Peter Drucker put it best: “Efficiency is doing things right; effectiveness is doing the right things.”
That’s the true definition of productivity. Not output alone, not speed alone. It’s the multiplication of efficiency and effectiveness.
If you’re efficient but chasing the wrong goal, you’re going nowhere fast. If you’re effective but clumsy in execution, you’re wasting potential. Productivity happens only when the two collide: less waste, more meaning. This matters because what you measure dictates what you improve. Some companies obsess over efficiency yet their output lands flat. Others set the right goals but never deliver at pace. Both miss the point.
Productivity is industry-agnostic, but the metrics shift. In manufacturing, efficiency might mean output per labour hour, while effectiveness shows up in defect rates and delivery performance. In services, efficiency might be response times or automation, while effectiveness is customer satisfaction or renewal rates. In technology, the lesson is sharpest. A team isn’t productive because it releases features quickly. It’s productive when those features matter to users, arrive on time, and avoid endless rework. Agile methods and objectives are simply tools to force the marriage of efficiency with effectiveness.
Henry Ford showed the formula in action. In 1913, the moving assembly line cut production time for the Model T from over 12 hours to just 1 hour 33 minutes. That leap in efficiency slashed costs, but Ford’s genius was in pairing it with effectiveness: making a car affordable to the masses. By 1925, the Model T cost only $260, down from $825. It wasn’t just faster production. It was a new market. A productivity revolution that reshaped the auto industry.
That same principle applies today. Businesses that optimise one side of the equation stagnate. Those that combine both scale. They create more value with fewer resources, move faster while hitting the target, and build competitive advantage that lasts.
So the question isn’t how efficient you are. It’s whether efficiency and effectiveness are compounding. That’s where true productivity lives.
This image was originally posted to Flickr by jeffmcneill at https://www.flickr.com/photos/28837413@N00/5789354451, licensed under CC BY-SA 2.0.