Efficiency And Effectiveness

Efficiency may be defined as “The ability to accomplish a job with a minimum expenditure of time and effort”. It is a management tool measuring the competence of any organization, being the ratio of output to input, generally expressed as percentage. The input consists of all that goes into producing a product or service, i.e. labor, capital and/or materials, land, energy, capital goods (assets-machinery, tools, facilities, equipment), etc. Following is the equation depicting efficiency:

Efficiency = Actual Outputs (U) / Actual Inputs (I)

  The main goal of efficiency is the optimal utilization of all the resources and to reduce wasted material, time, energy, and money.  It stipulates the formation of a workflow that reduces unnecessary steps. Efficiency may relate to individuals or organization, but the objective remains the same. Being efficient means Performing or functioning in the best possible manner with the least waste of time and effort.

The origin of efficiency can be traced to Frederick Taylor’s Scientific Management Movement. Implementation of time and motion studies laid the foundations of improving productivity in manufacturing operations showing the way to the introduction of concept of efficiency.

Higher efficiency levels were thought to be the hallmark of successful organizations. Efficient organizations were automatically considered profitable and thus successful. But, that all changed when well- known and highly efficient organizations were found to be deficient in producing higher rates of profits and even started generating loses.

Effectiveness may be defined as:Having an intended or expected effect. Producing a strong impression or response; Producing a decided, decisive or desired effect. The degree to which objectives  are achieved and the extent to which targeted problems are solved.