Which is better?
Should you be more efficient or more productive?
On the face of it they sound like very similar things, so does it matter which you strive to be?
- Efficiency is the amount of input you use to produce a standard level of output. If you become more efficient you do the same for less.
- Productivity is the amount of output you get from a standard level of input. If you become more productive you do more for the same.
Mathematically they are identical
You can use the same metrics to measure them both:
- Tonnes / Man-day
- Tasks / Hour
- Orders / FTE
The only difference is the part of the equation that changes, you either push the numerator up or the denominator down.
Organisationally they are similar
You do the same things to improve them; reduce rework, cut travel time, remove waste, decrease defects and increase through-put. But you have to cash them in differently:
To improve efficiency you have to take resources out of the organisation. You will only make more money if you cut costs. Efficiency improvements need your organisation to shrink.
To improve productivity you have to ship more. You will only make more money if you boost revenues. Productivity improvements need your organisation to grow.
Emotionally they are a world apart
Would you prefer to work for an organisation that is growing or shrinking?
Productivity = Chickens or Eggs
In growing organisations people are proud to be part of the action. Because they are proud they give more of themselves, discretionary effort goes up and so does engagement. As engagement and effort go up the organisation becomes more productive and develops the capacity to allow it to grow.
Once you are in the spiral you can keep it going. Productivity improvements are (relatively) easy to generate.
Efficiency = Turkeys plus Christmas
In shrinking organisations people keep their heads down. They distrust their managers and are fearful for their pay check. Engagement goes down and discretionary effort shrinks to nothing. Why would you offer to help improve things if you are putting your job at risk?
If engagement and discretionary effort are low, it becomes nearly impossible to improve efficiency.
So if you are trying to improve
Remember one simple rule…
You don’t save yourself rich ~ Anon
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Image by Katherine Kirkland
I really like the way you have written this James. Language and messages often get mixed up around these two words.
Thank you Jason
Great clarity here. So many organizations don’t even have operationally consistent definitions for these terms . Every unit or tribe having their own language of control drives suboptimisation and constrains agile operations.
I hadn’t thought of that Richard. Lack of clarity of language gives lack of clarity of purpose and confusion abounds. Yet we like to use new language as it demonstrates to the world how clever we are.
Great explanation James, very clear. I particularly like the way you use mathematics to clarify the definitions. Thanks for sharing.
Thank you for reading it Kev