What Is the Difference Between Efficiency and Effectiveness in Business?

by Chris Miksen, Demand Media

Companies often talk about employee effectiveness and efficiency when brainstorming ways to improve business. While they sound similar, effectiveness means something entirely different than efficiency. An effective employee produces at a high level, while an efficient employee produces quickly and intelligently. By combining effectiveness and efficiency, a company produces better products faster and with fewer resources.


Effectiveness is the level of results from the actions of employees and managers. Employees and managers who demonstrate effectiveness in the workplace help produce high-quality results. Take, for instance, an employee who works the sales floor. If he’s effective, he’ll make sales consistently. If he’s ineffective, he’ll struggle to persuade customers to make a purchase. Companies measure effectiveness often by conducting performance reviews. The effectiveness of a workforce has an enormous impact on the quality of a company’s product or service, which often dictates a company’s reputation and customer satisfaction.


Efficiency in the workplace is the time it takes to do something. Efficient employees and managers complete tasks in the least amount of time possible with the least amount of resources possible by utilizing certain time-saving strategies. Inefficient employees and managers take the long road. For example, suppose a manager is attempting to communicate more efficiently. He can accomplish his goal by using email rather than sending letters to each employee. Efficiency and effectiveness are mutually exclusive. A manager or employee who's efficient isn’t always effective and vice versa. Efficiency increases productivity and saves both time and money.

Improving Effectiveness

To improve effectiveness, companies must take the initiative to provide thorough performance reviews, detailing an employee’s weakness through constructive criticism. Managers must make it a point to address effectiveness and explain how an employee’s performance affects the company as a whole. To avoid a workplace full of ineffective employees, companies must hire high-performing employees by weeding out candidates at the recruiting level. Employees are often ineffective because they don’t care about their work or because they don’t possess the skills to contribute. By interviewing candidates, calling references and conducting tests, companies can bring on employees with skills better suited for performing at a high level.

Improving Efficiency

Employees and managers are often inefficient because they either don’t know how to be efficient or do not have the necessary tools to perform tasks efficiently. Ways to improve efficiency include meeting with managers and employees to outline ways to implement efficiency in the workplace and asking for opinions on what the workplace is missing. For example, a small business that lacks an employee email system prevents managers from communicating with employees efficiently.

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