Productivity, Efficiency, Effectiveness: Which is best for business?

As a business leader, you should devote significant time to understanding productivity, efficiency, and effectiveness. These concepts sound similar on the surface, and they’re often treated as interchangeable terms in everyday language. Still, they’re very different in execution and affect your business over time. Learn the differences between productivity, efficiency, and effectiveness, how each can help your business, and how you can apply them to improve the bottom line.

Productivity

Productivity is measured in terms of output rate per unit of input. According to the UK productivity puzzle, this output rate has slowed down since the financial crisis struck. Productivity is essential for all businesses as it represents the work and the pace of strategy execution. Often forming a necessary part of goal-setting, achieving faster business growth starts with stepping up productivity and performance.

According to Forbes, 12 tried and tested techniques can make your business more productive. These include setting clear deadlines, taking structured breaks, avoiding unproductive meetings, establishing a tighter focus and concentrating on progress, not perfection. It’s no coincidence that all of these techniques can be achieved using OKRs, objectives and key results. This goal-setting framework clarifies what’s expected of people at all levels. It helps direct focus and resources to become more productive, efficient and effective in producing an enhanced result.

Efficiency

Efficiency is different. People can become very efficient in their tasks, however, unless they follow a structured plan of highly focused strategy execution, it’s prevalent for people to become focused on busyness, instead of business. They do things efficiently the way they’ve always done something out of habit, with little thought of what’s the best way to do it under the current circumstances. People like to be busy, but this can be unproductive without clear direction.

One of our favourite quotes here at Reclaro is from Peter F. Drucker:

It’s more important to do the right thing than to do things right.

An effective leader should focus on doing the right things to move the business forward. Efficiency is still important as it is concerned with minimising the resources required to produce the desired result. It is the ability to do something successfully with minimal input, and so with clear direction and tight focus, efficiencies can be improved and put to productive use.

Implementing an OKR framework will help leaders identify business areas that have gradually become less efficient over time. Once identified, appropriate action can be taken to improve efficiencies within those areas, which leads to higher levels of productivity and overall efficiency, when direction and focus are abundant.

Effectiveness

Effectiveness refers to how successful something is in producing the desired result. Within a business sense, effectiveness relates to the effects of employees’ actions. Effectiveness refers to how successful something is in producing the desired result. Employees demonstrating effectiveness in the workplace are producing high-quality results.

Similar to productivity, increasing effectiveness means aligning a more focused effort towards achieving strategic goals. This requires a planned out, strategic approach, with measurable, quantified steps that ensure timely progress. Once again, this is exactly what you get with OKRs, objectives and key results! To quote Peter F. Drucker again, “efficiency is doing things right; effectiveness is doing the right things” once you combine these, that’s when the magic happens!

Three key takeaways

1. If you can reach a high level of productivity, efficiency and effectiveness in business, you are likely to be operating at an exceptional level, producing the best outcome and achieving your goals.

2. OKRs, objectives and key results can help businesses achieve this high-performance level by aligning roles and responsibilities with the overall strategic vision. Hence, employees know exactly where they should focus their efforts for maximum impact and avoid simply being busy without direction.

3. The best outcome is that workers become more productive and effective, in an efficient way.

Check out our blog on setting impactful OKRs for high performance for more insight into this topic.

Alternatively, if you’d like to get started with OKRs in your business, download our free resource - The OKR Builder™- which includes a step by step guide on how to write compelling OKRs at different levels within an organisation.

Curious to learn more about the UK Productivity Puzzle? Complete our simple cost calculator to find out how much it could be costing your UK business every year!