Efficiency is related to the process inputs and it could be defined as the ratio of the prescribed resources expected to be used, ideally, over resources actually used (Sink and Tuttle, 1989). It measures how economically the firm’s resources are utilised when providing a given level of objective, e.g. output requirements. While effectiveness is concerned with the process output and it could be defined as the ratio of the actual output over the expected output. It measures the degree to which the relevant goals or objectives are achieved. In fact, in spite of the common use of the productivity, efficiency, and effectiveness terms, there are misuses of these terms. For example, production improvement does not necessarily mean productivity improvement. The former is concerned with the activity of producing goods and services, while the
latter is concerned with the efficiency and effectiveness with which these goods and services are produced. Also, efficiency improvement does not guarantee productivity improvements. One can be very efficient and still not be productive, for example, assume a job was done in half the prescribed time but with unaccepted quality. Here, the efficiency was improved 100% while the effectiveness is zero. Thus, to be productive one must be effective as well as efficient in that order (Sumanth, 1998).
Efficiency is related to the process inputs and it could be defined as the ratio of the prescribed resources expected to be used, ideally, over resources actually used (Sink and Tuttle, 1989). It measures how economically the firm’s resources are utilised when providing a given level of objective, e.g. output requirements. While effectiveness is concerned with the process output and it could be defined as the ratio of the actual output over the expected output. It measures the degree to which the relevant goals or objectives are achieved. In fact, in spite of the common use of the productivity, efficiency, and effectiveness terms, there are misuses of these terms. For example, production improvement does not necessarily mean productivity improvement. The former is concerned with the activity of producing goods and services, while the
latter is concerned with the efficiency and effectiveness with which these goods and services are produced. Also, efficiency improvement does not guarantee productivity improvements. One can be very efficient and still not be productive, for example, assume a job was done in half the prescribed time but with unaccepted quality. Here, the efficiency was improved 100% while the effectiveness is zero. Thus, to be productive one must be effective as well as efficient in that order (Sumanth, 1998).
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