On many occasions I have used the UK National Health Service (NHS) as an example of how effectiveness, efficiency and productivity are not the same thing. In this blog I want to look at why effective investments require clear objectives and before moving on to organisations in general I want to begin with the NHS as this is one of the clearest ways of explaining the effective investments require clear objectives rule.
Let’s start by asking “what is the objective of the NHS, or any health service?” Many, including those in government would claim that it is to treat people with diseases as quickly as possible and in a way that is efficient in that it uses only the minimum resources necessary to produce a healthy person. They may even claim that in doing that the Service is effective in curing the population of diseases. If that really is the objective then the target for investment is clear. Sufficient well trained and competent doctors, sufficient hospital beds in the correct area, an efficient diagnosis and appointment system, the use of A I and other systems to rapidly diagnose and treat and research into the treatment of disease. I’m sure there are others but you get the idea. Unfortunately, for me, that is the objective of a National Cure Service not a National Health Service. Hence many investments made are productive, efficient but cannot be called effective.
If your objective is a healthy population you invest in housing, disease prevention, eliminating poverty, health education, diet etc and much less in medical delivery services. Same organisation, on the face of it the same objective, but not really. Effective investments require clear objectives.
Now, hopefully you see why, before embarking on any investment project you must properly define the objective. If the objective is just to produce the product or service in the most productive way then you will be looking at anything that increases productivity per person, per hour or however you want to measure it. Investment will be in equipment, digital systems and processes. If on the other hand, your objective is to produce something remarkable Why Being Remarkable Is Effective or sustainable Is Servitisation The Way To Sustainability? Effective Sustainability Means Less But Better then it is likely that your investment will need to be in R & D, design, training and marketing or something along these lines.
Here’s the point. Do you and / or your organisation really understand your objective? If you do, has that objective been communicated properly to everyone taking investment decisions? Is every investment decision evaluated not just against the standard measures of ROI, ROCE, Payback etc but against the declared objective? An investment which produces a lower ROI but moves you closer to your objective will be a better one than one that is just based on traditional quantifiable means.
If you want to go to London then the slow train to London will get you there quicker than the private jet to Paris. It’s all about understanding the objective.
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