Efficiency Theories: The State-of-the-Art

Efficiency Theories: The State-of-the-Art

Vojko Potocan (University of Maribor, Slovenia) and Matjaz Mulej (University of Maribor, Slovenia)
DOI: 10.4018/978-1-4666-4373-4.ch007
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To some authors and scientists the concepts effectiveness and efficiency are significantly different. To others, they mean the same; while to a third group the truth about them lies somewhere between these two extremes. This chapter provides an overview of efficiency theories. It finds that the term efficiency covers both doing the right thing and doing the thing right. Efficiency is not limited to internal factors of success, nor should effectiveness only be seen as a term pertaining to the outer factors of success of a human origin, organization source, or inherent in national, local, or international regions.
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The Selected Framework for Consideration of the Efficiency Concept

When dealing with various human associations/organizations, one recurrently faces the question: “What is new concerning (the understanding and consideration of) efficiency of their working (and behavior)?” But this question is much easier to pose than to respond to with an answer that leaves no room for doubt.

The concept of efficiency is so wide-reaching that it is in reality not possible to define in a unified and holistic way. It is a concept/word/term used in most sciences, be they natural, technological, or social. At the same time, this concept - especially in the social sciences - is used for the consideration on different levels of human activity (e.g. from the individual to the world-wide scope). In addition, there are several different, and even non-comparable, divisions of these levels. For example, in economy, efficiency is used for dealing with activities on the macro (national economy), mezzo (sectors of economy), and micro (businesses) levels. On the other hand, the concept of efficiency is used in several disciplines, such as organization and management for dealing with the whole organization (as in the macro level), parts of an organization (as in the mezzo level), and groups within those parts (as in the micro level). Other social science disciplines, such as geography, sociology, psychology, logistics, human resource management, and so on, are also facing similar definitional differences.

From the entire range of all sciences, we will therefore limit ourselves to dealing with those social sciences that predominantly consider organizations and how they work, which means: the macro level covers the organization, the mezzo level its parts, and the micro level the constituent groups (that is: those inside it).

Key Terms in this Chapter

Content of Efficiency: Efficiency Theories provide for at least two terms which various authors use to define efficiency in terms of its content. The first term is perspectives, which some authors propose to cover e.g. the realistic, power and social justice approaches and evolutionary perspectives. The second term is the generalization about effectiveness with the values-based and time-specific nature of an effectiveness construct.

Efficiency: Efficiency can be described in the most general terms as a requisitely holistic measure of working of the reviewed business system; it has been created because humans deemed that tone can attain the desired outcomes of organizational performance from the vantage point of various constituencies directly and indirectly affected by the organization.

Concept of Efficiency: In economics and business economics, as well as in most of the natural and technological sciences, the practitioners use the concept of efficiency solely to deal with suitability of the entire working of the organization, including the internal and external parts of the business process and environments. In organizational theory the theoreticians make a distinction between efficiency and effectiveness and they use both terms. In management science, the scientists rather strictly delimit efficiency and effectiveness.

Methodology of Efficiency: The need for requisite holism of consideration of efficiency requires the methodological bases of the efficiency construct to be requisitely holistic as well. In that framework, two aspects require priority attention. i.e.: A (minor) part of the methodology for dealing with an efficiency construct depends on the framework given by the selection of the approach for dealing with the efficiency construct, and; A (larger) part of the methodology depends on the chosen methodology of dealing with the organization, and which measure of efficiency is a side-effect of the work.

Approaches to Consideration of Efficiency: In literature authors mentioned some various well-known approaches to consideration and understanding of efficiency such as: Goal based approaches, Systems approaches, Constituency approaches, and Contingency approaches.

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