Small Business Management: Productivity vs Efficiency

In running a small business, productivity and efficiency are essential factors for creating a thriving company. Learning how to manage both productivity and efficiency, and the difference between them, will help to define the success of your small business. Many beginners attempt to manage their businesses through monitoring their efficiency levels, but that can be a mistake if you have not properly considered how to distinguish between productivity and efficiency.


This is a vital part of the small business model, but it can only be used to deal with the way in which resources are handled, and the product supplied distributed. This analysis can evaluate the level of attainment in production of supplies. Small businesses rely upon efficiency models to calculate areas in which they can trim costs and improve their intake and production of items. Efficiency is only a guide; however, and it needs to be considered alongside another system of calculating processes.


Productivity also calculates how resources are handled and converted into useful goods, but in this model, the small business person can concentrate upon the details of their work. It will provide an analysis of the relationships between input and output in a businesses supply. Productivity will calculate how resources are used in direct relation to the purpose of the company, allowing the business man or woman to see the entire picture of where their resources are used.

Efficiency Versus Productivity

Productivity emphasizes the purpose and aim of the company in the products they supply, while efficiency merely notes the speed and turnaround of a product. The difference is between quality and quantity. While rapid and large supply is necessary, it is also important to consider the quality of the goods made. Efficiency will be able to tell you the former details, which can be useful if you are making a good, but slow, product. Productivity will give you the value of the work in relation to everything else that the product requires.

Choosing Which You Need in a Business Model

When you are considering how to calculate your ability to supply items, you will need to consider the purpose of the analysis you will perform. If you simply wish to consider your output, then relying upon the efficiency model will provide you with enough information. On the other hand, if you need to calculate the relationship between input and output, then a productivity model will help you to focus upon your total net profits. Productivity can also be useful if you are under-producing, or failing to meet targets.

Time: Vitally Important

The possibilities of efficiency and productivity both relate to another important feature of the small business, which is that of time. While people may procrastinate and not produce goods at an even level, most employees (and even the small business owner himself), will respond positively to a deadline or time guidance. Using time as a guideline in establishing a model of efficiency or productivity is a good way of revealing areas in a business which needs improvement.