Efficiency means whatever you produce or perform; it should be done in a perfect way. Although, Effectiveness has a broader approach, which means the extent to which the actual results have been achieved to fulfill the desired outcome i.e. doing accurate things. These are the metric used to gauge the performance of an employee in an organization.
Efficiency and Effectiveness are the two words which are most commonly juxtaposed by the people; they are used in place of each other, however they are different. While efficiency is the state of attaining the maximum productivity, with least effort spent, effectiveness is the extent to which something is successful in providing the desired result.
Take a read of the article to understand the difference between efficiency and effectiveness in management.
Content: Efficiency Vs Effectiveness
|Basis for Comparison||Efficiency||Effectiveness|
|Meaning||The virtue of being efficient is known as efficiency.||The magnitude of nearness of the actual result with the intended result, is known as effectiveness.|
|What is it?||Work is to be done in a correct manner.||Doing accurate work.|
|Emphasis on||Inputs and Outputs||Means and Ends|
|Time Horizon||Short Run||Long Run|
|Ascertainment||Strategy Implementation||Strategy Formulation|
Definition of Efficiency
Efficiency refers to the ability to produce maximum output from the given input with the least waste of time, effort, money, energy and raw materials. It can be measured quantitatively by designing and attaining the input-output ratios of the company’s resources like funds, energy, material, labor, etc.
Efficiency is also considered a parameter to calculate the performance and productivity by making comparisons between the budgeted output and the actual outputs produced with the fixed number of inputs. It is the ability to do things in a well-mannered way, to achieve the standard output.
Efficiency is an essential element for resource utilisation, as they are very less in number, and they have alternative uses, so they must be utilised in the best possible way.
Definition of Effectiveness
Effectiveness refers to the extent to which something has been done, to achieve the targeted outcome. It means the degree of closeness of the achieved objective with the predetermined goal to examine the potency of the whole entity.
Effectiveness has an outward look i.e. it discloses the relationship of the business organisation with the macro environment of business. It focuses on reaching the competitive position in the market.
Effectiveness is result oriented that shows how excellently an activity has been performed that led to the achievement of the intended outcome which is either accurate or next to perfect.
Key Differences Between Efficiency and Effectiveness
The points, given below describe the substantial differences between efficiency and effectiveness:
- The ability to produce maximum output with limited resources is known as Efficiency. The level of the nearness of the actual result with planned result is Effectiveness.
- Efficiency is ‘to do the things perfect’ while Effectiveness is ‘to do perfect things’.
- Efficiency has a short run perspective. Conversely, the long run is the point of view of Effectiveness.
- Efficiency is yield-oriented. Unlike Effectiveness, which is result oriented.
- Efficiency is to be maintained at the time of strategy implementation, whereas strategy formulation requires Effectiveness.
- Efficiency is measured in operations of the organisation, but Effectiveness of strategies is measured which are made by the organisation.
- Efficiency is the outcome of actual output upon given the number of inputs. On the other hand, Effectiveness has a relationship with means and ends.
Efficiency and Effectiveness both have a prominent place in the business environment which must be maintained by the organisation because its success lies on them. Efficiency has an introspective approach, i.e. it measures the performance of operations, processes, workers, cost, time, etc. inside the organisation. It has a clear focus on reducing the expenditure or wastage or eliminating unnecessary costs to achieve the output with a stated number of inputs.
In the case of Effectiveness, it has an extroverted approach, that highlights the relationship of the business organisation with the rest of the world to attain a competitive position in the market, i.e. it helps the organisation to judge the potency of the whole organisation by making strategies and choosing the best means for the attainment result.