Dear Ranya, effectiveness and efficiency are two different things. Efficiency refers to the quality of the internal operations of the organisation, while effectiveness refers to the organisation's impact on end users. First you will need to set objectives for effectiveness and for efficiency, then work out what indicators you can use to assess the extent to which those objectives have been met. Then decide what data to collect to measure those indicators. And you will need baseline data for each indicator, ideally from before the strategic management accounting was implemented (sometimes this kind of data can be collected retrospectively from existing records) or, failing that, from as soon as possible after it was implemented. This baseline will be used as a benchmark to assess progress against.

I am not an accounts specialist but I will try to give you a couple of examples to illustrate what I mean. An objective for efficiency could be to reduce the amount of bad debt. Some expertise would be needed to set indicators against this but, for example, one indicator could be expressed in percentages per year, e.g. a reduction of X per cent in year 1 after implementation and a further Y per cent in year 2. (Now you can see why you need the baseline data, otherwise you can't tell whether there has been a reduction - and bad debt is one of those things that should already be recorded.)

An objective for effectiveness could be that suppliers report increased satisfaction, i.e. a positive impact, when dealing with the organisation. Such 'soft outcomes' are harder to measure but self-report is often deemed acceptable. Here you might need to establish a baseline before you set indicators, e.g. by asking a sample of suppliers for their current or recent levels of satisfaction, unless you already have a good idea of what those levels are likely to be. Then you could set indicators as appropriate for the amount of increase in satisfaction you want or expect to see; ask the suppliers again after, say, one and two years; and compare the answers. (It could also be instructive to ask for their reasons; this kind of information can be immensely useful for organisational development.)

The organisational evaluation literature contains a lot of advice about how to measure effectiveness and efficiency in public sector organisations. I haven't read anything specifically about evaluating the implementation of strategic management accounting, but I think generic advice should be applicable.

Good luck!

The above response is good. The problem is that the time period may be very long to have an effect and many other factors are involved. The best way is often to ask key managers for their perceived evaluations.

Thanks so much Helen Kara , you give me comprehensive explanation, I know efficiency refers to the relationship between input and output as well as how are the relate to other and how to control of them.  while, effectiveness refers to the overall organisational objectives. and How public sector organisations deliver strategic goals and agreed outcomes from their allocate financial resources?

Thanks Trevor Hopper for your advice to ask managers. the one of my respondents in my study is managers, also financial managers and management accountants

Effectiveness: A measure of how well the process step meets or exceeds customer requirements. e.g Level of satisfaction

Efficiency: A measure of resource utilization in the process. e. g. Time per process and No. of staff per process

Bueno, se ve en los resultados que la organización refleje ante los tiempos de cumplimiento que planifico en su Plan de Operativo, ejecutando profesionalmente las NIF, evitando los errores contables, riesgos, desperdicios y brindado servicio Efectivo en menor Tiempo.

Be careful when you deal with these concepts because they are not always working in harmony. Increased one of them may hurt the other one.

In general, Efficiency involves in reducing cost by increasing the level of utilization of resource while effectiveness focuses on achieving goals. Relying too much on efficiency may lead to decrease the effectiveness especially in a public sector and vice versa.

For example, reducing the points of providing service to the public increases efficiency but may lead to decrease effectiveness by making receivers service more unsatisfied than before.

The balance between the both concepts is required.

The following can be considered to deal with the performance measurement concept in the public sector context for your consideration of SMA implementation in the government:

1) 3 E's concept under the Value for Money Measurement. 1) Economy - measures to what extent the cost of the inputs be reduced without wastage. 2) Efficiency - measures to what extent the resources of the activity utilised optimally to produce the required outputs. 3) Effectiveness - measures to what extent the objective of the activity has been achieved.

2) Financial and Non Financial Performance Measures or Key Performance Indicators (KPIs) used in the application of Outcome Based Budget (OBE) or Balanced Score Card in the public sector context

Literature survey and review for the above conceptual application may be helpful.  

Dear Ranya Dakhelalla,

I would suggest that you study management account and administrative science journals, which would help you as a starting point for your research aims.

Second, a colleague of mine is working on similar topics, so I would like to suggest some exemplary studies that might help you to find a suitable approach for studying management accounting in PA:

1. Greger et al. (2015): " Perception of Benefits Achieved by IT Management Accounting in the Public Sector"

2. Greger et al. (2013): "Performance Management of IT in Public Administrations. A Literature Review on Driving Forces, Barriers and Influencing Factors"

Regarding the question you asked "How public sector organisations deliver strategic goals and agreed outcomes from their allocate financial resources?" I would like to give you an another example. We have conducted the following study in the context of e-government, where questions of setting and measuring goals (often in financial terms) is also a challenging task. The challenge can be describe as a mismatch between planned and realized benefits (respectively "strategic goals" and "agreed outcomes"), since multiple stakeholders have to be considered in both planning and realization.

3. Balta et al. (2015): "Why Realization Mismatches Expectations of E-Government Project Benefits? Towards Benefit Realization Planning"

If you can not access the papers over the internet, please feel free to contact me.

Best regards

Ranya,

You are correct that:

"efficiency refers to the relationship between input and output as well as how are the relate to other and how to control of them. while, effectiveness refers to the overall organisational objectives."

You are also correct in your observation that in the public sector it is hard to define outcomes, and thus measuring effectiveness is difficult.

One way to overcome this problem is to use Analytic Hierarchy Process (AHP) to determine the priorities of your organization and to compare these priorities to the economic contribution of each program.

The method is described in the attached article, and I have used it successfully with a number of organizations.

BR

Article A servant of two masters: The dual role of the budget in nonprofits

the measure of effectiveness and efficiency of public sector is by SMA through portfolio budget statements. 

Ranya, in the UK public sector, and for several years 'efficiency' and 'effectiveness' have been used for specific types of change.  Efficiency is about providing the same output for less resource input (often a euphemism for budget cuts) whilst effectiveness is about doing more for the same resource input. 

It follows therefore that:

Efficiency is measured by customer surveys showing no great decrease in levels of satisfaction, or demonstrating the same level of order satisfaction within specified time, whilst showing a lower budget or achievement with fewer staff, less equipment or some similar measure. 

Effectiveness would be measured by illustrating new and improved services, improved customer satisfaction or some such measure; whilst holding the resource consumption at the same level as any previous period.

Strategic management accounting consists of various techniques including  :Activity Based Costing(ABC),Activity Based Management(ABM) ,Activity Based Budgeting(ABB), Target Costing (TC) , Value Chain management(VCM) and  Balanced Scorecard (BSC). The significance of these techniques is related to their effects on the increasing the “efficiency” and “effectiveness” of public and /or private organizations. Efficiency has been defined in various contexts. However, the most popular definition of efficiency is: the ratio of output to input-meaning the organization (public or private) should attempt to obtain more output from the exerted inputs. This means the public organizations ,in your question ,should determine the peculair relevant variables .For example ,the Ministry of Agriculture ,Should define and calculate the amount of water, land , labor ,etc., which are used to produce 100 Kilograms wheats.  Then ,the Ministry can determine the efficiency of its production. Of course efficiency is case sensitive and is related to the Minstry of Agriculture in my case.

Effectiveness ,also has been defined in different contexts. One famous definition is: the amount of achieving the designated goals of the organization (public or private). In my example, If the Ministry of Agriculture ,has planned  to produce for example,1000,000 Kilograms of wheats, and has been able to produce only 900,000 Kilograms ,there is an effectiveness problem ,because the total amount of production is less than the planned production. However ,the 900,000 Kilograms of wheats may have been produced efficiently.

Thus, efficiency is one thing, and effectiveness is another thing. Furthermore, strategic management techniques help public (and private) managers to determine their effectiveness and efficiency. Because there are different strategic techniques and the nature of the public organizations are also different, each public organization should first determine which technique it would use ,and then develop relevant measures to determine the efficiency and effectiveness of its designated programs within the domain of that techniqe. 

Thanks so much to all, Stuart Addy and Mohammad Namazi are giving me clear idea.  

Dear Ranya,

Thank you so much. I have done many practical experience in this regard.If you need help,please let me know.

Mohammad Namazi, yes of course I want to help, because my PhD research in the strategic management accounting in public sector

Dear Ranya,

I can provide you with some examples from past experience but as I no longer have access to the government databases the examples would only be 'anecdotal'. However, if you feel they would help please ask.

Stuart Addy