Difference Between Efficiency and Effectiveness

Efficiency and effectiveness are both commonly used management terms. Yet, while they sound similar and start with the same letters, they both mean different things.

Efficiency refers to doing things in a right manner. Scientifically, it is defined as the output to input ratio and focuses on getting the maximum output with minimum resources. Effectiveness, on the other hand, refers to doing the right things. It constantly measures if the actual output meets the desired output.
Since efficiency is all about focusing on the process, importance is given to the “means” of doing things whereas effectiveness focuses on achieving the “end” goal.

Efficiency is concerned with the present state or the “status quo”. Thinking about the future and adding or eliminating any resources might disturb the current state of efficiency. Effectiveness, on the other hand, believes in meeting the end goal and therefore takes into consideration any variables that may change in the future.

In order to be efficient time and again, discipline and rigor is required. This can build inflexibility into the system. Effectiveness, on the other hand, keeps the long term strategy in mind and is thus more adaptable to the changing environment. Effectiveness is acceptability, usefulness or suitability from the users or market point of view. An overhead bridge may be constructed most economically and in record time. But it may not be effective, if few people make its use because they find an alternate route much convenient.

Since efficiency is about doing things right, it demands documentation and repetition of the same steps. Doing the same thing again and again in the same manner will certainly discourage innovation. On the other hand, effectiveness encourages innovation as it demands people to think, the different ways they can meet the desired goal.

Efficiency will look at avoiding mistakes or errors whereas effectiveness is about gaining success.

Effectiveness and efficiency follow a normal curve pattern,
or more likely a normal curve with negative skew, which
means that effectiveness and efficiency fall off faster than
they develop, which means that challenges don’t just
creap in; the pace is more of a gallop.

In the earlier days of mass production, efficiency was the most important performance indicator for any organization. However, with consumers facing an increasing number of choices, effectiveness of an organization is always questioned. In order to be a successful organization, there needs to be a balance between effectiveness and efficiency. Only being efficient and not meeting the requirements of the stakeholders of the organization is of little use to anybody. And effectiveness may result in success but at what cost?

Let’s use a practical example to illustrate the concepts. Suppose that two guys, Mark and John, are trying to change a flat tire on their cars (each one has his own car).

Mark starts by taking out the jack and placing it under the car. He quite doesn’t know where to position it, so he goes by trial and error and wastes a lot of time doing it. After 20 minutes he finally manages to fix it, so he proceeds to lift the car and change the tire.

As you can see Mark was doing the right thing, but he was doing it poorly. We can say that he was being effective, but not efficient.

John, on the other hand, starts by grabbing a towel and cleaning the tire. He wants to make the thing shiny before he changes it. And mind you he is very good and fast at cleaning every little detail of the tire.

We can say that John is being efficient, because he is cleaning the tire fast and throughly, but he is not being effective, because cleaning is a step that is not required at all when changing a flat tire.

Now if we had a third person, Peter, who could change the flat tire using the right steps and doing it quickly, we could say that he was both effective and efficient.

Summary:

1. Efficiency is having more output for the same input or less input for the same output.
2. Efficiency means doing the things right whereas Effectiveness is about doing the right things.
3. Efficiency focuses on the process or “means” whereas Effectiveness focuses on the end.
4. Efficiency is restricted to the present state whereas effectiveness involves thinking long term.
5. Organizations have to be both effective and efficient in order to be successful.

Sources:
http://www.differencebetween.net/business/difference-between-efficiency-and-effectiveness/
http://www.dailyblogtips.com/effective-vs-efficient-difference/