Writing for the online magazine Simplicable, technologist John Spacey defines value creation as “any process that creates outputs that are more valuable than its inputs. This is the basis of efficiency and productivity.”
In my recently released book Stronger Through Adversity, I expand on the view of value creation by linking value to effectiveness. Specifically, I noted:
Productivity is a combination of efficiency and effectiveness. Efficiency reflects a company’s outputs (goods and services) over their inputs (human and material resources).
The higher the outputs relative to inputs, the greater the efficiency of a business. Effectiveness, by contrast, is an external measure of meeting stakeholder needs. A manufacturer could run a very efficient operation (high volume output with low costs for production) and achieve minimal effectiveness if those items produced don’t satisfy the needs of the consumer. The reverse can also be true. The manufacturer could effectively meet consumer demands but be inefficient.
Management consultant Peter Drucker noted, “Efficiency is doing things right; effectiveness is doing the right things.” Since productivity combines efficiency and effectiveness, I’ll modify Drucker’s perspective to read, productivity is both doing things right and doing the right things. So how do you drive efficiency in your organization and effectiveness for that matter?
For me, customer value often is more a function of reducing clutter as opposed to increasing complexity. Clutter removal often involves streamlining cumbersome processes that hamper value delivery. In Stronger Through Adversity, Rob Rosenberg underscored how restrictive policies curb the productivity of well-equipped and talented teams. Rob is the Global Head of Human Resources at DHL Supply Chain, the global leading contract logistics provider. DHL operates 1,400 warehouses and offices, with more than 146,000 supply chain employees.
Rob noted, “As the head of HR, I am always looking at how I can better enable our people. During the pandemic, that enablement involved lessening reporting requirements or approvals and supporting local decision-making. From our board down, we yielded more autonomy to our local teams. For example, in Singapore, our roughly 1,000 employees run vital life science operations, which ensure the distribution of pharmaceutical supplies. Nearly half of that team lives in neighboring Malaysia. During the pandemic, the borders locked down between the two countries. Rather than trying to address that problem remotely, we empowered our local team to take action.”
Rob added, “Within 24 hours of the closure, the team found a way to work collaboratively with governmental agencies, third-party housing partners, and border control authorities. Our Malaysian employees were allowed to reside in Singapore for an extended period. The local team assured safe living and working conditions for our Malaysian employees and operated our life sciences and healthcare distribution without interruption.” Rob’s example demonstrates the need for leaders to challenge policies and procedures that disempower team members or slow business operations. We should see ourselves as enablers, poised to drive needed decision-making to the frontline while removing barriers to effectiveness.
Inspired by Rob’s insights, here are a few challenge questions for you this week:
- Would you consider your business both efficient and effective?
- How are you driving effectiveness? Are you reducing clutter and complexity?
- Are you also looking for ways to streamline the overall real-time decision-making at the front-line?