BSBA students learn in their Principles of Management course that managers have to promote the twin goals of effectiveness and efficiency. Many students just nod and include this statement in their class notes, but in doing so they miss an important point: these twin goals are often inversely related!
That is, we can increase effectiveness by hiring more people, perhaps at higher-than-normal salaries, spending more to develop new products and perhaps also by increasing advertising. But if the dollars going out will not dramatically increase the dollars coming in, efficiency suffers.
A classic example of "management run amok" is the U. S. Department of Defense (DOD) under Robert McNamara in the 1960's. His background was in manufacturing (Ford Motor Company), not in military operations. Yet he and his "whiz kind" advisors thought that every decision could be evaluated through a cost-benefit analysis.
Wherever possible, McNamara and his young team of advisors tried to simplify and to standardize every aspect of DOD operations. Their goal was to improve efficiency, but in the process, effectiveness went out the window.
Army and Marine infantrymen were issued "generic" boots rather than the exact-fitting heavy duty boots they were accustomed to. The DOD analysts though this was a great money-saving measure, but the boots were so bad that infantrymen had cut, blistered and bleeding feet after hiking only a few miles in rough terrain.
Another mistake: one airplane for both the U. S. Air Force and the U. S. Navy that could be used as a fighter and also as a bomber. The result was the FB-111, called the "Edsel" of modern aircraft.
A final example: replacing the high-powered, reliable M-14 rifle with an unproven M-16 rifle that jammed frequently and had only half the range of the M-14. Another example of improving efficiency at the expense of effectiveness.
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