We explain what are the effectiveness, efficiency and productivity, how they differ and what are the indicators of each.
What are effectiveness, efficiency and productivity?
Efficiency, efficiency and productivity are three terms that are closely related to each other and that are widely used within the business environment , especially in the areas of management.
The three concepts are used daily within organizations and are defined as follows:
- Effectiveness . Ability to achieve the goals the company set out to achieve.
- Efficiency . Ability to achieve theestablished goals using the least possible amount of resources.
- Productivity . Production capacity, according to the relationship between the product and the input, that is, the resources that should have been used to generate those goods with the quality that customers are looking for.
Some of the differences that exist between the concepts of effectiveness, efficiency and productivity are:
- Efficiency does not consider saving resources or care, as efficiency does.
- Although the definitions of effectiveness and efficiency consider the fulfillment of the goals within certain deadlines, efficiency implies reaching goals as quickly as possible and spending the least amount of resources needed. In efficiency, time and resource use are set aside.
- Efficiency and effectiveness are two qualitative concepts, while productivity is a quantitative concept .
- Efficiency requires efficiency.
- It can be productive but ineffective or it can be effective and unproductive.
- Productivity is a magnitude that describes the activity of a company while efficiency is an attribute that can have a process or not.
- Identifying the origins of inefficiency and determining how it can impact productivity is key for any company. When the organization is inefficient, resources are wasted.
- Efficiency is linked to quality while productivity is quantity.
- Efficiency focuses on how to produce a good , efficiency in the ability to produce it.
To calculate the efficacy, efficiency and productivity indicators, the following formulas should be used:
- Effectiveness . To evaluate the effectiveness a percentile table is used, with a score from 1 to 5 in which 1 is very ineffective and 5 very effective. The formula is as follows: Efficacy = (result achieved * 100) / expected result
- The formula is: Effectiveness = (result achieved / actual cost) * time spent / (expected result / estimated cost) * expected time. If the result obtained is less than 1 it is considered inefficient, if it is equivalent to 1 it is considered efficient and if it exceeds 1 it will be very efficient.
- Productivity . Productivity is responsible for establishing efficiency in the use of resources. To make this evaluation, the formula is as follows: Productivity = outputs / inputs.
Thanks to these measurements , you can evaluate the performance of the company’s staff, improve competitiveness and set goals correctly. In addition, they are a key tool for adjusting costs and times.
Examples of effectiveness, efficiency and productivity
Some examples of efficiency can be the following :
- One company produced 10 pairs of shoes per hour, until an employee designed a new system that allows 15 shoes to be produced in 50 minutes.
- A construction company had estimated that it would take 10 months to build a bridge, but to get it, it had to hire more people and extend the shifts. The total cost was much higher than calculated. They were not efficient.
- It took 60 minutes for a charter to pick up the 12 people that he had to move to the plant, until he found an alternative path that allowed him to pick up those 12 people in 45 minutes.
Some examples of effectiveness are :
- A dressmaker was hired to make five overalls in four days and she succeeded.
- A pastry chef had to prepare three pies before noon. He got up early and got it.
- The exhaust pipe of a taxi broke and the taxi driver managed to repair it in a very short time.
The productivity can be illustrated as follows :
- In one plant 70 umbrellas are manufactured per hour, while in the competition 90 units are produced at the same time. The last plant is more productive since in the same period it manufactures a larger volume of umbrellas.
- A factory that produces 200 jackets has 50 employees who have an 8-hour workday. Per month, they work a total of 25 days. In this factory, the productivity is two jackets per hour for each man.