EFFECTIVENESS & EFFICIENCY IN BUSINESS

 EFFICIENCY AND EFFECTIVENESS

Efficiency and effectiveness are the main tools of measuring the success of organizations or

inter-organizations.


  •  Efficiency:

Efficiency can be easily defined as “doing things right”. It alludes the function of getting

the maximum output out of minimal inputs.


Efficiency can be classified into 2 types

1. Input efficiency- it can be obtained by reducing the amount of input to get the

same level of output.

2. Output efficiency-increasing the amount of output produced with maintaining the

same level of inputs

Example:

A baker who bakes fresh bakery products always worked with the objective of earning profits 

by increasing the quality of his products to retain the customers, to increase the customer

satisfaction continuously. He normally bakes 50 buns in an hour and is thinking of ways to

improve is efficiency and effectiveness in order to increase his productivity.

Efficiency:

50 buns – output one hour- input

Input efficiency: He producing 50 buns in 45 minutes

Output efficiency -he being able to produce 60 buns in an hour






  • Effectiveness:

Effectiveness is simply “doing the right things”. It is the measurement of the capability

of an output in achieving the organizational objective.

Example:

The bakery products being able to earn profits, retain the customers, to increase the customer

satisfaction continuously will help the baker improve his effectiveness.




  •  Productivity

Productivity is “doing the right things in the right way”. An organization will be

able to see a rise in its productivity if it continuously focusses on increasing its

effectiveness, efficiency. Productivity is an indicator for understanding the

effectiveness, efficiency of an organization.

Productivity = Output / Input



It is the responsibility of a manager to use the scarce resources efficiently to achieve the

organizational objective effectively. (sir’s note) Minimum resource wastage leads to high level

of efficiency. Working hard towards attaining the organizational goal can help the organization

achieve high level of effectiveness. Management strives to maintain high levels of both

effectiveness, and efficiency which will lead the organization in a successful path.






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