Difference Between Efficiency and Effectiveness | Six Sigma

Difference Between Efficiency and Effectiveness

→ In almost all Industries, Efficiency and Effectiveness terms are used.

→ The simple meaning of both words is explained below.

→ "Efficiency is doing things right".

→ "Effectiveness is doing the right things”.

→ We will understand the meaning of both terms with the help of different examples.

→ Both words are many times mentioned in various Quality Management System Standard like ISO 9001:2015 Standard and IATF 16949:2016 Standard

→ As per ISO 9000,

→ Efficiency is the relationship between the result achieved and the resources used.

→ Effectiveness is the extent to which planned activities are realized and planned results are achieved.

What is Efficiency?

→ Efficiency means doing things right.

→ It is focused on the process. Thus it is a very important factor for the organization.

→ It is the ratio of output to input and focuses on getting the maximum output with minimum effort and resources.

→ So Efficiency is a productivity metric.

→ Efficiency is the ability to do something or produce something without wasting materials, time, or energy.

→ Being efficient means spending less time on something, spending less money on something, or spending less effort (or a number of workers) on something.

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Examples of Efficiency

→ HR person hiring new employee very quickly by reducing the cycle time of the approval process.

→ It is a good example of efficiency. But at the same time, it is possible a person has not a specific skill of his role.

→ So the efficiency says that "Hire Now".

→ For a better understanding, we will take one more example.

→ If we are making the 1000 products per shift. 1000 products are the maximum products that we can manufacture. Out of that 20 products are get rejected.

→ So we can say the efficiency of the process is = actual output/maximum output = 1000/1000 = 100%

→ But the effectiveness of the process is = total good output/total output = 980/1000 = 98%

Key Performance Indicators for Efficiency

→ Refer to the below KPIs that is related to efficiency

• Overall Equipment Effectiveness (OEE)
• Inventory Turn around time
• Conversation Cost per unit
• Productivity in Revenue per Employee
• Energy Cost per product manufacturing

What is Effectiveness?

→ Effectiveness is doing the right thing.

→ It is End result-focused.

→ Effectiveness is constantly measured if the actual output meets with the desired output or not?

→ Thus it is focused on the end result. It is a very important factor with respect to the customer's perspective.

→ So the Effectiveness is a quality metric.

→ Effectiveness is doing the right things in the right way at the right time

Examples of Effectiveness

→ The HR person hires the new person as the right candidate, at the right time, for the right vacancy that is called effectiveness.

→ So the Effectiveness says "Hire the Right Person”.

→ For a better understanding, we will take one more example.

→ If we are making the 990 products per shift. 1000 products are the maximum product that we can manufacture. Out of that 990 products, all are the ok products.

→ So we can say the efficiency of the process is = actual output/maximum output = 990/1000 = 99%.

→ So we can say the effectiveness of the process is = total good output/total output = 990/990 = 100%.

Key Performance Indicators for Effectiveness

→ Refer to the below KPIs that is related to Effectiveness

• On-Time Delivery
• QFTR - The quality first time through Rate
• Number of Non-Compliance Events/Year
• Supplier’s Quality rating

Possible Cases of being Efficient and Effective Organization

→ There are four possible causes for the organization as being efficient and effective

Case 1: Organization is neither effective nor efficient

→ In this case, the customer will not give more business, and also the organization will not make a good profit due to low effectiveness and efficiency.

→ In this case, the customer and the organization both are unhappy.

Case 2: Organization is efficient but not effective

→ In this case, the customers will be dissatisfied due to the less effective it may be chances of the quality problem but input costs will be lower.

→ In this case, an organization might be happy for a lesser manufacturing cost.

Case 3: Organization is effective but not efficient

→ In this case, customers will be satisfied due to high effectiveness. Customers will get good quality products but input costs will be higher for the organization so the profit will be lower side.

→ In this case, a customer might be happy with good product quality.

Case 4: Organization is effective and efficient

→ In this case, customers will be happy with the good product quality and the organization will also happy for the lesser input cost so the profit will be on the higher side.

→ So this is a win-win situation for both.

👉 See Also:

➨ All Topics

➨ Lean Manufacturing

➨ ISO 9001:2015 & IATF 16949:2016

➨ 7 QC Tools

➨ MSA, FMEA, PPAP, APQP_SPC

➨ Six_Sigma & Lean Six_Sigma

➨ QA & QC Topics