What is efficiency? What is effectiveness? Imagine you manage a local car wash. Which criteria might you use to determine your efficiency as a manager? Which criteria might you use to determine your effectiveness?

In business, efficiency means how well you use available resources in order to maximize results (or profits if you like). Effectiveness, on the other hand, refers to how well your company is carrying out is activities, e.g. high quality of your products, high customer satisfaction.

If I managed a car wash, I could measure efficiency by how many cars are washed per hour. Or how do our costs per car washed lower as the total amount of cars washed increases.

If I wanted to measure effectiveness, I would need to measure how well do we wash the cars, e.g. is our service excellent, good, regular, or bad. Our customers are satisfied with the way we wash their cars or not.

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