Productivity vs. Efficiency: What’s the Difference?

Productivity and efficiency are terms we often use interchangeably when speaking about performance. But when you look at productivity vs. efficiency, it’s difficult for managers and team members to grasp the key differences and learn how to measure each.

If you don’t understand the difference between these two terms, you may look at the wrong metrics for your business.

This guide will help explain how and why you should differentiate between the two terms. First, let’s take a closer look at productivity.

What is productivity?

Productivity is a metric used to gauge an employee, team, or company’s performance based on the number of outputs (goods and services) produced and the inputs (time or energy) it took to produce them.

Productivity is relatively straightforward to measure — which is why many businesses focus on it. Managers can determine employee productivity metrics by measuring how many deliverables a team member completes over a certain amount of work hours.

What is efficiency?

Efficiency is the production of goods and services with the least amount of waste. In this situation, waste refers to many things, including time, materials, and money. While productivity measures how much a team member can produce, efficiency focuses on how well outputs were created.

High efficiency means getting things done using the fewest resources. Efficient workflows will result in higher quality output, but they may take longer than a highly productive workflow.

Productivity vs. efficiency: what’s the difference?

The difference between productivity and efficiency comes down to quantity vs. quality. Productivity concentrates on measuring the quantity of outputs, while efficiency measures the quality of each output.

It’s important to mention that highly productive employees are not necessarily highly efficient employees.

For instance, if a salesperson works 50 hours a week to meet quotas, they’re productive but not efficient. Conversely, if another salesperson works 30 hours a week and comes in just under that quota, they’re efficient but not productive.

You’ll need to measure both efficiency and productivity to assess a team member’s performance. Ultimately, the only way to know for sure is to calculate each.

How to calculate productivity and efficiency

Productivity is about doing more with less. You can calculate true productivity by dividing your total output by your total input.

Managers can calculate efficiency by dividing the time it typically takes to complete a project by the time a team member spends on it.

Employee productivity vs. hours worked is one way many managers track productivity rates. However, this doesn’t have to be a manual process. Hubstaff can take the manual work out of this process.

With an employee productivity tracking is a way of measuring productivity through automation. Hubstaff records activity, projects, and tasks as team members track their time.

This can be a simple and affordable answer to measuring remote employee productivity.

Productivity metrics are helpful, but they can only tell you so much about how your team is tackling their workload.

For example, a team member can spend their week creating ten graphic design projects for a client. This output may be considered highly productive among the other team members.

However, if those projects are rushed because managers focus on productivity instead of efficiency, clients may reject the work.

If another team member on the same team creates four designs in the same time frame, but they’re all accepted by the client with minimal edits, which team member produced more?

The team member who had all their designs approved has created more valid output. In other words, it is better to have four excellent projects completed than ten subpar projects.

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What is more important, efficiency or productivity?

In most cases, efficiency is a more important metric for employers to track because it inspects the quality of work rather than just the amount. However, both metrics are crucial for testing employee success.

High productivity levels are the goal for many managers and team members, but are we chasing the wrong metrics? Not necessarily, but it is essential to watch for both efficiency and productivity when tracking outputs.

Productivity is a raw measure of the amount of work completed. Efficiency is a refined metric of how efficiently an employee can handle a task.

In 2020, we conducted a Productivity Benchmark Report that showed that the average activity rate for our customers was 49.6%.

From one angle, this number shows that employees technically spend less time working than not. This would be considered unproductive.

However, one could argue that employees were extremely efficient. Assuming they produced enough outputs to keep their jobs, this data suggests they hit those goals using less than half of the time they spent clocked in. In theory, an activity tracking tool could help you reduce overtime costs.

Of course, there are a number of other variables to consider. These differing perspectives are why we encourage managers to look deeper into their productivity metrics.

You should strive to measure productivity and efficiency. However, many managers overlook efficiency and only track productivity.

Why efficiency matters for your business

Ever heard the phrase work smarter, not harder? Efficiency is the epitome of that concept.

An efficient team member can increase productivity while producing high-quality output. Efficiency requires time management, masterful prioritization, and confidence in their work.

Your most efficient employee could complete half as many tasks in the same time as your most productive employee, but those tasks could bring the highest return for your company.

This is why we believe efficiency is more important than productivity. As a manager, you should push your team members to focus on efficiency and quality of work rather than churning out more pointless products.

Final verdict

How do you measure productivity and efficiency in the workplace? We would argue that there is a difference between quantity vs. quality.

Unless you’re working to create raw materials, the quantity of work often matters less than the quality.

By now, we hope you would agree that a new perspective can change the way we view successful work. Judging team members solely on their hours and not their efficiency during those hours is simply ineffective.

Instead, focus on the efficiency with which your team handles a project and the time spent completing a task. Sometimes, less is more.

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