3Es (Economic, Efficiency and Effectiveness

SSP3024 Public Sector and Corporate Management 2016/2017

Overview• 3Es refer to Economy, Efficiency &

Effectiveness.

• 3Es must present in Context, Content & Process [see Pettigrew’s model of strategic change]

• 3Es important in government policy. Public service managers cannot escape from their influence.

Economy• Refers to which the cost of inputs is

minimized.• Usually measured in terms of money

saved by switching to cheaper inputs.• Concept relates to inputs. For example,

for a motor car manufacturers, it means minimizing the cost of physical inputs like labor etc.

• For public service – purchasing goods & services at the lowest price or using competitive tendering to lower labor costs.

Efficiency• Minimizing of inputs to the programmed in

relation to the outputs from it, given the objectives and the means to pursue the objectives.

• Concerns with the relationship b/w inputs &outputs.

• About achieving the target with the least possible use of resources. About getting more for less.

Efficiency• Achieved by minimizing inputs in relation to

outputs or by maximizing outputs in relations to inputs.

• Determinant of this relationship is the process.

• In a car company – about making the best use of manufacturing processes, technology & staff – to add value to the raw materials when making car.

Efficiency• For public services – about managerial reform

& introduction of new working practice. Competitive tendering system be employed.

• Competitive tendering system encourages in-house organization to ask question like about what needs to be done & how it should be done.

Effectiveness• Effectiveness measure reveals the extent to

which objectives have been achieved/met.

• Makes no reference to cost.

• About achieving what we want to achieve.

• About relationship between intended outputs & actual outputs.

• Example – a target to achieve 10% share of the market for a particular car company.

3Es in the Public Sector

• Concept easier to apply in a car company, for instance, as it needs to improve performance.

• For car company alternatives in the market-place exist. Customers go for other brands if price is too high or quality is too low.

• Concept – difficult to apply in the public sector because:

3Es in the Public Sector

• Public sector organizations are monopoly suppliers of good and service. – For example, there is only one Ministry of Family

and Women’s Development. Cannot go elsewhere if not satisfied with the service provided.

– In competitive environment there is incentive to be efficient [increase profits, increase dividends for shareholders]

– Inefficiency could lead to closure. A monopolist does not have the incentive.

3Es in the Public Sector• A car company has a clearly identifiable product –

the car. Not so in the public service. Example – what does a university produce? – lectures, seminars, researches, ideas, educated citizens or businessmen.

• A car company has a clearly identifiable customer who enters financial exchange with it. Not so in the public service. Customer could be a member of the public, minister in charge of the service, Parliament (elected by & represents the electorate) or the taxpayer. Minister may want to reduce the overall expenditure of the services but the public may want more services.

• A car company has an explicitly stated objective – the maximization of profits. Efficiency creates more saving, so more profits. Not the case in civil service where the underpin value is the demand for equality. Example, is it correct for the police to focus on the area where the rich live & ignore the area where the poor live.

3Es in the Public Sector

• All of these problems make it difficult for the 3Es to be pursuit in the public sector.

• But they must be adopted to improve the delivery of services.

3Es in the Public Sector