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Economy, Efficiency, Effectiveness

In today’s competitive world, it is fundamental to drive a company around the concepts of Economy, Efficiency and Effectiveness. The right balance in implementing those 3E’s, allows any organization to be more flexible and to respond in faster pace to current and future challenges. Many companies loses their sight by focusing only on profitability and short term gains, while under turbulent times such measures lead to higher risks. A business should prefer to focus on long term strategies if they want to improve their overall performance and remain in the market. A good way to steer in such direction is by looking to create and deliver value at any level of their activities. Value itself drives profits, and such profits are funded in sound basis when the 3E’s are developed under the right balance.

Long term economic gains always follow valuable companies. A leader in the market remains in such position when they are able to deliver value at any level; to its customers, providers, and to the many other stakeholders who interact with them. To achieve the right balance of the 3E’s is not always easy. It requires a strong commitment from the firm’s management in order to provide the right quality, at the right cost and with the right amount of innovation. In other words, it means that the services and products should meet such criteria in order to unlock value for the entire company.    

  • Economy – reducing costs of inputs


  • Efficiency – the right effort allocation


  • Effectiveness – to achieve the goals

Value drives profits, is the idea that a company is providing the right products and services with the right amount of quality, and that the prices matches the market expectations. To evaluate the creation of value and the balance of the 3E’s it is important to deploy a specific methodology. It should help to review the amount of value delivered and the indicators on which the business is excelling and the ones that are missing. The procedure is to fulfill a template and then to proceed with an audit that will determine the total score of the organization, giving a clear picture of their 3E’s situation. Such audits should be organized in regular basis at least one by year if the firm is really willing to improve its performance.

A common mistake is to confuse Effectiveness with Efficiency which are different concepts but work complementary in the 3E’s approach. 


Effectiveness should be understood on deliverable basis and the achievement of goals. Its concept works around the fact if an objective was accomplished or not. Doing a good performance in terms of Effectiveness is to deliver on time what was expected. Most directors and senior executives have in charge the responsibility to meet such criteria. If its division, business unit or company is working hard but not delivering the internal requests or the ones of the market then they are not effective. The best way to asses Effectiveness is to set the objectives before the kickoff of a project or activities and see if they were achieved or not under the standards set at the beginning.   


Efficiency on the other hand, states the right use of resources to accomplish a task. It means the wise consumption of inputs on which the work is completed. Once that the goals are attained it is fundamental to see how they can be met with the least effort. Improving Efficiency means that the company is in a trend of reducing wastes and consuming less to deliver the same amount of value. 

A proper way to measure efficiency is by acknowledging the process to complete a task and allocating the right amount of resources. By doing so, the company can estimate if the volume of input was enough or not to complete the activity. Then the results are used to evaluate a new set of inputs that will determine if the amount can be even reduce or requires to be raised. However, Efficiency is not always measured in the amount of resources but rather in the use of the proper practices to accomplish a task. It means if the same amount of resources can be used to accomplish a work load, sometimes the method helps to identify which is best way to work and proceed to deliver under the least possible effort. This concept can be easily understood under the business phrase “don’t work hard, work smart” or “less is more” it conceives; to set priorities, to place the right volume of inputs and to tackle problems in the easiest way to achieve the same result as working hard. 


It covers the financial side on which an activity is achieved. Because we are living under a world in which economics permeates every aspect of our lives, it is fundamental to balance the use of resources to achieve the right goals at the reasonable cost. There is a difference between Efficiency and Economy, the former states the volume of resources and its way of using them while the latter looks more in the terms the cost of them. Money is a type of resource that needs to be allocated wisely in today’s competitive exposure. Under the current free trade scheme of doing business, the offer is wider in terms of labor and commodities so big corporations have access to such advantages. Then competition is fiercely fought locally and internationally so the right cost becomes a critical factor to improve value delivery.

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