Productivity vs. Efficiency vs. Effectiveness

Where are the differences between productivity, efficiency and effectiveness and which is desirable to achieve?

Effectiveness: focus on impact

Being effective means that you are focusing on the right things, the ones that matter, the ones that have an impact.

There are a lot of items on our to-do-lists, but which ones are the ones that have the highest impact? Those are the tasks that contribute to your effectiveness. being effective in reverse also implies that you actively choose not to pursue irrelevant tasks.

Take Henry Ford’s favorite quote:

If I had asked people what they wanted, they would have said “faster horses”.

Henry Ford

Spending time on making horses run faster would not have contributed to his effectiveness. Instead, he focused on building better cars and thus raised the effectiveness of mobility.

However, being effective does not give any evidence of how well you do anything. This is where efficiency comes into play:

Efficiency: fixed output, reduced input

Efficiency adds the first viewing angle of performance by reducing the input in order to fulfill a task: While the outcome remains fix, e.g. building 100 cars, we concentrate on reducing the effort in doing so.

Reducing the input can result in taking less time, spending less money, involving fewer resources.

Why should we limit ourselves to a fixed output? This is where productivity comes into play:

Productivity: increased output, reduced input

Being productive is far more ambitious than just being efficient: While we still strive to reduce the input, we now also try to increase the output. In our example of the car manufacturer, we do not only reduce labor and financial assets as input factors but also increase the engine power (faster cars) and find a way to double the number of cars (more cars) that roll off our assembly line in the same amount of time.

being efficient or productive ≠ being effective

Being efficient or productive is not linked to also being effective in general! You can execute the wrong tasks with less input (efficient but not effective) or execute a lot more wrong tasks with less input (productive but not effective).

Therefore, a combination of effectiveness and productivity is the desired method that results in the highest impact.

🎯 focus on relevant things
💥 impact
📌 output is fixed
🔽 input should be reduced
🔼 maximize output
🔽 minimize input
Comparison: Effectiveness vs. Efficiency vs. Productivity