Productivity vs Efficiency

Updated 25/08/2021

There are so many businesses, tools, and programmes offering to make you more productive or to increase your efficiency. The terms are often used interchangeably and lose meaning. Knowing the difference between the two words, and how they work together could be vital for the success of your business.

Quantity vs Quality

Basically, productivity is about quantity, the amount of “stuff” that you produce. Whereas, efficiency is about the quality of the output, taking account the input involved as well. To give an example in a business setting, you may create 10,000 units in month one, 11,500 units month two and 15,000 units in month three. During this period your productivity has increased, 150%, i.e. 10k to 15k. If, however, you spent twice as much in month three as month one, spending double should get you a 200% increase, but you only got 150%, then your efficiency has decreased.

Undesirable Results

The two measures are interlinked, but if you measure the wrong one, or give rewards for the wrong metric, then you may end up with an undesirable result.

The Nail Factory

Take this story from communist-era Russia, I am not sure of the source, but it goes like this. A nail factory was told to increase production (productivity) to make more nails next month. It couldn’t get any more raw material quick enough to increase the numbers to meet the quota. So, it made smaller nails, with the same amount of raw materials as the previous month, and it achieved its new quota of X number of nails. The person in charge of overseeing the production numbers came back to the site and said, “No, you can’t do it like this. We will have to measure the output in a different way, next month.” “Next month we need Y tonnes of nails,” they added. So, knowing that they would need to spend time sourcing the extra raw materials, they knew they would struggle with, in the previous month, they came up with a plan. What if we just made one big nail. It would weigh the same as the quota required, and we can spend the time that would have been used on production, in sourcing the raw materials. Once again, the person in charge of production came back and was pretty annoyed with the result of this month’s output, but it matched the criteria as set out by them, so, there wasn’t much to be done. This story illustrates how merely looking at productivity (increasing the output), can lead to issues with the quality of the product. Who wants one massive nail? Also, how incentivising the wrong performance indicator can lead to undesired and unexpected outcomes.

Paralysed by Perfection

The reverse can occur when efficiency only is taken into account. If you make conserving resources, ensuring perfection, and reducing waste, your top priorities, then your output volume may be the one to suffer. Staff can become unable to make progress as they are paralysed by perfection.

Find the Right Tools

So, it is vital that you look for tools and systems that value both productivity and efficiency. Look for systems that let you reduce errors, and improve compliance, to increase efficiency, plus, at the same time include the ability to automate tasks to increase productivity. SwiftCase helps thriving businesses, swamped by growing demand, automate and organise, to focus on what matters — loved by 1000s of users across Insurance, Finance, Legal, Service & Contractor sectors.
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