Efficacy, efficiency and effectiveness

We explain what efficacy, efficiency and effectiveness are, as well as their differences. In addition, we explore the indicators to measure each one, and more.

Efficacy, efficiency and effectiveness

Efficacy, efficiency and effectiveness are concepts related to the performance and productivity of business activity carried out by a person, group or organization. Though these terms may they sound similar, their meanings are not:

• Efficacy. It is a person’s ability to reach a goal. It is connected with the tasks necessary to achieve an objective.
  Example of efficacy: a company reached the goal of increasing online sales by 20% in one month, through better customer service from the sales team.
• Efficiency. It is the ability to choose the best resources, or to optimize available means and resources to meet an objective.
  Example of efficiency: a company reached the goal of increasing online sales by 20% in one month, and managed to reduce shipment packaging costs by 5% by replacing plastic bags with reusable cardboard boxes.
• Effectiveness. It is the ability to achieve the best result with the least amount of resources and in the shortest possible time. In other words, it is the balance between efficacy (people skills) and efficiency (means and resources) to reach a target.
  Example of effectiveness: a company reached the goal of increasing online sales by 20% in one month by reducing investment in digital advertising, but with a new and clearer message, which was targeted at a more specific audience.

Efficacy, efficiency and effectiveness are interrelated aspects that are part of the operational analysis of companies, which consists of the study of productive and unproductive agents with the objective of increasing productivity.

• See also: Market research

Efficacy and efficiency indicators

Indicators or tools to measure efficiency and efficacy provide company management with valuable information for decision-making when optimizing work processes. They are metrics that allow for assessing variables such as: cost-benefit, return on investment, or cost-effectiveness.

• Efficiency indicators. They measure the quality or degree to which an objective was met according to the plan laid down for each stage of the process.
  For example: an efficiency indicator may be: Was the objective met within the estimated time? The answer may be YES or NO. If the answer is negative, the reason should be further analyzed.
  Another efficiency indicator might be: Did the objective meet expectations? The answer may be YES or NO. In the case of a negative answer, the reason should be further analyzed, which could a planning error, lack of information, external factors, among other reasons.
• Efficacy indicators. They measure the amount of resources used to meet an objective.
  For example: an efficacy indicator may be: Was the objective reached with the estimated resources? The answer may be YES or NO. If the answer is negative, the reason should be further analyzed.
  Another efficacy indicator might be: Did you foresee unexpected events with the resources necessary to achieve the objective?, among other indicators.

The three E’s of management

The three E’s of management is a theory proposed by Austrian-born professor and business consultant Peter Drucker (1909-2005) which holds that:

• Efficacy. It is what we do to reach a goal. We can do many things right, but not all of them bring us closer to the goal. We should do right that which should be done.
• Efficiency. It is the ability to use means to reach a goal. We must optimize the choice of inputs and means available or to be acquired.
• Effectiveness. It is the combination of efficacy and efficiency. According to Drucker: “There is nothing so useless as doing efficiently that which should not be done at all.”

Drucker argued that the key to every business strategy is that it manages to achieve its objectives in the most effective way. To ensure effectiveness, management must control production time, direct efforts toward set objectives, and make effective decisions.

“Management is doing the right things; leadership is doing the right things.” Peter Drucker (1909-2005).

Difference between efficacy, efficiency and effectiveness

The main difference between efficacy, efficiency and effectiveness is:

• Efficiency means doing things well, and focuses on a person's abilities to perform the tasks or processes necessary to attain a goal.
• Efficacy is about doing the right thing, in the right way, at the right time. It focuses on the proper use of resources, means, and time to achieve an objective.
• Effectiveness is the combination of both concepts, that is, a balance between doing things right and doing the right thing with the least possible resources and time to achieve the objective with the highest possible quality.

References

• "Effectiveness, quality and efficiency: A management oriented approach. Springer Science & Sudit" E. F. (2012). Business Media.
• "¿Cómo identificar indicadores de eficacia y eficiencia para los procesos de tu área, unidad o empresa?" Torres G. (2021). Veigler.
• "Efectividad, eficiencia y productividad" Carvajal, H. (2008). Semana.

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