You may like to consult the classic book by Arthur M. Okun -Equality and Efficiency -The Big Tradeoff. Arthur Okun was the Chairman of the Council of Economic Advisers in the Johnson administration. The book is the edited version of the Godkin lectures he delivered at John F. Kennedy School at Harvard University in April 1974.This is published from Brookings Institution Press, Washington DC.

Efficiency

Efficiency and effectiveness are both commonly used management terms. Yet, while they sound similar and start with the same letters, they both mean different things.

Efficiency refers to doing things in a right manner. Scientifically, it is defined as the output to input ratio and focuses on getting the maximum output with minimum resources. Efficiency in the workplace is the time it takes to do something. Efficient employees and managers complete tasks in the least amount of time possible with the least amount of resources possible by utilizing certain time-saving strategies. Inefficient employees and managers take the long road. For example, suppose a manager is attempting to communicate more efficiently. He can accomplish his goal by using email rather than sending letters to each employee. Efficiency and effectiveness are mutually exclusive. A manager or employee who's efficient isn’t always effective and vice versa. Efficiency increases productivity and saves both time and money.

Effectiveness

Effectiveness, on the other hand, refers to doing the right things. It constantly measures if the actual output meets the desired output. Since efficiency is all about focusing on the process, importance is given to the ‘means’ of doing things whereas effectiveness focuses on achieving the ‘end’ goal. In other words, Effectiveness is the level of results from the actions of employees and managers. Employees and managers who demonstrate effectiveness in the workplace help produce high-quality results. Companies measure effectiveness often by conducting performance reviews. The effectiveness of a workforce has an enormous impact on the quality of a company’s product or service, which often dictates a company’s reputation and customer satisfaction.

Efficiency is concerned with the present state or the ‘status quo’. Thinking about the future and adding or eliminating any resources might disturb the current state of efficiency. Effectiveness, on the other hand, believes in meeting the end goal and therefore takes into consideration any variables that may change in the future.

In order to be efficient time and again, discipline and rigor is required. This can build inflexibility into the system. Effectiveness, on the other hand, keeps the long-term strategy in mind and is thus more adaptable to the changing environment.

Since efficiency is about doing things right, it demands documentation and repetition of the same steps. Doing the same thing again and again in the same manner will certainly discourage innovation. On the other hand, effectiveness encourages innovation as it demands people to think, the different ways they can meet the desired goal.

Efficiency will look at avoiding mistakes or errors whereas effectiveness is about gaining success.

In the earlier days of mass production, efficiency was the most important performance indicator for any organization. However, with consumers facing an increasing number of choices, effectiveness of an organization is always questioned. In order to be a successful organization, there needs to be a balance between effectiveness and efficiency. Only being efficient and not meeting the requirements of the stakeholders of the organization is of little use to anybody. And effectiveness may result in success but at what cost?

Summing up the following can be stated:

1. Efficiency means doing the things right whereas Effectiveness is about doing the right things. 2. Efficiency focuses on the process or ‘means’ whereas Effectiveness focuses on the end. 3. Efficiency is restricted to the present state whereas effectiveness involves thinking long term. 4. Organizations have to be both effective and efficient in order to be successful.

Improving Efficiency

Employees and managers are often inefficient because they either don’t know how to be efficient or do not have the necessary tools to perform tasks efficiently. Ways to improve efficiency include meeting with managers and employees to outline ways to implement efficiency in the workplace and asking for opinions on what the workplace is missing. For example, a small business that lacks an employee email system prevents managers from communicating with employees efficiently.

Improving Effectiveness

To improve effectiveness, companies must take the initiative to provide thorough performance reviews, detailing an employee’s weakness through constructive criticism. Managers must make it a point to address effectiveness and explain how an employee’s performance affects the company as a whole. To avoid a workplace full of ineffective employees, companies must hire high-performing employees by weeding out candidates at the recruiting level. Employees are often ineffective because they don’t care about their work or because they don’t possess the skills to contribute. By interviewing candidates, calling references and conducting tests, companies can bring on employees with skills better suited for performing at a high level.

For my comments it is easy to confirm that these concepts are often used interchangeably and with little consistency, and in some cases improvements to efficiency or effectiveness can appear to be interdependent. In general, efficiency is a measurable concept, quantitatively determined by the ratio of useful output to total input. Effectiveness is the simpler concept of being able to achieve a desired result, which can be expressed quantitatively but doesn't usually require more complicated mathematics than addition.

Marketers need both efficiency and effectiveness metrics. Effiiciency metrics are from cost / resource optimization perspective (output /input) while effectiveness metrics check how effective the process was in meeting the customer (internal, external) requirements.

Here’s an easy way to distinguish whether your metric is one or the other:

• If the metric is measuring how well you squeeze out waste or cost or measure maximum output for input, it’s most likely an efficiency metric. Marketing spend, and cost/per lead, lead/rep are examples of efficiency metrics.
• If the metric is measuring how well you are contributing to or producing a desired result, it is most likely an effectiveness metric. Share of preference, share of wallet, products/customers are examples of effectiveness metrics.

efficiency: optimum level of input and output ratios without considering your objectives.

effectivenes: the extent that you reached your objectives.

If so, @Jorge and @Murat, what about those many services where an important objective is improving their customer satisfaction, which is considered at the same time as the most significant output, which is otherwise not easily measurable?

Hi! Have look to the file I sent to you! It may help hopefully

Dear @Youcef, I thank you for your paper, but neither your work nor the others treat the interrelation among these parameters.

@Krenar, welcome, there are all possible definitions in that paper about the two criteria in the field of management. Anyhow that is all I have about the subject. Good luck. regards.

@Youcef, yes, it's exactly what I am saying: your paper purpose being focused only on the definitions of terms, it does not treat the interrelation among the terms, which may not only be shown in a certain form, like you are doing in your schematic representation, but also with an interpretation and possibly with a formula.

Moreover, your diagram is showing the efficiency entirely inside the effectiveness, while @Jorge and others clearly write that they are mutually exclusive, a total contrary view of both concepts in their interrelationship.

I am not sure if this paper can help you. Measuring efficiency is straight to the point by measuring outputs to inputs, where the I and O should be defined, as for a project most define the I/O as time, cost, scope. However measuring effectiveness is subjective since it is about the effects of the outcomes.

@Youcef, even this other paper is more focused on a time relationship between the terms. And, this time relationship does not figure out the real interrelation between the terms efficiency and effectiveness. It is not because two events have any time relation (simultaneous, successive or overlapped in any scale) that they are related between them in their essence. This is my opinion. I thank you for your contribution.

Can one say that they are always either inter-related or independent? I think it depends on each situation. To give a simple example: I prepare a meal in a short time, very tidy and carefully using the ingredients and energy so not to waste them, plate the food in a pleasing way - this is efficient preparation of a meal. The meal is does not have a pleasant taste, the quantity is unsuitable etc - it is not effective for an objective of preparing a nice meal. So I efficiently prepared an ineffective meal. Conversely the meal takes a long time, mess left in the kitchen etc but the meal tastes great - an inefficiently prepared effective meal. I do not think there is an overall there is a method to measure this relationship.

@Genevieve, the simple example you described above shows, at least in my opinion, that there is no relationship at all between efficiency and effectiveness, as the main output of your thought in that example is that a process, including its inputs and outputs, that is, a system, may be efficient without being effective or vice-versa. This kind of conclusions, logically I think, push to the independency between the terms, as two totally different ways of measuring a given process (and its output(s)), be it a project as in the case of Youcef, or a meal preparation, as in yours. I think that to answer your question - that is another way of formulating this thread's question - one must show at least one example that demonstrates the interrelation of efficiency and effectiveness. So, your comment "I think it depends on each situation" obligatorily needs another one than that of a meal preparation to demonstrate the interrelation of these two very important terms.

The Nobel Price winner in economics (1970), Paul Samuelson, has written many books on economics, micro and macro. He said, for instance, at his "Economics" 19e (2010), written with Nordhaus, that: "Remember that efficiency means that the economy's resources are being used as effectively as possible to satisfy people's desires." This is the only phrase I know, which is however not exemplified and I may confess that I do not understand it, that, as it is formulated, supposes an interrelation between efficiency and effectiveness, even though within the phrase one observes the expression "as effectively as possible" instead of effectiveness. More exactly, this Samuelson definition of efficiency shows a dependency of efficiency from effectiveness, but I repeat, I do not understand it, because I do not understand no more the "cost-effective" notion related to it, which must be, in my way of understanding things, cost-efficient instead of. But, then, the definition of Samuelson may not hold, as no one concept may be defined by using the same word or its relatives (cost-efficient for efficiency), still in my way of understanding things.

I am not an economist. I do not think that the statement from Samuelson & Nordhaus that you quote is itself effective. Have you asked Samuelson & Nordhaus to explain it?

If you think of the logic: efficient and effective is possible, efficient and effective is possible, not efficient and effective is possible, not efficient and not effective is possible - not dependent.

Efficiency and effectiveness are very broad terms - as you note regarding cost-effective where cost is a measure of effectiveness. To measure would depend on the specific aspect and objective that you are examining.

Dear @Genevieve, in all threads opened through/in RG, we try - at least me - to better understand any problem or issue by entering the corresponding question and waiting for the opinion of the others, which are supposed to be in such a condition to say something with the due authority/references and/or which makes sense in relation to the stated question. And, if any debate is provoked in the meantime, I suppose that we may discuss, accept or reject the opinions of others, making also recommendations if we totally or mostly agree with the question or any answer about it, that is any comment, or we find it (very) interesting.

I noted that you recommended the answer of @Murat, without any comment, which means that you totally agreed with. If one, at least me, consider/s the efficiency definition of @Murat - which is [as quite all other definitions of (technical and allocative) efficiency, the former being called also productivity] a definition of economics, and this is not a subject only for economists, as I now - may easily note that his view of efficiency excludes objectives, to which he is relating the definition of effectiveness. In short, I think that for @Murat there is no dependency at all between both terms, as one is related to inputs and outputs, excluding objectives, and the other is related only with objectives. Am I right, @Murat?

After some time, you thought to intervene with your comment, which in fact goes against your recommendation for @Murat, clearly, at least in my understanding, bringing doubts by asking in your first comment "Can one say that they are always either inter-related or independent?". Therefore, I supposed that you confirmed in your own way the question of this thread, didn't? Quickly after you continued with "I think it depends on each situation", following with one example that clearly shows no dependence between these two dimensions, because you are returning to @Murat definitions, which I understand does not link the ratio outputs/inputs with any kind of objectives. In this moment I asked you another example to show if these terms are dependent of each other.

Even the four possibilities you added in your second comment that show how both terms may be combined with each-other, in my strong opinion, continue to go to @Murat (but not only him, for sure) ideas. Because, you are presenting two assertions or propositions - let say p for efficiency and q for effectiveness - and their four possibilities of combination, which are well known in maths' logic as: (1) p and q, (2) p and not q, (3) not p and q, (4) not p and not q. But, here also, it is more than clear that you are saying still nothing about the relationship among p and q themselves.

After my comments to the contributions of @Youcef and @Genevieve, I observe that they have both choosen to unfollow the question, after having been engaged with comments, which are still valuable. Is it the right behavior? Does it help the discussion among the so-called researchers, scientists or whatsoever?

IMHO, efficiency refers to "doing things right": it is about precision; While effectiveness, refers to "doing right things": it is about accuracy; There's an inter-relationship (interdependency) between the two: if one cannot state an objective (target) accurately and precisely, it is hard to reach it precisely in an accurate way.

HOW TO MEASURE THOSE TWO?

To find a "rule (a.k.a "nomic", a.k,a. "measure") that rules the process" we need two things:

• a model of reality and
• a map reality

In general it is a problem of "nomic measurement",

(model- based measurement); to read what is "nomic measurement probem", you can read Hasok Chang's "Inventing Temperature: Measurement and Scientific Progress" (I think it is available here in researchgate too: https://www.researchgate.net/publication/266145263_Inventing_Temperature_Measurement_and_Scientific_Progress_Oxford_Studies_in_the_Philosophy_of_Science )

@Didi, your approach is new and intriguing to me. Could you, please, have another link, as in RG the text you suggested is not available online? Thank you.

@Krenar Ibrahimi, if you could provide me your email address i could send you that file .. cheers!

no need to do that i already sent you the file :)

efficiency is additional value of supply chain where as effectiveness is directional efficiency. efficiency is measured as cost per unit and effectiveness in terms of output, process , competitive advantages and stakeholder happiness

Dear @Anjay. The question is not simply what is one or another of both terms, but which is their interrelationship if it exists. If I really understood your answer, your idea is more about a non relationship. Really? If yes, you have another point of view from @Didi, for instance. Right?

Efficiency is through the process and effectiveness is the outcome of the process. There is a relationship. Both are dependent on each other.

Dear @ Nagendrakumar Nagalingam. I thank you for your answer. However, the question is how to measure or evaluate the possible interrelationship existing between both concepts.