Are Efficiency and Productivity the same?

Both could help Business Profits.

“Great Companies Obsess Over Productivity, Not Efficiency”

That was the title of an article in the Harvard Business Review by Michael Mankins in 2017.

WHICH IS MORE IMPORTANT – EFFICIENCY OR PRODUCTIVITY?

Efficiency is usual expressed as the amount of effort in man hours required to accomplish a given task, when compared with the standard in that industry for the task.

In company A, if it takes 15 hours effort compared to the industry standard of 10 hours – activity is 66% Efficient, whereas for Company B does it with 8 hours effort they are 125% Efficient.

Productivity is expressed as the ratio of Output to the Input required. These are typical measured in Pounds £.

For a company C, that generates an Output worth £100 and incurs a cost of £80 (Man power effort, raw materials, overheads, etc), the Productivity would be 1.25

WHAT IS THE DIFFERENCE?

The real difference comes when looking at the strategy to improve the numbers.

• Cut Costs, (headcount, hours of effort) — in order to improve profitability.
• Grow Revenue (better marketing, more effective sales) – increasing the value of the output for the same input.

It is this difference in emphasis that leads to “Great Companies Obsess over Productivity”.

One way to increase Productivity is with Automation.

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Please see Productivity FAQ page for details on some of the terms / jargon used above.