Leaders focus on effectiveness, and managers focus on efficiency.
By Pearl Zhu, an innovative “Corporate Global Executive ” with more than 15 years of experience in strategic planning, IT, software development and marketing.

Effectiveness and Efficiency are two fundamental goals all businesses over the world are pursuing, however, more often, there're lack of clarify upon their true means and how to achieve them accordingly.

Effectiveness is doing the right things; and efficiency is doing things right. Business must ensure both efficiency and effectiveness, and with agility if you are to be successful. Efficiency is doing things right with minimum inputs and resources (do it right the first time) and effectiveness is doing the right thing by following the principles and leading in the right directions. Managers focus on efficiency, Leaders focus on effectiveness, to ensure business having the vision and well defined goals to reach it; while "efficiency" is the relationship between how much time (or labor) you expected or planned to expend, versus what the actual was. If you expend less time or labor than expected, you were efficient.

Quality (Efficiency + Effeciveness = Q) is doing the right thing right, the first time, with zero backlog and wastage and highest customer satisfaction rate. Generally, you have to have effect first, and then make the effect more efficient. Efficiency means a way to measure how good you are in what you are doing in terms of available resources. Then is a good way to measure the effectiveness and bottom line is the economy. Efficiency is to do what is effective, achieve high customer satisfaction with less operating cost, and achieve good work-life balance for employees using good team work.

Agility (Efficiency, Simplicity, flexibility): Most of organizations think of efficiency as the most beneficial (profitable) means of doing business. Distributing workloads and delegating is often necessary, but many business practices add complexity that inevitably leads to losses, through additional expenses, waiting, bureaucracy, etc. Often such unnecessary complexity becomes obstacle for businesses to response to the changes and lack of flexibility to make alternative options to do the work. At higher mature level, agility is the ultimate goal for business to response to change with speed, and out-beat competitors with capacity.

At some point in the enterprise evolution, business effectiveness and efficiency are also correlated specifically when the organization reaches its capacity. At this point trying to improve effectiveness brings down efficiency and vice versa. The corollary is true as well. Accordingly, the next level should be on effectiveness of improving effectiveness, which could implicitly involve efficiency of improving effectiveness, and ultimately reach the enterprise agility.

Source: Future of CIO