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9 Types of Efficiency

 , December 24, 2019
Efficiency is the amount of output you produce with a unit of input. This has several common variations:


Productivity is the amount of value a person creates in an hour of work.
The design team increased their productivity to $50,000 per employee per month.

Resource Efficiency

Resource efficiency is the output achieved relative to consumption of a resource such as a gallon of water. This is an important sustainability metric as improving resource efficiency tends to reduce the environmental impact of economic activity.
Farmers in the region reduced herbicide consumption by 44% with companion planting techniques.

Machine Efficiency

The resource efficiency of a machine.
The new LED light bulb design achieved an overall luminous efficiency of 25%.

Process Efficiency

The efficiency of a business process.
The order fulfillment process was improved to use 27% less packaging materials.

Operational Efficiency

Operational efficiency is the efficiency of the core operational processes of a business. This is measured with management accounting metrics such as inventory turnover, capacity utilization and unit cost.
The inventory turnover of the ecommerce firm improved to 28 days.

Economic Efficiency

Economic efficiency is the amount of value created by the resources of a nation or region. This has four types:
Allocative EfficiencyProducing the goods that consumers demand. For example, it wouldn't be efficient to produce trillions of purple widgets that nobody wants.
Productive EfficiencyProducing goods at low cost. For example, producing purple widgets for $0.11 / unit is more efficient than producing them for $11 million / unit.
Distributive EfficiencyDistributing goods to those who need them and/or deserve them.
ExternalitiesProducing goods without destroying the planet or decreasing quality of life.

Business Efficiency

Business efficiency is the amount of revenue that you produce from inputs such as labour and capital. For example, revenue per employee is considered an indicator of business efficiency.
The firm improved its revenue per employee to $690,000 by launching popular new designs.

Capital Efficiency

Capital efficiency is the amount of value created per dollar of capital. Capital is anything that creates long term value such as a bridge, machine or software code. At the level of a company, this can be measure with return on invested capital.
Return on invested capital declined to 19.1% due to quality issues that required production shutdowns and recalls.

Management Efficiency

Management efficiency is the output achieved by a management team relative to the inputs they control. For executive management, this is the same as capital efficiency. For middle management, this is an indicator of the output created by spending and capital controlled by a management team. For example, the efficiency of a marketing team might be measured by how cheaply they can acquire customers.
The marketing team reduced customer acquisition cost by 9% to $5.6.
Overview: Efficiency Types
DefinitionThe amount of output you produce with a unit of input.
Related Concepts


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