Can Efficiency Be Isolated from Economy and Effectiveness in Program Management?
Given the complex relationships that exist among economy, efficiency, and effectiveness, a key question arises: Can the concept of efficiency be isolated from economy and/or effectiveness in program management?
While the 3 Es are all interrelated, Figure 2 suggests that economy and efficiency are especially closely linked. The International Organization of Supreme Audit Institutions’ (INTOSAI) publication Standards for Performance Auditing (ISSAI 3000) argues that in some cases it may be difficult to totally separate the concepts of efficiency and economy from each other. Both concepts may, directly or indirectly, concern whether an audited entity is:
- following sound procurement practices;
- acquiring the appropriate type, quality, and amount of resources at an appropriate cost;
- properly maintaining its resources;
- using the optimum amount of resources (staff, equipment, and facilities) in producing or delivering the appropriate quantity and quality of goods or services on time; and
- complying with regulatory requirements that govern or affect the acquisition, maintenance, and use of its resources.
Isolating efficiency from effectiveness is generally an easier matter. Since objectives can be achieved in inefficient ways, and since it is possible to be efficient at doing the wrong thing, it is possible in theory to separate issues of efficiency and effectiveness. However, in some cases, there is a trade-off between efficiency and effectiveness: beyond a certain point, improvements in efficiency may compromise the quality of services being delivered to the public.
Whether or not efficiency can be clearly separated from economy and effectiveness, what is clear is that auditors should always develop a strong understanding (or knowledge of business) of the elements of economy, efficiency, and effectiveness in relation to the entity, program, or activity being audited.