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Efficiency and Effectiveness

In business language, there are many terms with similar words but different usage. Efficiency and effectiveness are similar kinds of terms but their applications are slightly different. In general, efficiency is a measurable quantitative instrument while effectiveness is about being able to achieve.

Efficiency is doing things right; effectiveness is getting things done.

What is Efficiency?

In business language, efficiency means the measure of outputs over inputs. In simple words, it is the ability to avoid wastes (like material, energy or money etc.) while achieving desired goals.

It is about keeping the unwanted minimized or use of minimum resources without compromising quality.

What is Effectiveness?

Effectiveness is about having the desired result with respect to plan. it is the measure of output. Being effective means getting the right thing done. It is result oriented qualitative measure. For example:

  • Airplanes are the most effective way to travel around the world.
  • The world needs an effective solution for global warming.
  • Organizations adopt most effective processes and procedures to control costs and gain competitive advantage.

How they Work (Example)

For example, Z public school has a mission to provide quality  oriented education to students by providing effective learning opportunities, it has the strength of 500 students with 30 administrator staff including teachers.

Efficiency measure will include following:

  • A number of student ratio with respect to teacher
  • A cost per student for the year
  • Number of students in the class

(Online classes are also conducted by Z public school which is a good example of efficiency with help of technology)

The effectiveness measures will be:

  • A number of students get admission in the university level.
  • A number of students get the scholarship for Furthur study.
  • A number of students pass during the year.
  • How many of students get a good position in the examination board?

What is the Difference between Efficiency and Effectiveness?

 Characteristics Efficiency Effectiveness
About Measure of output over input Measure of output
 Measure Mosly quantitative  Usually qualitative
 Focus  Operational focused  Result oriented
Example Efficiency is doing things right Effectiveness is getting things right

Why they Matter?

Efficiency and effectiveness are important parts of the value for money audit. which is conducted in not for profit organizations to measure performance.

Commercial organizations also use these measures to lean their operations. In the modern era, technology has drastically changed the ways organizations operate, now they are more efficient and effective by utilizing modern machinery and information technology techniques like e-commerce, EDI etc.


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