Efficiency definition

“Judgements of efficiency are based on some idea of ‘wastage’. A relatively efficient process either requires fewer inputs or produces more outputs compared to a similar process, to achieve the objectives of the process.

The authors refer to this as technical efficiency, which in equation form is:

Technical efficiency = Output quality / Input quantity

Different business units performing the same process can be compared by calculating the efficiency of each unit (giving a set of measures of absolute efficiency) and comparing the results [the relative efficiency].

An important variant of efficiency is Allocative efficiency. This involves weighting the inputs and outputs by their monetary values. Thus:

Allocative efficiency = Value of outputs/Cost of inputs


Effectiveness definition

Effectiveness is very similar to efficiency, but the measure is related to some enterprise objective rather than the technical quality of output. For example, one common indicator of effectiveness is related to customer satisfaction rather than output. Therefore the effectiveness measure of a business process can be indicated by the resource inputs needed to produce a level of an enterprise objective.

A further measure of effectiveness is given by:

Effectiveness = Enterprise objectives/Input Quantity"

Using Employee monitoring software is an effective way to enhance staff Efficiency.