Comments on: Productivity and Efficiency Calculations for Business

By: Germaine

Germaine — Mon, 26 Sep 2016 12:18:41 +0000

Therapists in a nursing home setting are paid by the hour, but work by the minute. To achieve 90% PRODUCTIVITY, figure for 8hr there are 480min. To achieve 90% the worker has 45 min of ‘fluff’. Now the corporation changes PRODUCTIVITY to EFFICIENCY of 3.90, workers find it hard to achieve this bench mark. There is ‘no’ formula to measure ones time, minutes by. That I do not understand!

By: Baddog

Baddog — Wed, 06 Apr 2016 18:25:13 +0000

Please refer to the APICS dictionary for the definition of both Efficiency and Productivity. This is what I believe to be the standard terminology and definitions that businesses should be operating by.

By: Gman

Gman — Sat, 03 Oct 2015 21:43:31 +0000

Look at it this way:
Productivity is rate per hour of what ever it is you are doing.
Let’s say you lay tiles and you have 2 guys and the most productive lays 25 per hour and your least lays 20 per hour.
The most productive lays 25 per hour.

Now, let’s say that the standard time to lay a tile should be 30 per hour.
The productivity for your best guy is still 25 per hour, but his efficiency compared to the standard is 25 divided by 30 is 83.33%

Your most productive worker, may not be really efficient based on standard time.

Usually productivity is expressed as a rate of something (time, Unit, etc) and efficiency as a percentage based on a standard.

By: Paul

Paul — Sun, 07 Oct 2012 10:34:16 +0000

Hi,

I like your article, but I’ll throw forward a slight variation. I’d be grateful for any comment.

The formula for efficiency and and productivity look very much the same. Basically it is output/input.

However, my interpretation is that efficiency relates output to a given mix of inputs whereas I see productivity as relating output to the cost of a mix of inputs.

For example, if Fred and Joe perform the same task in the same manner and achieve the same quality of output, but Fred produces 20% more output than Joe then Fred could be said to 20% more efficient that of Joe.

However, if Fred and Joe use different types of machines to perform the same task then the mix of resources is not the same and one must divide the output by the cost of the resources used. For example, let’s say that for every $100 of resources consumed (including labour cost) that Joe produces 10% more output than Fred then it could be said that Joe is 10% more productive than Fred. One could even compare the productivity of two people who perform different tasks by dividing the dollar value of their output by the dollar value of the resources consumed (incl their labour cost).

That is, efficiency relates to the amount of output created by a given mix of resources whereas productivity is measured by the value of output relative to the value of the resources consumed.

By: nospam

nospam — Mon, 12 Dec 2011 22:53:09 +0000

I’m not sure these terms have ever really been defined in the context of business. I’ve googled everywhere for the difference, because I figured there should be a difference. The problem is that your post contradicts at least 4 other blogs on the internet trying to explain the difference. Just google for ‘productivity v.s. efficiency’ and see how everyone is saying something different.

So given the fact that no one seems to know, I have no reason to trust what you say. Wikipedia is not a valid cite for something controversial like this. Go to google books and find a definition; now that would be acceptable.

If you can find a proper citation from a business text or process management I would be grateful and I would be happy to propagate that knowledge. As it stands now however, I see no reason to believe your definition over anyone else’s

By: hector

hector — Thu, 20 Aug 2009 13:59:45 +0000

I think your post is quite wrong as productivity is just another name for efficiency: pls read some definitions or wikipedia for example.
the particular RATIO OF ACCOMPLISHMENT you mention (“actual output / standard output”) has nothing to do with efficiency. It is actually closer to EFFICACY: which is “accomplishment” ie WHAT IS ACHIEVED; vs efficiency : HOW it is achieved: how many resources are being used for the given result(ie productivity). Nevertheless besides of the name given to your ratios, your reasoning seems good

By: Andres Naranjo

Andres Naranjo — Wed, 21 Feb 2007 01:48:11 +0000

I agree on these having standard definitions that people try to recreate. Nothing like a gorup trying to reinvent the wheel.
Based on my experience however, I would say that productivity and efficiency are measures of an overall operation that comprises a set of processes.
Specific business processes, at strategic, core or supporting level are best measured around their time, cost, and quality drivers. Their “measure types” need to be around result measures (that show a completed cycle) or activity measures, which are linked to a specific activity within the process.
There are also extended process dimensions beyond time, cost, quality; which include data, compliance, risk, ownership, benefits. These might need to be measured as well.
Great blog btw.

By: Mark Graban

Mark Graban — Mon, 05 Feb 2007 18:05:17 +0000

What about quality?