Efficiency vs. Effectiveness: What’s The Difference? (With Examples)

By Chris Kolmar - Nov. 16, 2020

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Efficiency and effectiveness are two buzzwords that get thrown around a lot in the business world. However, they are frequently employed incorrectly and interpreted poorly.

Incorporating a methodology that is both effective and efficient is the goal of every business. Knowing the difference between the two terms is the first step to developing more productive practices.

What Is the Difference Between Efficiency and Effectiveness?

Efficiency is doing things the right way, while effectiveness is doing the right things. Something is effective if it produces the intended result, whereas it is efficient if it functions with the least use of resources. It is possible to be effective without being efficient and vice versa.

Consider these example scenarios for a better idea of the difference between efficiency and effectiveness.

  • Efficient. Alice develops a generic sales email she can send to 100 potential clients each day. 2% of her emails lead to a sale.

  • Effective. Bob researches potential clients and crafts a tailored email for each. He sends ten emails a day. 40% of his emails lead to a sale.

Alice has found a way to maximize her working hours, as far as customer contacts per hour go. She has the same resources as Bob (time, effort, list of leads, etc.) but achieves more connections. In other words, Alice has maximized her output, given the same input as Bob. She has streamlined the process of reaching a large number of clients quickly.

Bob, on the other hand, has a strategy for closing sales more regularly. He spends more time and resources on each email, but that effort pays off with a higher success rate. Bob has prioritized developing meaningful connections over contacting a maximum number of clients in the shortest time frame. He has focused on the goal of selling the company’s products rather than performing that function quickly.

Here’s a quick breakdown of the differences between efficiency and effectiveness:

  • Efficiency

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    • Process-oriented (best possible methods with least wasted resources)

    • Improves current workflow (present-oriented)

    • Measurable using predefined metrics

    • Time-sensitive

    • Input/output ratio matters

    • Primarily concerned with internal mechanisms (using minimal company resources for maximum payoff)

  • Effectiveness

    • Goal-oriented (best possible result, regardless of resources used)

    • Improves quality of work (future-oriented)

    • Difficult to measure

    • Not time sensitive

    • Input/output ratio is unimportant

    • Primarily concerned with external results (competitive position in the market)

While efficiency and effectiveness focus on different aspects of a well-functioning business, they are not mutually exclusive. Let’s expand our hypothetical scenarios from earlier to include more people.

  • Inefficient and ineffective. Connor crafts a generic sales email and sends it to twenty potential clients a day. 1% of his emails lead to a sale.

  • Efficient and effective. Denise develops a partially generic sales email, then incorporates client research to make each email somewhat personally tailored. She sends it to twenty potential clients a day. 30% of her emails lead to a sale.

As you can tell, every business wants an employee like Denise. She has developed a more efficient system than Bob’s while only sacrificing a bit of effectiveness.

Connor is the ultimate drag on business. His tactics are ineffective in leading to sales, and he employs those tactics inefficiently.

For those keeping track at home: Alice (ineffective, efficient) makes two sales per day, Bob (effective, inefficient) makes four, Connor (ineffective, inefficient) makes 0.2, and Denise (effective, efficient) makes six.

What Comes First, Effectiveness or Efficiency?

Effectiveness should be the first priority of any business, followed by developing efficient practices. Think of it this way: if it’s your first time baking an apple pie, are you more concerned with crafting a delicious dessert or baking it in record time and with the fewest apples? Clearly, delivering a tasty treat is more important than baking it efficiently.

In the same vein, businesses should strive only to perform tasks that effectively promote profits and growth. It doesn’t matter if a company can develop a project with few resources in a short space of time if that project doesn’t align with corporate goals.

The biggest issue with prioritizing efficiency over effectiveness is that people may never actually perform their tasks because they become stuck trying to optimize how they complete it. It is essential first to learn how to perform a task, even if your methods are not optimal. Then, you can iterate and improve, making the completion of your effective task more efficient.

The first step in making a productive company is focusing on effectiveness., even at the cost of efficiency. Once a business puts effective practices in place, the company can begin making those practices more efficient.

What Does an Effective Leader Do?

An effective leader looks outside the bounds of his or her company to the bigger picture. He or she sets expectations that individuals can easily align with their work practices. It takes discipline and long-term thinking to be an effective leader. Following these tips can make your leadership more effective:

  • Do the right things. Sounds simple, I know, but doing the right things poorly is more important than doing the wrong things well. Effective leaders manage their workers, so they spend time only on work that aligns with broader corporate goals.

  • Seek feedback. Effective leaders are aware of their blind spots. They value contributions from employees who have ideas on developing more effective methods and inspire others to create ideas that can aid the company.

  • Hire and develop the right people. You can have the best strategies in the world, but if you don’t have the human capital to make it happen, you’ve got next to nothing. Effective leaders invest in recruitment strategies that attract top talent. They also develop the strengths of existing employees and internally promote those that best contribute to the company’s effectiveness.

  • Synergize. Corporate goals are all fine and well, but they take several departments and countless individuals to actualize. Effective leaders know how to encourage collaboration and communication so that all workers understand what their broader goals are and where they fit into those goals.

  • Manage time. Time is a company’s most valuable resource. Effective leaders maximize their time by focusing on long-term strategies and determining corporate goals. They don’t get bogged down in the minutiae of day-to-day tasks, instead seeking to optimize the value of those tasks.

  • Make decisions. Effective leaders make big picture decisions using the input of those around them. They also take both the internal (available resources) and external (market trends) elements into account before reaching a decision.

Evolving to Efficiency

Once a company puts effective methods into place, evolving its efficiency is the next step. If a company has a top-quality product but struggles to deliver it to clients efficiently, they will struggle to compete in the market. That’s the macro view of things. On an individual level, we can break down the evolution to efficiency into five steps:

  1. Practice the most effective ways of performing your task, regardless of the time and resources spent.

  2. Learn more about the process through trial and error.

  3. Look for actions that can be automated, done with fewer resources, completed faster, or cut out entirely.

  4. Analyze the results of these changes and see how much effectiveness you lose by optimizing efficiency.

  5. Repeat the process and continue to adjust.

Companies that establish effective practices but don’t look for a better way to perform them succumb to inefficiency. The key is to develop key performance indicators so that any structural changes made to improve efficiency can be adequately measured and altered if need be.

Balancing Effectiveness and Efficiency

As you can probably tell by now, balancing effectiveness and efficiency is the Holy Grail for any business. If efficiency is doing things the right way and effectiveness is doing the right things, then a good balance of the two means doing the right things the right way.

That means starting with a solution, however imperfect, to a problem. Then, implement that solution and learn from it. Finally, use your experiences to determine the best ways to improve upon that solution to increase efficiency.

Ultimately, clients want an effective product. But if a company can’t keep up with the demand, their market share will fall off. Every situation is different. A company that’s trying to grow aggressively and has ample resources might prioritize effectiveness. But a company that’s content with their market share and has limited resources will prioritize making their operations more efficient.

Finding the balance between effectiveness and efficiency is the ultimate goal, whether on a personal or corporate level. Work to find the most effective methods and then adjust those to maximize efficiency, and you’ve positioned yourself to be productive and successful.

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Chris Kolmar

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Chris Kolmar

Chris Kolmar is a co-founder of Zippia and the editor-in-chief of the Zippia career advice blog. He has hired over 50 people in his career, been hired five times, and wants to help you land your next job. His research has been featured on the New York Times, Thrillist, VOX, The Atlantic, and a host of local news. More recently, he's been quoted on USA Today, BusinessInsider, and CNBC.

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