At the recent Rio summit (the less than spectacular one) there was some discussion about whether GDP is the best measure of a nation’s well-being … in an age where we are increasingly looking at the negative impact (on the environment) of increased industrial activity.
The World Confederation of Productivity Science has been looking at the same issues for some time and has proposed the establishment of a SEE (social, environmental and economic) productivity index which tempers GDP with social and environmental factors.
It is good to see the rest of the world catching up with our thinking!
You will recognise the 3 word in the title to this post as being …. well, what, exactly? related terms? or synonyms?
If you do a search for these terms online, you can find lots of definitions and lots of ratios … many go which are just plain wrong!
In descriptive terms, efficiency is doing things right … and effectiveness is doing the right things.
In simple ratios … Efficiency = Actual Output / Standard Output (i.e. it measures how good performance is compared to some measure of what the machine or the person or the team should do … in the case of a machine this might be the manufacturer’s specified optimal performance).
Effectiveness = Standard Output / Resources Required (i.e. it measures how well we turn resources into – quality sets of – our planned output)
Then productivity becomes Efficiency x Effectiveness
= (Actual Output / Standard Output) x (Standard Output / Resources Used)
= Actual Output / Resources Used
(This has been a public service refresher announcement!)
It is almost important to run a high productivity company at the moment. The shadow hanging over Europe from the Euro crisis is sucking all the energy out of the European market … and pulling other markets down with it.
We know that we are already in a long-term difficult period … if ‘they’ cannot sort out the Euro soon, this period will just keep on getting longer.
Current ‘strategies’ seem ostrich-like … trying to mask the symptoms whilst failing to address underlying problems.
What we need is decisive action … soon!
Business seems to have lost its ethical context. Business decisions are taken according to whether they are within or outside of legal and regulatory frameworks … not whether they are within or outside of prevailing value sets or ethical frameworks.
If we cannot put ourselves in the shoes of others (and empathise) how can we expect to understand our customers, our suppliers, our stakeholders … and if we can … surely we must have a framework that says we will do nothing that might hurt or offend these groups.
That is what ethics is … an understating of the needs of others and how our actions might impact on those needs.