficiency level of a project is low, improvement is needed for the project to be more successful. But what can be approved? To become more efficient, the system, process or tools have to be improved. A good way to start would be to look into the project objectives or KPIs as discussed in last subsection and check if they are relevant and if they are being fulfilled.

If the effectiveness level of the project is low, the project can easily fail. To increase effectiveness, the most important long-term priorities must be identified. But how to prioritize them? It can be very helpful to use tools to prioritize, and one tool that the author came across is the Eisenhower Matrix, which can be seen in Figure 3. The matrix has two lines (important and not important) and 2 columns (urgent and not urgent). If the task is important and urgent, it should be done right away. If it is important but not urgent, it should be schedule and done later. If it is urgent but not important, it is delicate and one way to "deal with it" is to assign it to someone else. If it is not important nor urgent it should be eliminated.

Figure 3: Eisenhower Matrix

Project team effectiveness is something that might also need improvement. Improving team effectiveness will improve project success. If the team intends to be effective, it will become efficient as well. The first step to increase project team effectiveness is to identify the organizational responsibilities, where the vision is set and mission is created. Next the project manager's responsibilities have to be identified, career path is created and then skills are tied to objectives. The last step is where the responsibilities that each team member has are identified.

Limitations

Though project efficiency and effectiveness is important when aiming for success, the concept among project management is somewhat unclear. The concepts are often used in the field of project management, but rarely defined. The scope of efficiency and effectiveness is wide and the two concepts can be used in a lot of different situations. The author of this article found out that there is no step by step recipe for efficiency and effectiveness, but that is the beauty of it too. Every project has its own way to efficiency and effectiveness. In the author's opinion, the most important thing is to be aware of the concepts at the beginning of a project, make sure it's goals are effective and monitor it all the way to the end.

If the project manager or the project team have not been aware of the concepts and the effectiveness level of the project is low, chances are that the project can not be repaired. As described in subsection Project efficiency and effectiveness levels, if projects lack effectiveness, they are likely to fail. This is another reason why the awareness of the concepts is important.

Annotated bibliography

Following references may be beneficial for further reading on topic addressed in this article.

Sundqvista, E, Backlunda, F, Chronéera, D. (2014, Mar 19th). What is project efficiency and effectiveness?

In this article, Erik Sundqvista, Fredrik Backlunda, Diana Chronéera discuss what project efficiency and effectiveness is. They talk about the concepts and discuss it theoretically with few interviewers. They talk about many interesting points and finish with empiric results and analysis.

Banister-Hazama, D., Moreci, J., & England, K. (2012). Increase project team effectiveness: step-by-step. Paper presented at PMI® Global Congress 2012—North America, Vancouver, British Columbia, Canada. Newtown Square, PA: Project Management Institute.

In this article Banister-Hazama, Moreci & England introduce three steps to increase project team effectiveness. The three steps they write about are the identification of organizational responsibilities, project manager's responsibilities and the responsibilities of each team member. They explain that success is often seen as a team effort, but failure is a result of an individual and more successful projects can be produced by creating more effective teams. They assumes the entire organization will be involved in the effort.

Bridges, J. How to Write Effective Project Objectives Every Time. (2019, Dec 4th). Projectmanager.

This article explains the meaning of projects objectives, why we should care about their effectiveness and how to write effective project objectives. The difference between goals and project objectives is explained, and few types of goals are introduced.

Xebrio. (2019, Aug 14th). The Eisenhower Matrix: The Key to Productivity and Time Management. Medium.

In this article Xebrio dives into the Eisenhower Matrix. The matrix was developed in the 1950s by U.S. president Dwight Eisenhower. The matrix is a decision making tool which Xebrio calls the key to productivity (efficiency and effectiveness) and time management.