The differences between effectiveness and efficiency (with examples)

Two concepts widely used in the workplace and in business, but which do not mean the same thing.

In the business world, it is very common to use the terms effectiveness and efficiency as if they were synonyms.. However, they are two concepts that differ in some nuances.

Although this is a common mistake, it is very important to know how to differentiate between the two concepts given their importance in disciplines such as economics or, more related to the field of psychology, the field of scientific research.

In this article we will look at both terms according to their real meaning, highlighting how they differ and giving examples to facilitate their understanding. In short, we will see what are the differences between effectiveness and efficiency..

• Recommended article: "How to calculate the productivity of a company? Method and examples".

What do the terms effectiveness and efficiency mean?

Both words are widely used synonymously, both in general culture and in a field as specific as economics. In fact, it was not until the 1980s that Spanish-language dictionaries officially began to differentiate between effectiveness and efficiency, thanks in part to the interest that arose in that decade in the area of administration and management.

Meaning of Eficacia

The word efficacy refers to the ability to achieve the objectives set by an organization.. Thus, it is effective when the agreed goal is achieved from the beginning, regardless of how it was achieved or the process followed to reach it.

Meaning of Efficiency

On the other hand, the term efficiency refers to the ability to achieve the planned objective without wasting the resources allocated to it.. In other words, that resources are used as economically as possible with the intention of reaching the desired goal.

Differences

From these two definitions we can extract that the main difference is whether the resources have been properly consumed or not. You are effective when you achieve your goal, regardless of whether or not you have wasted resources, and you are efficient when you achieve your goal by making the best use of what you have.

Thus, a question that may arise once you have achieved your objective is whether or not you have wasted resources, a question that may arise once the two concepts have been defined is whether one can be effective without being efficient or vice versa.. It is possible to be effective, that is, to reach the agreed objective, but without being efficient, therefore, spending more resources than necessary. The opposite can also happen: being efficient, having spent fewer resources than necessary, without being effective, not having achieved the desired objective or as it was intended to be achieved.

In any case, we must bear in mind that both effectiveness and efficiency are important concepts in business administration and in the field of Human Resources. Part of the performance of workers and departments depends on the work dynamics applied, and part of it has to do with individual variables of each member of the organization: level of technical knowledge, soft skills, attitudes and beliefs, etc.

Efficiency characteristics and calculation

This term focuses on the objectives or results of the process, without taking into account how they have been achieved or whether resources have been misused.

Checking whether the objectives have been achieved is something that can be done in an objective and quantifiable way. Efficacy is measured in terms of the result obtained, comparing it with the result that was originally expected.

Relating it to the field of health, we say that a treatment is effective when it has been studied in laboratory conditions and has been shown to be useful in improving a certain problem, such as a psychological disorder or a disease.

However, However, it should be noted that the fact that a treatment has been shown to be effective experimentally does not mean that it will have the same results.does not mean that it will have the same results when used in clinical practice, since patients may present multiple characteristics that were not taken into account under experimental conditions.

To simply calculate the efficacy of, for example, a company, the following formula can be used.

(result obtained x 100)/ expected result = % of efficiency

Let's take a practical example. A dairy company aims to produce 100 yogurts per day, but today it made 150 yogurts per day:

(150 yogurts x 100)/100 = 150% efficiency.

Having an efficiency of 150% means that they have produced more than originally planned, i.e. they have been more efficient than desired.

Efficiency and calculation characteristics

Efficiency refers to the ability to achieve the objective without using more resources than strictly necessary.. The degree to which one is efficient is subjective and qualitative.

Thus, efficiency is not only limited to achieving the goal, but also aims to obtain the best result by making the most profitable use of resources. It starts from the premise of minimizing costs and maximizing results, therefore, it focuses on the process by which the products are obtained.

A psychological or pharmacological treatment is efficient when it positively influences the problem to be treated with low costs, whether social or individual. For example, if a drug improves mood but is extremely expensive, it will be inefficient because, despite being able to treat a health problem, its production involves too high a cost.

Measuring efficiency involves taking into account the relationship between the results obtained and the actual cost, comparing them with the expected results and the expected cost.

Efficiency is not only about not wasting resources, it is also about detecting what is being done wrong and what influences the results, so that the production process can be redirected to avoid wasting resources.

To calculate efficiency, subjective factors can be taken into account, such as, for example, the qualities of the product or how attractive it is to the market; however, what is fundamental in its calculation is to take into account factors such as the invested expenditure, the type of resources used, the production time...

Formula for calculating efficiency

The calculation of efficiency is somewhat more complicated than that of effectiveness. For this reason, the following example will be presented in much more detail.

Basically, the following formulas must be followed:

• Result obtained / (expenditure invested x working time).
• Expected result / (expected expenditure x expected time).
• Both coefficients are divided and the result shows the level of efficiency.

To illustrate this, let's go back to the case of the dairy factory. Let's imagine that this factory produces 150 yogurts in less than 24 hours at a cost of €1 each, with a target of 100 per day at a cost of €1.20. Taking these data into account, the calculations would be as follows:

150 yogurts produced / (1 € of invested cost x 24 hours) = 6.25 100 yogurts expected / (1.20 € expected expenditure x 24 hours) = 3.5 6,25 / 3,5 = 1,78

We have obtained that the efficiency has a value of 1.78. Since it is greater than 1, this means that the work is efficientSince it implies that no more has been spent than necessary, but rather the opposite, a greater quantity than expected has been obtained by investing less.