Performance versus Efficiency

Performance and efficiency are often used interchangeably, but performance involves understanding the result being achieved, while efficiency does not, and instead emphasizes the resources used to produce that result. When the two meanings are combined, it mixes the two notions of producing according to expectations, while getting maximum output with minimum expense. When a car’s engine performs, this means it delivers the power, speed, or other metrics expected from it. It may perform more or less than other engines, but performance is only defined in connection with what’s expected from it. The engine’s efficiency refers to its capacity to deliver performance by minimizing the energy and friction needed to produce the expected power and speed.

Performance

Performance measures how well a task is completed. It's an outward-facing metric concerned with the end result, often measured by accuracy or throughput. A high-performing person or system consistently achieves its goals in a certain way.

In a factory, a machine's performance is measured by how many products it produces per hour. For a computer, performance is how quickly it can execute a program. In client service, it’s how well the service is delivered to clients, the attention given, and the solving of problems.

With organizations, stakeholders may have different opinions on the performance and what’s expected of them, others, and the whole. Thus, the discussions about their preferences, who may influence, and the power in the decision-making process.

With GRI, performance consists of behaving in congruence with outside expectations, while being capable of adapting when needed, and minimizing disengagement.

Efficiency

Efficiency, on the other hand, measures the ratio of output to input, focusing on how resources are used. It's about minimizing waste of time, money, efforts, energy, materials, and other resources to achieve a desired outcome.

An efficient organization gets the most out of what it can deliver to produce performance.

A factory machine is efficient if it uses the least amount of electricity and raw material to produce each product. A computer program is efficient if it uses the least amount of memory and CPU cycles to complete its task. In client service, it’s how employees solve numerous problems and create customer satisfaction in the minimum time.

Delivering a result in less time with fewer resources than expected combines the idea of both performance and efficiency.

From Barnard and Drucker’s View

Peter Drucker is often recognized for distinguishing between efficiency and performance. However, the distinction had been established by Chester Barnard long before. IN their views, the meaning of performance is equated with effectiveness. Efficiency is doing things right; effectiveness is doing the right things.

• Efficiency involves minimizing wasted resources to complete a task. Using the engine analogy, it emphasizes an internal focus on the process. An efficient person or system finishes tasks with minimal input.
• Effectiveness, or performance, concerns achieving the desired outcome or result. It reflects an external focus on the objective or goal.

A performing organization is one that accomplishes its goals regardless of how resources are used. We can only agree with Drucker's view that performance is more important than efficiency. Someone can be highly efficient at a task that doesn't need to be done at all, making the effort pointless. As Drucker explained, the most successful organizations and individuals first identify what the "right things" are (in terms of performance and effectiveness) and then focus on doing them "right" (efficiency).

Barnard and Drucker apparently didn’t explore what “desired outcome” means, which, in organizations, relates back to understanding stakeholders' influence and values. Nor does the definition address the common ground between efficiency and performance. Setting aside discussions about ethical conduct and social responsibility, these two concepts together can reveal how someone behaves in ways that are interesting and engaging or not, which, from a managerial perspective, is an achievement worth considering.

Machines, like in the first analogy above, don’t have interests or emotions. People do. That difference narrows the gap between the ideas of efficiency, effectiveness, and performance. When you include the emotional component along with intellect and behaviors, you can’t perform without being effective, and you can’t be effective, at least in the long run, without performing in a way that aligns with your own goals and expectations.