31. Peter Drucker in his own words interpreted for small business 3

“Efficiency is doing things right; effectiveness is doing the right things” – you could substitute the words ‘management’ and ‘leadership’ if you want to. And the distinction is critical. Focusing on making a process work smoothly and seamlessly and achieving that can be very satisfying, but if it is not the right process, it will not produce the results.

You might have a great advertising drive, with a good system for handling responses, but if it is not targeted at the right customers with the right message, then its effectiveness will be severely limited. Your restaurant may have got the production of a standard menu to a fine art, with fast service and controlled costs, but if the menu is not what customers want, or the location is not where customers want to go, the results will be disappointing.

So the obvious lesson for small business is to make sure you do your research well: that you identify the right product for the right client in the right place at the right price; that you identify the key factors whether those be marketing factors such as key buying issues or production factors such as what is the most effective way of producing the product or delivering the service (e.g. in small batches or high volume, over the internet or in a retail shop etc). So the first stage is: what is the most effective way to target, market, finance, produce, sell, deliver etc this business?

When you have identified what the right thing to do is, that is the time to be working out how to do it well – the efficiency side of the equation.  

But there is another relevance of these words to small business. It is easy to get lulled into a false sense of security by what what we do well. We know we are good at it and we get satisfaction from achieving – we are efficient. But some use this as an excuse not to do the things they do not like doing. And if that happens, then the business will suffer. It might be making cold sales calls or chasing payment, or dealing with staff performance. But if it is something which is business critical then it must be attended to – it is about being effective as a business.

So the second lesson is: make sure you know what needs to be done and that you either do it or manage it being done by someone else. There is no part of the business process that can be safely ignored.