Efficiency versus Effectiveness

Being efficient is all about performing or functioning in the best possible manner with the least waste of time and effort. Efficiency measures how much input is required to achieve a certain amount of output. It is a productivity measure.

Being effective is all about adequate to accomplish a purpose; producing the intended or expected result. Effectiveness assess how much of things, problem or opportunity is handled. It measures amount or degree of accomplishment.

In short, efficiency is about doing things in right way whereas effectiveness is about doing right things.

For firms, cost is one of major indicator of the organization's efficiency. Whereas, quality of product, flexibility of firm, delivery of services are few indicators of effectiveness and are more important in customer's perspective. The firm can even charge the premium to the customer for being more effective than competitors.