Productivity is Effectiveness x Efficiency

November 3, 2018

 

 

Efficiency is doing things right. It means optimizing the use of resources, viz., time, energy, effort, money, in order to achieve the desired outcome or producing the desired result.  Often confused with effectiveness, efficiency is a measurable concept, since it can be quantified.  In simple terms, it is ratio of the output in units to the input in units. 

 

If you can achieve the same result in lesser time, using lesser resources, you are more efficient. At the same time, no result is perfect.  There is almost always scope for improvement, the latest in technology or alternative resources that can be used to save time, effort, money or energy.  

 

When organizations compete, the more efficient organization has an advantage over the other. Productivity ratios are calculated based on outputs and inputs. Traditional labour productivity measures of standard hours to productive hours are the same.  In a service organization, efficiency would generally mean parity between the billed hours, paid hours, performed hours and scheduled hours. However, efficiency increases when the performed hours are lower than the billed hours. 

 

Baldamus points out that ‘as the word efficiency has no scientific fundament, we are inclined to assume without question that to maximize efficiency is desirable if not indeed the chief purpose of industrial enterprise.’ This preoccupation with efficiency has resulted in a trend that excludes the less quantifiable yet essential components of running a successful global organization.

 

As a measurable concept, it gives a good indication of how the organization’s resources are being utilized. Quite obviously, the lesser the resources used, the greater the benefit for the organization. Unfortunately, most organizations focus on reducing headcounts, rather than increasing the productive hours of the existing headcounts, causing long working hours and a stressed organization. To make it worse, organizations focus on doing things right and do not focus on doing the right things.

 

Effectiveness is doing the right things.  It is result-oriented and not resource-oriented. It is not about achieving the same outcome with lesser resources, but about achieving the outcome that is in the best interests of the organization. It is about prioritizing and strategizing. Not everything within an organization can get the same amount of focus and attention. Attempting to do that is an ‘overkill’ which simply defeats the core objectives – it leads to a plethora of activities, many of them efficient, but not necessarily effective. 

 

Effectiveness is qualitative – be it an individual or an organization. To be effective, one must achieve the greatest benefit aligned with the key objectives or purpose, not necessarily at the least cost. It means an organization, or an individual strives to achieve those ‘big rocks’ which are the priorities aligned with the vision of the organization. Doing the ‘right things’ is not easy and is quite subjective, especially when it cannot be measured easily.   Whereas it is easy to measure labour hours, time spent, cost incurred, etc., it is not quite as easy to measure levels of customer satisfaction, personal satisfaction, product quality, skills or personal calibre. This results in organizations ignoring one-half of what productivity is all about.

 

According to Currie, productivity is ‘the quantitative relationship between what we produce and the resources that we use’. Smith and Beeching said productivity is, ‘the volume of output which is achieved in a given period in relationship to the sum of the direct and indirect effort expended in its production’. In my opinion, both these definitions focus on efficiency alone and ignore effectiveness. Productivity should actually be defined as ‘obtaining the desired results in line with one’s vision, purpose and objectives by optimizing the use of available resources’.


In summary, productivity is the amalgamation of both efficiency and effectiveness. There is no point in doing something efficiently, when in fact it should be done at all

 

I can give you hundreds of examples, but let me offer two for the purpose of this article – one organizational and the other personal. Consider an organization which routinely clocks the in and out time of every individual to ensure that ‘standard working hours’ are maintained; yet it does not consider the idle time, wastage of time during office hours, the output that the individual has achieved in comparison to the benchmark and whether the efforts put in during those hours are result-oriented. At the personal level, consider you are extremely nimble at using the keyboard and play video games, high efficiency indeed, but is this in alignment with your life’s purpose and objectives?

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