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August 10, 2005

Distinguishing Effectiveness from Performance

First of all, why on earth would anyone care about this difference?

Simple definitions can quickly point out why:

- Performance is a measure of the actual level of achievement compared to the target level of achievement.

- Effectiveness is a measure of the actual level of impact compared to the target level of impact.

The relationship between the two is also logically simple: operations are managed on the basis of achievement generating impact.

For example, an operation might be run on the basis that creating 10 units of something will result in 100% customer satisfaction. But let's look at some possible results:

- If the operation only creates 9 units, it's performance is less than targeted.

- If it creates 10 units but the customer is still not satisfied, then the operation's effectiveness is less than targeted.

We know that these kinds of things happen, and we at least want to be intolerant of them if we can prevent them. So to put a fine point on the significance, let's look at how we respond to those realities.

The pressure point in this comes from the idea of "managing by results". Many management issues are so closely related to "improvement initiatives" and/or to "problem resolution" that it is necessary to know when responsibilities and accountability are being correctly placed or not.

In reacting to situations, error or confusion here can easily lead to counterproductive or even destructive efforts that mismatch the solution approach and the objective. In addition to mistaken responsibility and accountability, using the wrong person, process, or tool to respond to shortcomings generates inefficiency and possibly even collateral damage.

In diagnosing situations, confusing performance and effectiveness can simply, but profoundly, lead to attacking the wrong problem. Let's call this the "shoot the messenger" syndrome. We want operations to be effective above all else, but when effectiveness is lacking, is it because the performance missed its mark, or is it because the defined customer requirements turned out to be unreliable indicators of the true terms of satisfaction? On the other hand, what if effectiveness was sufficient, but performance had actually missed its mark? Let's call this the "house of cards" syndrome. Does the effectiveness mean that the performance mark (i.e., the assumed requirements) is unnecessarily high, or was the occasion merely one of luck?

Again, the pressure on all of this comes from the perspective of "managing by results".

- If the intent of defining and assessing "results" of operations is to drive the next cycle of operations to meet needs and standards drawn from those results, it is important to carefully distinguish when impacts are being specified as opposed to achievements.

- Then, the implied causality of performance driving effectiveness must be frequently reviewed and re-validated.

- Finally, it is crucial for executives and managers in charge to know that they will neither "shoot the messenger for delivering an undesirable message"...NOR build the business as a "house of cards".

Posted by Malcolm Ryder at August 10, 2005 10:26 AM

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