Efficiency? Effectiveness? What is the difference?

Effectiveness and efficiency are two words that sound very similar and also have a similar meaning. According to the Cambridge Dictionary, efficient means "working or operating quickly and effectively in an organized way", i.e., effective even plays a role in the definition of efficient. Effective on the other hand means "successful or achieving the results that you want". However, even if one is tempted to equate these two words in everyday life, they should not be used as synonyms. Especially in project management, it can make a big difference which word you use. But what exactly is the difference between effectiveness and efficiency and how do these two terms have a significance for project management?
Several white wind turbines are standing in the ocean.
Effectiveness means taking a specific action that should lead to a desired goal. First you have to ask yourself what your goal is and then find out how effectively it can be worked towards. The focus of effectiveness is thus on the goal and the goal orientation. 
Efficiency, on the other hand, is about optimising the measures that have been set. For example, it is about achieving the goal in the shortest possible time or with the lowest possible financial input. The focus is on economic efficiency, i.e., on how resources can be minimised and still achieve the goal.

What is efficiency

According to DIN EN ISO 9000:2000, efficiency is described as the "relationship between the result achieved and the means employed". In connection with efficiency, it is often said that one "does things right". Doing things right here means approaching things in the right way, i.e., doing them in a meaningful way. When you do something efficiently, you want to achieve the best possible result while using as few resources as possible. But how can this statement be backed up with concrete figures? After all, quantification plays an important role in project management because, ultimately, numbers are helpful to see whether the set goal has been achieved or missed. And so the question arises of how efficiency can be measured. Possible key figures that can be used for this are the Schedule Performance Index and the Cost Performance Index.
The Schedule Performance Index (SPI) is a time-related performance indicator used to find out how the resource "time" was used. The SPI is calculated by dividing the Earned Value (EV), i.e., the target cost of the actual performance, by the Planned Value (PV), i.e. the planned cost of the performance at the time of reporting (SPI = EV/PV). If the SPI is greater than 100 percent, then the project is implemented faster than planned. And if it is less than 100 percent, then the project is proceeding too slowly. If the planned duration of the project is divided by the SPI, it can be determined whether the planned end date of the project can be met or not.

The term Cost Performance Index (CPI) refers to the monetary resources used at the reporting date. It is calculated as follows:
CPI = EV/AC. As with the SPI, EV stands for Earned Value and AC for Actual Cost. At 100 percent, the budget is perfectly met; at less than 100 percent, the actual costs exceed the target costs of the actual performance. Dividing the total planned budget of the project by the CPI, one can determine what the estimated total costs are on the reporting date.

Both quantities thus relate to how accurate the planning was and whether the results were achieved as planned in terms of time and budget. It is therefore about the use of resources, which should be done as economically as possible.

What is effectiveness?

When it comes to effectiveness, you want to do the right things. In other words, one works effectively when the measures taken lead to the desired goal. 

In contrast to efficiency, effectiveness is viewed more qualitatively. It is about the goal and the question that should be asked in this context is: Has the goal been achieved? In advance, there is a specification that states what is expected from the project. If all the items recorded in the specification have been fulfilled, then the goal has been achieved. Also, during the project, when carrying out tasks, you can ask yourself whether this task contributes to getting closer to the goal. Although effectiveness is more qualitative in nature, there are also some key figures that can be used in terms of effectiveness. These are, for example, the number of corrections or the complaint rate. If the goal has been achieved 100 percent and the customer is satisfied with the result, then there should be no complaints or requests for corrections. If the target is not achieved, there may be complaints from the client.

Either? Or? Both?

Although efficiency and effectiveness are often used synonymously in everyday language, there is a difference that cannot be ignored, especially in project management. But should projects be carried out effectively or efficiently? And do you have to commit to one of the two? The answer is no. It is best to focus on a combination of both in a project. After all, if you only work effectively, you can lose sight of the input. You get lost in trying to achieve the goal as perfectly as possible without considering the investment that needs to be made to achieve it, which wastes resources and drags out the project.
Trying to manage a project efficiently only will also fail. Even if one could work efficiently on a task without defined guidelines, one should not do so. Because without guidelines, you can work as efficiently as you want, you have no goal in mind and therefore end up working on the wrong things. One would use the resources in the best possible way, but in the end, this does not lead to the goal. This proves again that one should combine both.
In a project, one should first work effectively, i.e., determine the right steps, define the goals clearly and document them. Then the project can be executed, and the processes can be optimised through efficiency.

To define the goals of the project, it is a good idea to use the SMART formula. SMART stands for specific, measurable, achievable, realistic and time-bound. The goals in a project should therefore fulfil these criteria. In addition to the formulation of the goals, the so-called project profile provides an overview of the project process. Moreover, it makes sense to carry out detailed capacity planning and to establish successful time management. Both are done by the project manager, who should always try to keep control. 

To better understand the differences and the interplay between effectiveness and efficiency, you can find an example in the following:
At the end of the project, a meeting should take place to discuss the lessons learned. The whole project team, consisting of 20 people and the project manager, should attend this meeting. The project manager is responsible for finding a suitable date when everyone can attend - he himself only has five free dates before he is involved in another project full-time. Now he can pick up the phone and call all 20 team members, ask which of the five dates suits best and write this down. At the end, he can summarise this in an overview and, if there is no clear winner, check again with the team members, who cannot be there on the day with the most votes, and find a solution. In the end, he found a date that suits everyone, but the time he had to spend on it is enormous. Alternatively, he could approach the task efficiently. He could use a date survey tool to give participants five dates to choose from, with the options "I can", "I can't" and "I can arrange it if necessary". Now he sends the link to the survey to his team members and asks them to respond by a certain date. If, after completing the survey, there is still no clear date, he can still pick up the phone and contact the people who can’t, to find a solution.

What you should consider in your projects

Team members should know how their own tasks relate to the project goal so that they can work effectively. This creates clarity and avoids unnecessary loss of time. For this purpose, certain processes should be established within a project, for example, that at the beginning of each phase it is communicated exactly what the goal is or that along with work packages the information concerning which goal is to be achieved with it is communicated. If a clear process is developed for this, employees can contribute effectively. 

The use of PM tools can also be helpful in working effectively and efficiently.  PM tools can help ensure that all information is passed directly to the appropriate team member or that tasks are prioritised accordingly. However, a PM tool should never compromise the efficiency or effectiveness of the team. This means that if the tool does not fit the project or the team and more time is lost maintaining the tool rather than adding value, then the use of another tool should be considered.

In addition, you should always check whether there is room for improvement. In other words, where do delays occur and how can one work more efficiently? It should be checked whether the team members are overworked or whether there are other problems that lead to a work not being finished on time. Especially when talking about overwork, it is important to take regular breaks in order to maintain the highest possible effectiveness and efficiency. It would be ideal to send out regular reports so that a solution can be found quickly if problems arise. 

In addition, one should always keep in mind that multitasking is not always beneficial. It is better if employees can focus on a single task and concentrate on it. . In addition, the plan for the next day could be prepared the day before. This way, employees can go home with a good feeling and tackle the tasks the next day.

Closing words

In the end, it can be said that one cannot be efficient without working effectively. Rather, effectiveness and efficiency go hand in hand and are important to enable a goal-oriented and resource-saving project process. In order to run a project successfully, one should first look at effectiveness. For this, it is important that the team has an insight into the goals of the project in order to know what they need to work towards in the first place. After that, one can look at efficiency in order to use the resources as wisely as possible.

Efficiency and Effectiveness  - The IAPM logo.
Author: IAPM internal
Keywords: project management, term, tip, efficiency, effectiveness

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For better readability, we usually only use the generic masculine form in our texts. Nevertheless, the expressions refer to members of all genders.