Performance vs Effectiveness & Productivity vs Efficiency

Everybody wants these things. They are all great. The problem is that we don’t know what they mean or how they relate to each other. We act as if these terms are somewhat synonymous, but they are not. They apply differently to any situation. So let’s break it down with some definitions:

Performance – Rich Stone’s unabashed dictionary describes performance as achievement versus some benchmark. You cannot have a conversation about performance, without understanding the quota, record, distance, average, etc. Performance is always relative. When you say that someone is not performing well, the standard of performance is what you are talking about.

Effectiveness – probability of achievement. Something or someone is effective when they have a high probability of achieving success in some endeavor. Effectiveness is like a teams winning record or a batting average. It is predictive, assuming that past achievement is a good indicator of future success.

Productivity – is simply achievement per unit of time. How much did you get accomplished in some period of time as measured on a clock or calendar. Productivity does not care about what else you spent your time doing. It doesn’t care about interruptions, equipment failures, or other problems – it is just output over time.

Efficiency – is achievement per unit of input. If the input is raw materials, then efficiency cares about wasted materials. If the input is labor, then efficiency cares about labor input. If the input is cost then efficiency cares about the cost.

So with these definitions in mind, we can talk about the terms intelligently. When we want to increase performance, then we can do that in any number of ways. Because performance implies a benchmark, then there can be a tendency to game the benchmark. Benchmarks are often synthetic metrics, derived from statistical analysis of an activity. There are usually some assumptions, (i.e. business is conducted as usual) such that if we alter the way we do business, we can improve against the benchmark, without any real increase in achievement.

Productivity is similar, in that we can improve (in appearance) productivity by ignoring “non-productive” activities, which may not be without consequences. To improve productivity this way is to ignore our constraints. Paying my bills is not productive, but earning a wage is, so if work lots of hours, and get paid well, but I don’t pay my bills – I suffer consequences. Productivity as a term, is loaded.

I think that people say performance, when they mean effectiveness, and they say productivity, when they mean efficiency. As leaders and managers, we should be always talking about effectiveness and efficiency. We should be looking for ways to make our staff more effective – that might mean learning (not training), it might mean more diversified experience (not cross training), both leading to a greater understanding of how they are expected to add value. We should be looking for ways to make our staff more efficient, that is to accomplish our goals, without ignoring our constraints. It may mean removing unnecessary activities from our work processes. That may mean tools and techniques. If that means faster computers, more sophisticated or reliable software, we should consider – how much do we pay our staff, and how fast would the expenditure pay for itself.

I think most people can point to issues with their own efficiency. You can ask your staff to identify waste in their work flows, unnecessary steps, “work-arounds” that could be made faster, or removed with a little bit of thought and effort. I think they can identify the amount of time they spend waiting for systems to finish, or things they do by hand that could be automated.

I think people find it harder to assess their own effectiveness. What they are missing that would make them more effective. As a manager, you may work closely enough with your staff, to observe some of these things, but often it is their peers who have a greater ability to assess.

I think that talent and technique contribute to effectiveness and efficiency. You can argue definitions, but in many endeavors, talent is the combinations of abilities that contribute to an individual’s effectiveness, whereas technique contributes to an individual’s efficiency.

I think of talent as the ability to assess “the work” and select the right tool or combination of tools, where as technique is the ability to apply each tool correctly .

What do you think? Does that resonate?