Are you productive or efficient? Learn the difference between productivity and efficiency with formulas and examples in our guide.
You may think that efficiency and productivity are the same thing. However, these terms are not synonyms. Even though they both describe the efforts based on the resources used, productivity and efficiency are different - and yet, they’re interdependent and complement each other.
In this article, we discuss productivity and efficiency, explaining the differences between them, as well as their correlation. A clear understanding of the terminology can help you analyze your work processes from a new and more professional viewpoint and, consequently, get better results.
Productivity can be defined as the ability to produce items or complete tasks with a specific number of resources. Roughly speaking, productivity refers to quantity of the output – goods and services produced. However, this output is inseparable from the input - which is, the resources used, like time, finances, materials, etc. (Most often, the input is time spent on a specific activity).
So if we produce more results using the same resources, our productivity will increase. And vice versa, if we produce less, our productivity will decrease.
As a measurement of performance, productivity can be calculated using a formula. So this is the equation to measure productivity:
Output / input = productivity
Let’s explain this by the following example. You work at a bakery and make 100 cupcakes per day. You work a full day, so it takes you 8 hours. In this case, your input is 8 (resources spent,) and your output is 100. To calculate your productivity, you divide the output by the input:
100 / 8 = 12.8
The equation shows us that you make 12.8 cupcakes per hour. This result can let you make conclusions whether you use your time productively. If it’s a small bakery, and you’re just one of the workers, then probably yes.
Here is another example. You work for a client, and you’re supposed to write 2 blog posts per week. Each post has to be 1,000 words long, which makes 2,000 words per week. You work 4 days, 4 hours every day, and this makes 16 hours per week. Your input is 16, and your output – 2,000:
2000 / 16 = 125
Based on this equation, you write 125 words per hour, and this is your productivity index.
Naturally, businesses are resorting to different measures to increase productivity. Here are some of the ways that can help produce more in the same amount of time:
However, be mindful that there's a dark side to productivity as well - a phenomenon called toxic productivity. Read more on toxic productivity here.
For more tips on productivity, check these articles:
Efficiency is “the peak level of performance that uses the least amount of inputs to achieve the highest amount of output.” In other words, efficiency is about achieving the same, or even better, results by reducing the amount of resources. This means that you use less budget, less personnel, or less time to achieve the same output.
While productivity focuses on the quantity of products, efficiency refers to the quantity of resources.
Here’s the equation for calculating efficiency:
(Expected hours of work / Actual labor hours worked) x 100 = efficiency
Let’s get back to our previous example and measure efficiency. If you are expected to work 8 hours at the bakery, but you work 7.5 hours, you divide 8 by 7.5, and then multiply the result by 100:
(8 / 7.5) x 100 = 106.6
This way, you’re 6.6% more efficient, as your result is higher than 100%.
Similarly, if you're expected to work 16 hours on writing your 2000 words, but it doesn't take you as long, and you finish your assignments in 14 hours, the equation will look like this:
(16 /14) x 100 = 114,2
You're 14,2 percent more efficient than expected.
PLEASE ADD AN EXAMPLE RELEVANT TO OUR CUSTOMERS BELOW (it can be from an agency or IT software company). YOU CAN KEEP THE REST
Like we mentioned before, efficiency is the ability of a company to maximize results by reducing the quantity of available resources. Take a look at a list of examples to see how this is expressed in some businesses:
There is another term we should mention here. Effectiveness is very different from both efficiency and productivity, as it refers not to the quantity of produced results (like productivity,) and not to the quantity of the resources spent (like efficiency.) Effectiveness is about quality, about doing the right thing - choosing the tasks wisely, so that they bring the best results.
If you make more cakes or write more words in one hour, this will make you more productive. If you write your post in three hours instead of four, it will make you more efficient.
But it doesn't mean the quality of the final result will be good enough.
In Resource Management, effectiveness is crucially important. By taking a more considerate approach to managing your resources, you can reduce costs and achieve better results. When there is alignment within an organization, when goals are clear, and you take into account the human side as well as the delivery side, focusing on both product delivery and the personalities of workers, you get to allocate your resources in a more proficient way.
And the advantage of that is obvious – the motivation of employees increases. If you consider the interests of people, their passions, ambitions, and the projects they’re currently involved in while allocating assignments, they start to treat work as something that matters and find pleasure in it. It definitely has a positive impact on their performance and, as a result, on the quality of the product or service.
This is why in the webinar on Resource Management, Nicole Tiefensee, the COO and co-founder of Runn, says that Resource Management is about doing the right thing – doing things effectively, by focusing on the quality of the outcome and utilizing the available resources in the most proper way:
And I always tell my teams here, we can very efficiently do the wrong things.
Both productivity and efficiency depend on two variables – input and output. They both measure the quantity, even though each of them describes the quantity of different things. What's important, none of them actually guarantees the quality.
These are similarities. To illustrate the differences, take a look at the following comparison table:
By intentionally increasing productivity and efficiency, your organization will eventually achieve a higher level of profitability and economic growth. You can work on two levels – organizational and individual, as the human component is inherent in the life of any company.
So let’s take a look at some recommendations.
A vision is “an articulation of the long-term impact that an organization wants to manifest in the world,” or, simply speaking, an image of the future an organization strives to achieve. A clear vision unifies the efforts of teams within a company and has a positive influence on morale and that, in turn, leads to higher productivity and efficiency.
Unfortunately, many organizations fail to develop credible and distinctive visions. But to stay motivated, people need to feel connected to a common goal.
To develop a good vision, remember that it should be:
Continuous learning ensures that team members will always be familiar with the latest industry trends. Learning opportunities can include seminars, workshops, and mentoring.
There are many groups of learning opportunities. Here are some of them:
Giving feedback is a fundamental aspect of a job. It makes expectations clear and directs the participants in the work process. Julio Zhuo, the author of “The Making of a Manager,” says that feedback transforms people, helping them grow and making their lives better.
Good feedback is the regular one. It should be given as frequently as possible, and immediately, when the situation and memory about it is still fresh.
And, what’s important, it should work both ways. As a manager, let yourself be vulnerable and open up to listen to the opinions about your work and the company. It may be eye-opening.
In our webinar, Tim and Nicole mentioned a couple of things that will help you properly manage resources:
In most productivity books, the idea of focusing on something that matters to you is a red thread. You cannot do many different things with the same effectiveness. Instead, pick something that has value to you, something that will take you to your goal, and make it a priority. This will make you both efficient and productive, unlike multitasking.
You don’t have to do all your tasks by yourself. If you know someone who can do it better, or someone available while you’re busy, you, as a manager, can always ask them to help. Of course, this doesn’t apply to serious company-level assignments that require your interference.
Delegation has important benefits. It does make you more efficient, as you can focus on more important things instead of routine tasks like making reports. It decreases your workload and helps increase efficiency. At the same time, when you delegate tasks, you let people develop new skills and show them that you trust them.
Time is a limited resource. Poor time management leads to missed deadlines and related stress, as well as to procrastination. Besides, as we know, Parkinson's Law states that work expands to fill the time you allocate for it, so we can lose much time without even knowing it.
But by managing it properly, you can do more in less time – and this is exactly the definition of efficiency. There are many time management techniques, by using which you can achieve higher effectiveness, like time blocking and time boxing, the Pomodoro technique, and others. You can also work on your time management skills – things like prioritizing your tasks and organizing your day, which indirectly help you use your time better.
Productivity and efficiency are different things, even though they’re very close. If you have one, it doesn’t mean you will automatically get the other. However, without effectiveness - which is, without focusing on quality, productivity, and efficiency are good for nothing, as they will rather create an impression of busyness.
So measure your productivity and efficiency, improve them, remember about effectiveness, and see how fast your company trajectory can change.
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