It can be very difficult to assess the real result in various areas of human activity. For this purpose, quantities such as effect and efficiency are often used. Often they are substituted and at the everyday level act as synonyms. How do the categories really differ from each other and is there a difference between them?
Effect - the result obtained during the implementation of a process or performance of an operation, which can be either positive or negative. This concept is widely used in economics, where it is expressed in the form of an absolute value estimate.
Efficiency - the effectiveness of an operation or process, determined by the ratio of the effect obtained and the costs incurred. Efficiency can be zero or positive, but this value is always relative.
Thus, the main difference between these concepts lies in the type of quantities. If the effect is an absolute value, then the effectiveness is relative. This is very important for economic theory, where it is impossible to determine the effectiveness of processes without in-depth analysis. The effect is obvious and can be measured formally. To establish efficiency, it is necessary to divide the result of labor by costs. The effect can be both positive and negative. Efficiency is either zero or positive. Otherwise, we are talking about its absence.
The phrase “negative efficiency” is an incorrect use of the term “negative profitability”, and the second option is more preferable for assessing the economic situation.
- Type of quantity. Efficiency is a relative value, and the effect is absolute.
- Method of counting. The effect is measured by comparing the current state and the baseline, and efficiency is measured by dividing the result by the cost.
- Formal expression. The effect can be either positive or negative, the effectiveness is either positive or zero.
- Significance. Efficiency is important for the long-term functioning of a company, an enterprise; the effect is necessary for the immediate solution of the problems that have arisen.