Small business

Effectiveness and efficiency in the evaluation context 
In evaluation studies, as noted briefly above, an important distinction should be made between
measuring effectiveness and efficiency. 
EFFECTIVE POLICIES FOR SMALL BUSINESS - © OECD 2004
14. Management, Monitoring, Evaluation and Control
81

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Measures of effectiveness, in the context of SME development, provide indicators of the capacity of assistance
recipients to (better) manage processes of business development. It therefore represents the true result of
‘capacity building’. Capacity is not simply a function of introducing a new activity or systems/product market
orientation to an institution, nor of its ability, with guidance, to deliver a particular set of programmes in the
short run. Nor is it solely about individual learning brought about by training programmes. It is about the
enhanced capacity of any (group of) organisations to do thing better once assistance comes to an end. 
It is therefore not evaluated via measures of efficiency, nor by long frame outputs in the summative
evaluation sense. For example, in the case of microfinance institutions effectiveness is not concerned with
outputs such as number of loans, repayment or default ratios or the growth of businesses to which money
was lent. It is possible to have sound results in this sense in the short run without the organisation having
advanced substantially in its ability to make sound judgements in respect of its future development.
Measures of effectiveness therefore include such things as improvements in the capacity of those in the
organisation to:
• Think and act strategically, and grasp opportunities strategically when identified;
• Plan new developments in an appropriate manner;
• Harvest and evaluate new ideas for development;
• Attract resources for sustainable development, including: physical resources, appropriate technology,
finance, human resources and appropriate knowledge;
• Develop management control and communication systems incrementally as appropriate to the needs
and stage of development;
• Attract and develop appropriate entrepreneurial leadership, management and HRD systems;
• Relate effectively to the stakeholder environment;
• Evaluate their own experience base and adapt and acquire experience according to future needs;
• Understand their own organisation capacities and development needs in respect of basic performance
in the market, delivery of services and finance.
Overall, in the context of SME development, there is a particular need to make judgements as to
improvement in the entrepreneurial capacities of organisations which are benefiting from enterprise
development, in particular their capacity to:
• Take ownership of things;
• Take independent initiatives;
• Manage autonomously;
• Network effectively with all key stakeholders;
• Manage holistically all aspects of organisation development;
• Think and act strategically by and through doing;
• Plan new development incrementally and assess risks accordingly;
• Evaluate themselves through the eyes of key stakeholders and particularly customers;
The first group of factors measures the capacity of organisations to grow. The second set measures the
ability to adapt to an entrepreneurial environment of uncertainty and complexity.
In contrast, efficiency measurement focuses on the utilisation of resources to achieve an output, usually
against a standard. This is more in line with measures of inputs against outputs, as at the ultimate impact
level of summative evaluation described above.