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What is Efficiency?

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Efficiency is the output you create for a unit of input. All governments, organizations, communities and individuals have limited resources such that efficiency is the basis of economic output. The following are examples of efficiency.


The efficiency of work is known as productivity. This is the output achieved in an hour of work. For example, a graphic designer who produces more designs in a month after discovering a software tool that streamlines their work.

Process Efficiency

The labor, resources, energy and time consumed by a process for each output.

Energy Efficiency

The energy consumed by equipment and transport relative to their output. For example, the energy consumed per passenger mile by a high speed train as compared to an aircraft.

Allocative Efficiency

Producing things that have value to businesses and consumers. In other words, producing a product that nobody wants is extremely inefficient.

Management Efficiency

The output of a management team relative to the assets they control and resources they expend. For example, managers of a startup who consume $1 million in expenses to produce $1 billion in value are extremely efficient.

Cost Efficiency

Cost efficiency is the value you get for the cost you pay. For example, the brand recognition that is created for each dollar of advertising spend.

Resource Efficiency

The value created for resources consumed including materials, parts, labor, machine time, energy and land.


Efficiency is calculated using the value of outputs. Value is based on quality. A chef who takes an hour to prepare 24 meals may be more efficient than a fast food worker who produces 24 hamburgers a minute because the quality of the chef's meals may be much higher.

Quality of Life

Efficiency often needs to consider quality of life. For example, a factory that produces $1 million in goods a month that causes $1 billion in pollution or reduced enjoyment of a community isn't efficient.
Overview: Efficiency Definition
The value created for a unit of input.
Related Concepts


This is the complete list of articles we have written about efficiency.
Business Efficiency
Division Of Labor
Economic Efficiency
Efficiency Formula
Efficiency Goals
Jevons Paradox
Machine Efficiency
Management Efficiency
More With Less
Operational Efficiency
Process Efficiency
Resource Efficiency
Specialization Of Labor
Technical Efficiency
Time Efficiency
Value Creation
More ...
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A list of efficiency measurements.

Business Efficiency

Common types of business efficiency.

Process Efficiency

How to calculate the common types of process efficiency.

Business Benchmarks

The common types of business benchmark.

Red Tape

A definition of red tape with examples.

Work Efficiency

The definition of work efficiency with examples.

Management Efficiency

The definition of management efficiency with examples.

Economic Efficiency

The common types of economic efficiency.

Agency Cost

The definition of agency cost with examples.


The basics of productivity.


An overview of flow.

Efficiency vs Productivity

The difference between efficiency and productivity.

Knowledge Work

A definition of knowledge work with examples.


An overview of bottleneck with examples.

Productivity Formula

How to calculate productivity with 3 examples.

Productivity Improvement

The definition of productivity improvement with examples.

Productivity Rate

The formula for productivity rate with calculation examples.


The definition of toil with examples.

Work Ethic

The definition of work ethic with examples.
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