Efficiency and effectiveness are two closely linked concepts that are, unfortunately, often misunderstood. So what are efficiency and effectiveness?
Efficiency
Efficiency relates to the amount of resources (input) used to achieve a goal (output). Efficiency can generally be conceived of as the ratio of the output to the input of any system. An efficient system would have a high output to input ratio, that is, it would produce a lot of the output for little of the input. There are different situations that can describe a gain in efficiency:
1. producing more output with a given amount of input
2. producing a given amount of output with a reduced amount of input
The other 2 situations representing possible efficiency gains,
3. producing more output with more input
4. producing less output with less input
depend on the measure of the ratio of output to input. In the first case, an additional amount of input must lead to the creation of more additional units of output than the current value of the ratio for the situation to represent a gain in efficiency. In the second, a reduction of one unit of input must be accompanied by a reduction of less units of output than the current value of the ratio. In other words, the output to input ratio must increase.
Effectiveness
Effectiveness relates to whether the means used lead to the end. In other words, whether the action has the intended result. In the business context, it most often refers to the extent to which a program or service is meeting its stated goals and objectives (or outcomes). Improving the effectiveness usually means changing something (normally the action) that will increase the extent to which the goal is met. For example, improving the effectiveness of an anti-smoking program would mean changing something that would increase the percentage of people who smoke (if that’s the indicator you decide to use to measure the achievement of the goal).
It should be noted that a program’s effectiveness can be increased by changes outside the scope of influence of the program. Changes external to a program can impact the effectiveness of a program, both positively and negatively. That is part of the reason of environmental scanning. Effectiveness is one of those concepts where it is important to understand the difference between correlation and causality.
