Efficient vs. effective — how knowing the difference can help you grow your business
“Efficient” and “effective” are two words that get thrown around a lot in business.
But if you ask a person using them what the difference between efficiency and effectiveness is, their response will probably be a blank stare.
Saying them might make you sound smart, but understanding the difference between them can help you answer the age-old question of whether it’s more important to focus on efficiency or effectiveness in your business.
This article will cover the main differences between efficiency and effectiveness, which is more important, and some tips to make your business run more efficiently and effectively.
What does “efficient” mean?
In business, being efficient means doing things the right way — in other words, reaching targets using the least amount of resources (human, financial, time, etc.) possible to achieve a business objective.
For example, a marketing team of four people that can produce 200 pieces of content in a month is more efficient than a team of six that creates 100 pieces.
Efficient teams run like a well-oiled machine and use only the necessary resources to get the job done. They usually have documented business processes that ensure daily tasks are optimized for maximum efficiency.
But being efficient may be a waste of time if you’re focusing on the wrong tasks — which is where effectiveness comes in.
What does “effective” mean?
If an action is effective, it leads to the desired outcome. Effectiveness in business means undertaking the tasks that are most relevant to helping the company achieve its goals.
For example, if your objective is to generate more high-quality leads, you would test several strategies and channels to determine which is most effective at driving traffic and capturing leads who fit your ideal customer profile.
Members of an effective team understand how their work connects to corporate goals. This helps them prioritize the tasks that assist the organization in achieving those goals, making them more effective.
Efficiency vs. effectiveness — what’s the difference?
According to Peter Drucker, the “father of modern management,” “Efficiency is doing things right; effectiveness is doing the right things.”
Being efficient means producing results with the best use of time and resources, while being effective means taking the right actions and achieving the desired results.
So can you be efficient without being effective and vice versa? Let’s use the example of the two marketing teams again.
Efficiency drives productivity. The team of four that produces 200 pieces of content per month is more efficient than the team of six that creates 100. Their productivity is higher than the other team’s — but that doesn’t say anything about the quality of the content they’re making.
Perhaps the second team creates fewer pieces of content because they spend more time on the production process — researching their target audience and carefully crafting content that drives more traffic and conversions. Therefore, they might be less efficient, but their work is more effective because it generates more leads and sales.
Similarly, effective leaders know which tasks to prioritize and which ones to delegate or eliminate. They have a clear vision of their business goals and understand what’s needed to achieve them.
Example of efficient vs. effective
Let’s take a look at another example of how efficiency and effectiveness differ. The average full-time office worker is contracted to work eight hours per day; shockingly, however, they are only productive for an average of two hours and 23 minutes out of the eight.
By contrast, the average freelancer is productive for around 36 hours per week, which works out to around seven hours of productivity per day. So what’s the explanation for this discrepancy?
A salaried employee’s monthly income doesn’t change depending on their efficiency level, so they have less incentive to work efficiently. Their work might still be effective, but they take longer to produce it.
On the other hand, a freelancer’s income depends on how much work they produce per hour. This might incentivize them to be more efficient, but there’s a risk of sacrificing quality and therefore being less effective.
This leaves leaders and business owners scratching their heads, wondering how to create a team that’s both efficient and effective — and which they should prioritize to help them meet their goals.
Is it more important to be efficient or effective?
Like the age-old debate over the chicken and the egg, the answer to this question depends on who you ask. Efficiency matters, but so does effectiveness, so sometimes you have to prioritize one over the other. So which should you choose to focus on?
As a business owner, your ultimate goal should be to strike a balance between effectiveness and efficiency. An efficient team may get things done in record time, but they might be so busy following the script that they never stop to think about whether they’re working on the right things.
On the other hand, if you have an effective team that’s working on the right things and getting results, you might benefit from analyzing their processes to improve their efficiency.
If you’re an entrepreneur or startup founder in the early stages of your journey, the smartest move may be to focus on effectiveness. Your team might be chaotic, messy, and inefficient at first, but once you identify which work is most effective, you can optimize your processes for efficiency.
However, if you want to expand a small business but have limited resources, you may want to focus on efficiency by optimizing your existing processes first. Working more efficiently will save you valuable resources, enabling you to analyze your effectiveness to understand what’s working and what isn’t.
As you can see, both efficiency and effectiveness are necessary for meeting your business goals and maximizing your profits. Whether you start with one or the other, you’ll need to look at both eventually.
It’s also important to avoid falling into the trap of thinking, “If it ain’t broke, don’t fix it.” Your business is constantly evolving, and what worked last year or even last month might not work now. Make a habit of regularly reviewing your organizational goals and the processes you use to reach them.
What is an effective leader, and how can you become one?
You’ve probably heard the term “effective leader” used a lot, but what does such an individual actually look like?
If you’ve ever had a boss who made you feel motivated at work, you’ve met an effective leader. But that former boss who made you want to run for the hills? Their leadership skills were probably not so effective.
For a start, effective leaders know how to prioritize and do the right things to move the company toward its goals. They don’t micromanage or meddle — they focus on being a leader.
But that’s not all. Effective leaders also need to know how to manage their time efficiently. In his book, “The Effective Executive,” Peter Drucker recommends leaders create the following three blocks of time:
- Time for individual thinking work
- Time for unstructured conversations and unforeseen tasks
- Time for meetings that matter.
Effective leaders also:
- Develop soft skills, such as active listening
- Trust their team and know how to delegate
- Communicate clearly and often
- Encourage employee growth and development
- Give positive feedback
- Lead by example (“do as I say, not as I do” won’t cut it)
- Ask employees for their input before making decisions.
How to make your business more efficient and effective
Improving the efficiency and effectiveness of your business is a great goal. It will boost your bottom line and makes for happier employees who are more likely to stick around.
Here are five ways you can start making your business run even more smoothly than Gordon Ramsay’s kitchen.
1. Set clear goals
Research shows that having a clear strategy and goals improves employee effectiveness, thus improving organizational effectiveness.
And this makes sense — if your goals are unclear or confusing, your team won’t know how to prioritize the most important tasks.
To make this process even more effective (see what we did there?), get your employees involved in it. Getting employee input will facilitate their buy-in and help align your business goals with your employees’ individual career goals and interests, making your top talent more likely to stay.
2. Communicate your goals clearly
Clear communication is fundamental to running an efficient and effective business. But don’t just take our word for it.
A 2020 study found that communication significantly impacts employee productivity and performance. Plus, 44% of employees say poor communication in the past has caused project delays or failures.
3. Connect goals to daily tasks
When you communicate your goals clearly, you help your team understand how their role connects to your business’s overarching vision.
You can then break those goals down into smaller, more manageable ones and divide them by teams and departments. In doing so, they will translate into the daily tasks your employees carry out.
If they can’t see or don’t understand your vision, they won’t prioritize the most important tasks or work in the most efficient way.
4. Use the right tools
With all the technology currently available at our fingertips, there’s no excuse for using tools that hinder the efficiency and effectiveness of your business. We’re looking at you, messy Excel spreadsheet.
Some of the most popular tools that business owners use to boost productivity include:
- Communication and instant-messaging tools, like Slack
- Collaboration tools, like Google Docs
- Workflow automation tools, such as Trello or Asana
- Productivity tools like Stack
5. Measure what works (and what doesn’t)
If you’re not measuring the efficiency and effectiveness of your business processes, they definitely need improvement.
When you measure the efficiency of your business, that means analyzing productivity. The higher the productivity, the higher the efficiency.
When you measure effectiveness, that means measuring the quality of the work produced. So you’ll need to measure both efficiency and effectiveness to find ways to improve both productivity and quality output.
How Stack can help you work more efficiently and effectively
Stack is a spatial browser that enables you to organize your digital workspace in a way that minimizes distractions, helping you to work more efficiently and get more done.
You can also use it to group tasks together, allowing you to focus on the most important things first and work more effectively.
Here are just a few of Stack’s features that can boost your efficiency and effectiveness at work.
Spaces
Start by separating your tasks using Spaces — our unique feature that lets you organize tabs, apps, files, and more into different digital spaces. For example, if you’re working on several projects, you could create a Space for each project. Within each Space, you would keep and update all relevant tabs, apps, files, and email accounts you need for that particular project.
Saved Cards
Saved Cards are a bit like bookmarks, but better because you can use them to save anything, not just websites. Grouping similar items together allows you to multitask like a pro so you can focus on one thing at a time. Save time by dragging and dropping items straight into your Saved Cards.
Focus Mode
Are you easily distracted by push notifications and social media? With Focus Mode, you can mute all notifications or schedule times to review them throughout the day. This allows you to work without distractions and get more done in less time.
Switch
Switch, our tabless browsing feature, can make you up to three times more productive. Instead of endlessly rifling through hundreds of open windows and apps, use the search bar to navigate where you need to go at lightning speed — and avoid falling down a social media rabbit hole.
Use efficiency and effectiveness to reach your goals
Both efficiency and effectiveness are necessary for your business to thrive, so it’s important to understand the role that each one plays in helping you reach your goals.
Striving for both is a constant balancing act, and there’s no right or wrong when it comes to which to prioritize first — there’s only what’s right for your business.
The right strategies and tools can help you run your business with military precision and achieve your goals more quickly. Stack is the world’s first Spatial Browser that promotes efficient and effective use of your digital workspace for greater productivity and faster results. Join the waitlist for Stack Next now.
