EFFICIENCY AND EFFECTIVENESS

BALAKUMAR V
INTRODUCTION
 In almost all Industries, Efficiency and Effectiveness terms are used.

 ‘’Efficiency is doing things right’’.

 ‘’Effectiveness is doing the right things’’.

 The Efficiency is the relationship between the result achieved and the
resources used.

 Effectiveness is the extent to which planned activities are realized and

planned results are achieved.
EFFICIENCY
 Efficiency means doing things right.

 It is Focused on the Process. Thus it is very Important factor for the Organization.

 It is the ratio of output to input and focuses on getting the maximum output with
minimum efforts and resources.

 So the Efficiency is Productivity Metric.

 Efficiency is the ability to do something or produce something without materials,

time or Energy.

 Being Efficient Means spending less time on something, Spend less money on
something or spend less effort on Something.
EXAMPLE OF EFFICIENCY
 If We are making 1000 Products per Shift.

 1000 Products are the maximum products that we can manufacture. Out of that
20 Products are get Rejected.

 So We Can Say the Efficiency of the Process is = Actual Output / Target Output =
1000/1000 = 100%.

 But the Effectiveness of the Process is = Total Good Output / Total Output =
980/1000 = 98%.

 Being Efficient Means spending less time on something, Spend less money on
something or spend less effort on Something.
Key Performance Indicators for Efficiency :

Refer to the below KPI’s that is related to efficiency.

Overall Equipment Effectiveness ( OEE ).

Inventory Turn Around time.

Conversion Cost Per Unit.

Productivity in Revenue per Employee.

Energy Cost per Product Manufacturing.

Visualization of Effeciency vs Effectiveness :
EFFICIENCY

EFFECTIVENESS
RESOURCES PROCESS OUTPUT

TARGET
EFFIECTIVENESS
 Effectiveness is doing the right thing.

 It is End result-Focused.

 Effectiveness is constantly measured if the actual output meets with the desired
output or not?

 Thus it is focused on the end result. It is a very important factor with respect to
the customer’s perspective.

 So the Effectiveness is a Quality Metric.

 Effectiveness is doing the right things in the right way at the right time.
EXAMPLE OF EFFECTIVENESS
 If We are making 990 Products per Shift. 1000 Products are the maximum
product that we can manufacture. Out of 990 Products, all are the ok Products.

 So We can say the efficiency of the process is = Actual Output / Maximum Output

= 990/1000 = 99%

 So We Can say the the Effectiveness of the Process is = Total Good Output / Total
Output = 990/990 = 100%.
Key Performance Indicators for Effectiveness :

Refer to the below KPI’s that is related to effectiveness.

On-Time Delivery.

QFTR – The Quality first time through Rate.

Number of Non-Compliance Events/Year.

Supplier’s Quality Rating.

 Efficiency Effectiveness
1. It Focuses on the maximum result with the least 1. It is doing the right thing in the right way of right
time and effort time.

2. It is focused on the Process 2. It is on the end result

3. It is a very important factor for the organization. 3. It is a very important factor for the customer.

4. Efficiency is a Productivity Metric 4. Effectiveness is a quality Metric

5. It is Yield Orientated 5. It is Result orientated.

6. Manufacture the maximum numbers of the product

6.Manufacture the Maximum Numbers of Good Products.
with minimum time and resources.
 Possible Cases of being Efficient and Effective Organization
Case-1: Organization is neither Effective nor Efficient

 In this Case, the customer will not give more business, and also the organization
will not make a good profit due to low Effectiveness and Efficiency. In this case,
the customer and the organization both are unhappy.

Case-2: Organization is Efficient but not effective

 In this Case, the customer will be dissatisfied due to the less effective, it may be
chances of the quality problem but input costs will be lower. In this case, an
organization might be happy for a lesser manufacturing cost.
 Possible Cases of being Efficient and Effective Organization
Case-3: Organization is Effective not Efficient
 In this Case, Customers will be satisfied due to high effectiveness. Customers will
get good quality Products but input costs will be higher for the organization. So
the profit will be lower side. In this Case, a Customer might be happy with good
product quality.
Case-4: Organization is Effective and Efficient
 In this Case, the customer will be happy with the good product quality and the
organization will also happy for the lesser input cost. So the profit will be on the
higher side. So this is a Win – Win Situation for Both.
THANK YOU