Efficiency is all about doing more with less. Think of a car that travels 15 km on a litre of petrol – that’s a high fuel efficiency. In business, we want to produce the same output using fewer resources (time, money, materials).
Effectiveness measures whether the right goals are achieved. If a company’s goal is to launch a new product, effectiveness asks: Did we launch it on time and within budget? It’s about achieving objectives, not just using resources.
Productivity is the ratio of output to input. It tells us how much work is done per unit of resource. The most common form is labour productivity, which looks at output per hour of work.
\$\text{Labour Productivity} = \frac{\text{Total Output}}{\text{Total Labour Hours}}\$
Suppose a bakery produces 240 loaves in a week. The bakers work a total of 80 hours that week. Labour productivity is:
\$\frac{240 \text{ loaves}}{80 \text{ hours}} = 3 \text{ loaves per hour}\$
This means each hour of labour produces 3 loaves on average. If the bakery improves training and reduces waste, it might increase to 4 loaves per hour, boosting profits and reducing costs.
Sustainability is about meeting present needs without harming future generations. In operations, it means using resources wisely, reducing waste, and ensuring long‑term viability. A sustainable bakery might use renewable energy and recyclable packaging, which can also improve efficiency and brand reputation.
| Month | Output (units) | Labour Hours | Labour Productivity (units/hr) |
|---|---|---|---|
| January | 300 | 90 | 3.33 |
| February | 360 | 100 | 3.60 |
| March | 420 | 110 | 3.82 |