Saturday, February 16, 2008

Efficiency in business

Efficiency is an often used term that is not as well understood as one may think.

I've done efficiency coaching with hundreds of executives and one day I realized that efficiency is often confused with effectiveness. And these two ideas are not the same at all. I have looked them up at - by the way, this is a very helpful website - and here is what I found for effectiveness:
  • noun: power to be effective; the quality of being able to bring about an effect

An action can be said to be effective, when the purpose of doing it or the desired effect is achieved. This is a rather black and white proposition. Effect achieved - effective. Effect not achieved - ineffective.

With Efficiency, a new idea comes in. It already assumes, that someone or something is effective and adds another quality. It is defined as:

  • noun: skilfulness in avoiding wasted time and effort (Example: "She did the work with great efficiency")
  • noun: the ratio of the output to the input of any system

Any effect can be achieved if one uses enough time and effort or energy. And efficiency can be seen as a gradual scale from inefficient - wasting time and effort or energy to efficient - no waste of and little consumption of time, effort and energy.

Economically an increase in efficiency usually equals an increase in profits.

Every learning or development process has these two steps: first one is concerned with the effectiveness only. A child learning to walk, finally can do so on his own without the help of his parents. The learning process was effective. Now the child can learn to run, walk backwards, turn, jump, balance and stand on his toes and thus increase his efficiency.

Differentiating these two concepts can help an executive to analyse and increase his personal efficiency and that of his staff.


Doug said...

That makes a lot of sense. Great data. Love you blog.

Rick said...

Thanks Gerhard. Interesting, enlightening. I will give that a try. I am always trying to think like that in fact that’s what has given me an edge over the years. I question the way everyone does it and often find there are much more efficient ways to do things.