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Measuring efficiency and effectiveness in business

Image courtesy of Stuart Miles at

Hello readers, we commonly hear sentences like we have to be effective and efficient in business. Today I will be writing about ways to measure effectiveness and efficiency. Most of us know what efficiency and effectiveness mean but anyway I will still define them.

A business is said to be effective when the established goals and objectives of the company are achieved. Thus, effectiveness is said to be achieved when an individual meets its organizational target. While efficiency deals with your ability to use the resources available to the maximum. 

Effectiveness measures the achievement of objectives, thus we can measure effectiveness using a quantitative key performance indicator that are tailored to measure your objectives. For example if a business decides to provide excellent customer service, the amount of customer compliants can give you an ideal of how satisfied your customers are. Another example will be an objective to increase production. Comparing the number of units produced last year to the number of unit produced next year will let you know if production has increased.

Efficiency on the other hand measures maximum utilization of resources. Quantitative attributes such as the cost used for production or production time will help measure efficiency. Basically you figure out a quantitative attribute to measure your efficiency.

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