Why Visionary Leaders Embrace the Value and Wisdom in Effectiveness

“Effectiveness is evaluated efficiency.” Russel Ackoff

Having completed my book The Business of Walt Disney and the Nine Principles of His Success and building a website, I’ve been able to spend time this spring and summer between work assignments catching up on some reading in areas of professional and personal interest.

I’ve dipped into a number of diverse areas:

corporate strategy (Michael Raynor, The Strategy Paradox);
organizational leadership (Elliot Jaques & Stephen Clement, Executive Leadership);
alternative organizational forms (Russell Ackoff, The Democratic Corporation);
leadership and the psychology of well-being in the workplace (Mihaly Csikszentmihalyi, Good Business);
neuroscience (Sally Satel & Scott Lilienfeld, Brainwashed);
Lean Six Sigma & TOC (Steve Borris & Daniel Borris, The “Success or Die” Ultimatum);
environmental ethics (Alex Epstein, The Moral Case for Fossil Fuels);
a number of biographies and memoirs of former Walt Disney artists.

I also enjoyed reading Lev Grossman’s The Magician Trilogy. Anyone up for an adventure in Fillory?

Thankfully, there’s no end to insightful books for the overly ambitious and curious. We have more espoused wisdom at our fingertips today via the role of the Internet as a digital receptacle and repository for acquired wisdom than time available to absorb it all, and not enough mental capacity to retain more than a handful or two of crumbs.

Of course, one man’s wisdom can be another man’s garbage, and it still takes a rational and engaged mind to separate the wheat from the chaff in creating an integrated world view. On the Internet, there’s too much chaff, too little wisdom of instrumental value, and too much wasted time to separate the two.

In reading Russel Ackoff’s 1994 book The Democratic Corporation, I came across a short section about the difference between “efficiency” and “effectiveness” that struck me as particularly profound and worthy of capturing and sharing. The two words are often strung together as if they are a single word and single concept, when in fact they pertain to two separate realms of human knowledge and discovery.

Here’s Ackoff from a section titled “From Efficiency to Effectiveness: Adding Value.”

Science, technology, and economics focus on efficiency, not effectiveness. The efficiency of a course of action relative to a possible outcome in a specified environment is measured in one of two ways: either the probability that it will produce that outcome in that environment, or the amount of resources it consumes in producing that outcome in that environment. For example, given two production processes that produce the same type of product, the one that is more likely to produce ones that meet standards is said to be more efficient. In other words, its probability of producing an acceptable product is higher. Alternatively, of two production processes that turn out equivalent products, the one that does so at the lower cost is said to be more efficient.

The effectiveness of a course of action in a specified environment is a function of its efficiency for each possible outcome and the values of those outcomes to those affected by them. A very efficient men’s clothing manufacturer may with great efficiency turn out suits that do not fit well. Another, less efficient manufacturer may turn out suits that do fit well. Because “fit” is a value to customers, the second manufacturer would be considered to be more effective even though less efficient. Of course, a manufacturer could be both more efficient and more effective.

The value of an end is not included in the meaning of the efficiency of the means with which it is pursued, but it is included in the meaning of the effectiveness of that pursuit. Effectiveness is evaluated efficiency – that is, efficiency weighted by the value of its product. The efficiency of an act can be determined without reference to those affected by it. Not so for effectiveness. It is very personal. The value of an act is never independent of those affected by it, and therefore may be quite different for different individuals.

The difference between efficiency and effectiveness is reflected in the difference between growth and development. Growth does not necessarily imply an increase in value; development does. The recent deterioration of General Motors and IBM shows that companies that grow do not necessarily develop. A company can grow but cannot develop without increasing its value.

Value is the subject matter of ethics and aesthetics. Therefore, they are necessarily involved in the conversion of efficiency into effectiveness. The production of information, knowledge, and understanding is primarily a function of science. The production of wisdom, which presupposes all three, is primarily a function of ethics and aesthetics because their essential contribution to human progress is the insertion of values in conscious human decision-making. Efficiency is the product of information, knowledge, and understanding; effectiveness is the product of wisdom. Wisdom enlarges the focus of decision-making from efficiency to effectiveness. It enlarges the range of possible consequences of a decision that are taken into account, and the length of time over which it is taken to have possible consequences. By taking long- as well as short-run consequences into account, it prevents the future being sacrificed to the present.

Since wisdom adds value to consideration of efficiency, it is important to understand value at least as well as we understand efficiency. This is not yet the case, but our understanding of value, ethical–moral and aesthetic, is increasing under pressure from systemic thinking and our growing preoccupation with development. (50-52)

What we are seeing, more and more – from independent-thinking people employed as knowledge workers in hierarchical organizational structures – is the demand for more effective managerial leadership at all levels of organizations.

What Ackoff does so well in this passage is make explicit the need for those in managerial leadership roles to pay attention to and embrace a wider array of human capabilities in executing their responsibilities, both in terms of the skilled knowledge needed to achieve efficiency and the underlying values, passions and wisdom inherent in effectiveness. Conscientious business leaders must demonstrate ethical-moral and aesthetic wisdom in the understanding and pursuit of effectiveness in their everyday work if they are to win the hearts and minds of consumers, employees, and other key corporate constituents.

Creating and sustaining a successful business is a heroic and worthy endeavor that requires the building of integrated systems sustained and enhanced through voluntary human cooperation. We know that the most admired companies, and often the most successful, are those that understand the need to take values seriously by demonstrating what Tom Peters and Nancy Austin coined “a passion for excellence.”

Managerial leaders still need to be reminded often that business is run by and for people who, each in their own way, aspire towards excellence. The days of succeeding through mechanistic business thinking are long gone. Good business is value-centric: How things get done affects what can and does get done.

Managers need to pay attention to the human level of engagement that exists alongside material goals. Research by Mihaly Csikszentmihalyi, reported in his book Good Business, observed five traits that significantly contribute to the effectiveness of visionary business leaders: optimism; integrity; ambitious perseverance; curiosity; and empathy.

Csikszentmihalyi writes:

The first is unbounded optimism, which consists in thinking well of human beings in general, and being positive about the future. … The second is a strong belief in the importance of integrity, and unwavering adherence to principles in which mutual trust can be based. A third characteristic of these individuals is a very high level of ambition coupled with perseverance, which allows them to weather hardships and to take on incredibly difficult challenges. The fourth outstanding trait is constant curiosity and desire to learn. Finally, all of them mention the significance of empathy for others and a sense of mutual respect. (156)

Each of these traits are essential elements in creating humane and psychologically healthy working environments where ongoing applied capability, growth, change and transformation are accepted and encouraged in order to pursue excellence and other aspirational human values.

The oft-pursued goal of efficiency when devoid of the ethical-moral and aesthetic values inherent in effectiveness will always lose in the long run when competitors are visionary leaders focused on ethical behavior as a basis for human value creation.

Barry Linetsky is a Partner with The Strategic Planning Group, and author of The Business of Walt Disney and the Nine Principles of His Success (Theme Park Press, 2017), which is available in print and Kindle editions from amazon. Visit www.BarryLinetsky.com. Twitter @BizPhilosopher.