Allocative EfficiencyAllocative 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 CapitalThe 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 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 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. turnaround time in the industry.customer acquisition cost is a measurement of marketing efficiency and cost per unit is a measurement of production efficiency.
NotesManagement 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|