Tug of War between Efficiency and Productivity
Productivity and efficiency are related, but they do not mean the same. Productivity is the amount of work done in a specified time, considering inputs. Efficiency means how well you use resources and effort to produce quality results. So, which one do you want to improve in your company – or is it both?
Of Course, Both!
Doing more with less effort is efficient. You achieve true productivity when you get more done (quantity) with less effort (efficiency), making the most of the same resources.
Productivity is the ability to get more outputs from the resources at your disposal within a set timeline (performance). You are more productive when the amount of output increases, whether in your personal or professional life.
Productivity in business is output per hour per worker or output per hour. Business productivity assesses how efficiently organizations or individuals use labor, time, and capital inputs to produce high-quality outputs (products and services).
If your company has a profit margin of $85,000 it is more productive than one with a profit margin of $50,000.
Today you may be more focused on results and figures because of the market’s competitive nature. Nevertheless, productivity is not limited to the number of goods produced or services rendered during a specific time frame. Instead, productivity is the quantitative relationship between a unit of output and the units of particular inputs.
Therefore, productivity is a business measure that tells you the total number of goods and services provided in a certain amount of time for each factor resource (employee, capital, time, costs, etc.).
The simple formula for measuring productivity in business is
Total Output/Total Input = Productivity
Let’s take, for instance, a translator who manages 5000 words daily in 10 hours.
Five thousand words are the output, and 10 hours is the input. The productivity of the translator then is 5000/10=500 words per hour. It may even be possible to increase that output by installing tools (like translation software for a first draft), streamlining business procedures, eliminating distractions, etc.
Efficiency is the ability to do something or achieve results without wasting resources (time, effort, or money).
It focuses on achieving the best or the same results with minimal effort, and less time, without compromising quality. It is doing things right.
Overall, the term efficiency refers to the highest level of performance that uses the fewest resources to produce the most output.
Efficiency measures how much work or energy you conserve to accomplish a goal.
It is the energy output divided by the energy output and then multiplied by 100.
Efficiency = Energy Output × 100
The reason why we multiply by a hundred is that efficiency is a percentage. The higher the ratio, the more efficient a process is.
How to get the right productivity vs. efficiency balance
Businesses and people looking to improve their lives should strive to improve productivity and efficiency, and below, we explain why.
While productivity offers the quantity, efficiency provides quality.
For instance, if an HR interviewer speeds up interviews and skips questions, in the quest for increased productivity, it undermines the quality of interviewees. That practice in the long run will cause the company to hire the incompetent employees who cost the business more.
Efficiency considers the cost factor, but productivity does not.
Using the same HR example, it is likely that the company later needs to invest in training and development to equip new hires with needed skills. So cutting corners is not worth it.
The work output of the new hires has to be up to standard with the organization’s culture.
Efficiency is the refined measure, while productivity is the raw output.
Raw productivity reflects the numbers, while efficiency demonstrates the amount of produced units or services rendered that positively affect a business’s bottom line. Management must always consider efficiency as organizations plan to increase productivity.
So, productivity and efficiency do not mean the same.
Efficiency borders on Quality and achieving similar results with less time. On the other hand, productivity relates to Quantity.
If you focus on efficiency alone, you lose productivity, which drives profits. If you focus on productivity alone, you lose efficiency and fail to account for underlying costs like waste and correction costs.
Thus, for a company to achieve true productivity, efficiency and productivity must be intricately linked and in balance.