Company 3E Measures: Efficiency, Effectiveness and Employee Change22nd November 2020
Effectiveness, Efficiency and Economy management idea can help managers to evaluate performance and then to improve it.
Effectiveness can be explained in terms of what is achieved. It is about whether targets are met or not and whether the right work is being completed. Managers are responsible for making sure that this happens. If a team is working really hard but not delivering what is needed, then they are not effective. Effectiveness is measured by setting out clear objectives before work starts and then evaluating whether the objectives have been met or not.
Efficiency can be measured in terms of the inputs required to generate the outputs. It is about the way in which work is completed. It is part of a manager’s job to help improve efficiency. For example, if the same work can be completed by using less resource or more quickly, efficiency has improved.
Measuring efficiency means that the process followed to complete the work must be defined and then each part of the process studied to see what resources are required. This becomes the starting point or benchmark for measurement.
Future work is then measured against the benchmark to see if it has taken more or less resource. Process changes are also measured to see if they are more or less efficient. It is also useful to measure one team’s efficiency against another and then adopt the most efficient methods as best practice always assuming that effectiveness is maintained.
Economy is the third element of the three Es model, covering the financial aspects of work being done. It could be argued that economy or finance is just one of the factors to consider when improving efficiency, but because finance is so important in organisations, economy has become the third element. Economy is measured by looking at the cost of the resources consumed and the value of the output delivered.
The Best Effectiveness, Efficiency and Economy Mix
It can be very difficult to find the best mix of effectiveness, efficiency and economy as there are so many ways to obtain value. For example:
It may be that the focus is on providing a specific output (effectiveness) for the least cost this may be at the expense of efficiency.
It may be that the focus is on maintaining a particular cost (economy) and producing the best output for that cost.
It is important that the priorities of senior management are established as this will then drive the most appropriate measures to be used and lead to the best effectiveness, efficiency and economy mix. This mix will change over time depending on the focus of the organisation and external factors too.
Every manager can be a better manager and understanding the 3Es Effectiveness, Efficiency and Economy can help improve business performance.
Enhancing customer experience is always a challenge. In order to enhance business performance, organizations have to expand their customer base.
Growth happens only when customer relationships with the organization are robust and satisfied. And customer satisfaction can only be increased with effective CRM in an organization.
But how would one measure the effectiveness of CRM for an organization? Below are some criteria that can be applied:
- Increase in customer retention
- Increase in orders per customer per year
- Increase in average spending per order or visit
- Increase in cross sales
- Increase in up sales
- Increase in reactivation of previous customers
- Increase in referrals of new customers by existing customers
- Achieving each of the above while keeping increased costs (required to make them happen) from offsetting the increased sales
Certainly, all this data can be collected over the years and a trend can be identified to measure the effectiveness of the implemented CRM program. Perhaps other parameters such as increased order per customer, number of orders per year, defections etc. could add to it.
To me it goes beyond that:
- Customer Expectations
Can we bring in customer’s perceptions or their expectations into this calculation? Will there be any effect of these parameters on the overall effectiveness?
E.g.: A organization’s intent might be to provide quick service – say in 5 minutes/customer – but the customer might expect service to take 10 minutes or more than that for it to be performed to his satisfaction.
So here the customer expectation might be different from what the organization is providing/intends to provide.
What has been the customer’s past experience with the organization, and what is his current experience? Perceptions keep changing with each experience. Does every customer carry the same perception every time? Does the organization maintain the same perception each time to keep their customers satisfied and happy?
It is clear that people make emotional decisions based upon experience as described in my previous blog post “Mantra of Growing Business”. Emotions keep changing as per the experience and so does the perception.
Some customers take rational decisions and accordingly their perception changes. So, what emotions do customers carry when their expectations are met, and how can this be measured?
Sometimes, everyday interactions with customers or past history of a customer would help understand a customer better to serve and fulfill their needs. So are organizations tailoring their services in a better way based on this to keep their customers happy?
Customers ‘belief’ in the product/service or overall organization may vary. As mentioned above, “perceptions” would turn into belief if the customer experiences similar service over a period. Customers carry this belief towards the organization and this belief would impact customer relationships and future growth.
The key element how frequently organizations communicate to their customers not only through advertising but also through personal communications. People feel valued if communication happens at a personal level and their opinions are sought and taken into consideration.