Allocative Efficiency
Allocative efficiency is the deployment of resources to create value. A failed strategy, project or product can dramatically reduce the efficiency of an organization by dedicating capital and spending to activities that create no value.Return On Capital
The operating income earned by a firm relative to capital employed. For example, a small restaurant with $40,000 in capital that produces $400,000 in operating income is extremely capital efficient. Managers are responsible for using capital efficiently including cash, land, facilities, machines and technology.Productivity
The output in an hour worked for employees under a management team. Productivity rates vary greatly by industry. For example, a bank that deploys a great deal of capital per employee should be more productive than an company that uses little capital such as a restaurant.Resource Efficiency
Resource efficiency is the use of resources such as energy, water, land, materials and parts without waste. For example, a farm that is managed to use less water per acre without sacrificing yield.Process Efficiency
The amount of time, labor and expenses consumed by a process relative to its outputs. For example, an ecommerce company that is managed to have the lowest shipping costs and the fastest order turnaround time in the industry.Cost Efficiency
The cost of business goals and outputs. For example, customer acquisition cost is a measurement of marketing efficiency and cost per unit is a measurement of production efficiency.Notes
Management efficiency is calculated with the efficiency formula using definitions of output and input that are relevant to an industry, organization or team.| Overview: Management Efficiency | ||
Type | ||
Definition | The output a management team creates relative to the capital they direct and expenses they expend. | |
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