• Dr.Bahtiyar EREN

9. Effectiveness, Efficiency and Productivity


The concepts of effectiveness, efficiency and productivity are all closely related. Therefore they are easily confused and used one another. This blog post is based mainly on the study of YÜKÇÜ and ATAĞAN (2009).


Be not afraid of growing slowly, be afraid of standing still. Chinese Proverb


There is a Turkish proverb for the ones who show no improvement:

"You are like a donkey tail that neither lengthens nor shortens"


Let us examine these three concepts in depth.

The three important terms for management
(1) Effectiveness
Effectiveness is defined in the literature as the degree to which organizations achieve their objectives or the level of achieving results[1].

Let's assume that the aim of the organization is to introduce an innovative or modern products into the market. If you call any organization which brings innovative products to market as effective, you may be mistaken. In fact, it should not be forgotten that the main purpose of the organization is not only to develop new products but also achieve to get some share from the market. In other words, not every output can be seen as effective result. Please take a look at the examples for more details to understand the difference between output and effective results.


Examples for effectiveness
(2) Efficiency
Efficiency is the completion of the desired task by allocating the minimum input/resource with minimum cost and time.

In addition to that it sometimes defined as the ratio of standard performance to the actual performance [1].


Efficiency : Standard Performance / Actual Performance or

Efficiency: Planned Performance / Actual Performance.


If the efficiency ratio is greater than "1" then the activity is executed above the standard performance level otherwise , it is done under the standard.


(3) Effectiveness vs Efficiency [2]
Effectiveness vs Efficiency

Sometimes it is needed to evaluate the organization in terms of two criteria:

(1) The usage of resources and

(2) The achieving the goals.


There are four possibilities: Your organization can be

(1) Effective and efficient (Goals are achieved without waste)

(2) Effective but not efficient (Goals are achieved with some resources waste)

(3) Efficient but not effective (Even though some resources aren't wasted, goals are unfortunately not achieved.)

(4) Neither effective nor efficient (Goals are not achieved and some wastes are produced).


(4) Productivity

There is "no one common" definition in the literature. The productivity can be defined based on economist, engineer, accountant or manager's perspectives.


Productivity is measured in terms of the rate of output per unit of input.

But the broader perspective of productivity can be defined as follows. The productivity includes

(1) Not only increasing the rate of output per unit of input,

(2) But also increasing the quality level of goods and services,

(3) Protecting the environment and nature,

(4) Providing good level of life and working conditions to employees.


Productivity can also be defined by two other perspectives: (1) Based on quantity and (2) Based on value. (Yükçü ve Atağan, 2009 ve [3]).



Productivity can be defined based on both quantity and value
(5) The relationship among Effectiveness, Efficiency and Productivity
The relationship among effectiveness, efficiency and productivity

As you see productivity is the result of both effectiveness and efficiency. When you remember the fact that effectiveness comes before efficiency, then you naturally come up with the sequence of effectiveness-efficiency and productivity. But this sequence is not one dimensional rather multidimensional.


“The most important thing in communication is hearing what isn’t said.”

Peter Drucker

Video link for this topic:

You can find more videos about Lean Management both in Turkish and English on my YouTube Channel "Dr.Bahtiyar EREN"

Link: https://www.youtube.com/channel/UCxMmXLJBx712F9bo0AhvWrw

You can find the detailed information about Lean Management in my book "Lean Management and Techniques: Questions and Answers" published by Yazardan Direkt Publishing House. Please note that the book is in Turkish. You can order the book from www.amazon.com.tr and http://www.heryerdekitap.com

Please check my webpage www.freeleansixsigma.com for mor information about Lean Six Sigma both in Turkish and English.


Quality is not an act, It is a habit. Aristotle.


Dr.Bahtiyar EREN


Resouces:

Main resource article: Yükçü, Süleyman., Atağan, Gülşah. (2009) “Etkinlik, Etkililik ve Verimlilik kavramlarının yarattığı karışıklık”, Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, Cilt:23, Sayı:4.


[1] https://www.ekodialog.com/Konular/etkinlik_nedir.html (Access Date: 01 Eylül 2019)


[2] https://www.publichealthnotes.com/differences-effectiveness-efficiency/ (Access Date: 01 Eylül 2019)


[3] http://www.mpm.org.tr/verimlilik/ (Access Date: 01 Eylül 2019)


[4] http://www.internetraining.com/Productivity/Productivity.htm (Access Date: 01 Eylül 2019)

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Operations Research
CSSBB, CSSGB, CQE
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