Efficiency vs. Productivity; Plus 3 Tips for Setting Benchmarks for Your Brand

One of the main goals of Dandelion Branding is to increase efficiency within the small businesses we work with.

Why efficiency?

Because it gives business owners more time and energy to get work done.

We’ve seen some hodge podged workflows, held together with MacGyver-style processes and structural decisions spawned by conversations accidentally overheard from different departments. Things that would be classified as cringe-worthy at best and potentially damning for growing companies at worst.

It’s normal to operate that way in the beginning of a small business—someone has to fill roles and people end up in jobs they don’t do, etc—but when the dust settles and you’re ready to grow your business, it’s best to start fresh and do it with efficiency in mind.

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What is Efficiency?

Okay – so we’re all clear, I wanted to give you the definition of efficiency. So I looked it up and the internet dictionary defines “efficiency” as being efficient. So here’s where the real research starts:

Efficient

Adjective: (of a person) working in a well organized and competent way.

So then, in a nutshell Efficiency is:

Noun: The quality of achieving maximum results from minimum input.

You can argue this, there are a ton of ways to define efficiency. When it comes to your business, it’s easiest if you stick with this definition.

The Difference Between Productivity and Efficiency

Super important. Productivity and efficiency are interrelated and definitely impact each other, but they’re two different things.

Productivity is the act of “getting things done.”

Efficiency is getting those things done faster, more organized, more automated, smarter, and done well. (maximum output with minimum input)

We see them interchanged a lot, and that can be dangerous for a brand. To chart a healthy course for your company you do to be productive and efficient as a business owner. If your brand isn’t hitting its targets, ask yourself what you’re missing. Here’s something to look out for:

• Inefficient Productivity: If you’re burning the candle at both ends and you’re not getting anywhere – you’re probably experiencing a loss in efficiency.
• Efficient Non-productivity: If you’re spending all of your time in a project management tool or trying to get things automated, you might actually be dealing with a productivity issue. When do you actually get the work done that your tool is supposed to be helping you manage? One caveat to this is when you’re setting up efficient systems for the first time for your brand, it takes time to do and you can’t rush it or let your brand falter #growingpains. But afterward, your tools should work for you. Don’t get caught up in a system.

Efficiency Calculations and the Introduction to Benchmarks

To calculate productivity, you divide output by input, simple as that. It’s good for raw materials and monetary calculations.

Efficiency, however, is a percentage, and acts more like a score. It’s a little bit more subjective and there are more factors to consider. One of those factors is the introduction of a benchmark. A benchmark is anything that serves as a basis for comparison. A benchmark can be a goal, an industry standard, or an internal standard. It’s an expectation that you want to hit or exceed.

To calculate efficiency, you take your benchmark, divide by the output, and multiply by 100.

Example with numbers:

Your team members write a high quality article in 2 hours.
The team member productivity = 1 article/2 hours – Scale that up to 40 hour weeks. You have 20 articles / 40 hours. That’s a pure number!

To calculate the efficiency of your team’s productivity, you want to add in the benchmark. So let’s say the industry standard is 1 per every 3 hours.
For this example, the math looks like this: (3/2)*100 = 150%.

Damn you’re team is efficient! You can do all sorts of math around knowing that now – like, how to compensate a salaried employee for their output based on their efficiency. You can also go to your team and ask them what helps to make them so effective and then you can work to improve those systems even further!

If, however, you find that you’re operating at a lower efficiency than your benchmark, this calculation can help you pinpoint exactly where that is happening. It will help you identify bottlenecks and missteps in communications that can help you improve your efficiency (and with it, your productivity).

This type of thinking is how efficiency (maximum results with minimum input) becomes part of your business model.

Why Benchmarks are Important

Benchmarks are important because without them, you’re at risk for creating processes and workflows that don’t make sense for your business.

In the above example if you hadn’t compared your team with the industry standard, you might feel like your team was average, or worse – failing. We see this happen a lot when business owners don’t see the ROI they expect. They immediate start fretting over the team’s usefulness and start thinking about replacements or firing people or taking on the work themselves because they think they can do it better (you usually can’t btw). Knowing and comparing your brand to benchmarks will give you a more realistic view of actual potential problems.

Two Types of Benchmarks

An internal benchmark is an indicator of where you currently are or where you have been at your best/worst.

An external benchmark is an industry standard or a competitor statistic.

We use benchmarks all the time to make judgments about the health of initiatives within brands. They help us to identify where breakdowns in performance could be and to set achievable goals and key performance indicators so that we can create relevant strategies for the brands we work with.

3 Tips on Choosing Your Benchmarks

When you’re choosing your benchmarks, you want to make sure that they are accurate, relevant, and sustainable.

Tip 1: Industry Relevance

Don’t go all willy-nilly with the standards you hold yourself to. A content marketing company’s benchmarks should be based on content produced, quality research, and revenue from clients. Don’t use profit benchmarks from ecommerce companies.

Similarly, if you’re selling a product, your benchmarks should be comparable with similar products. Don’t base your cosmetics company revenue goals on a machine building company (we’ve seen it happen).

Tip 2: Accuracy

Make sure that the data you’re looking at is complete and that you understand it. Goal/conversion setting applications—Google Analytics comes to mind—can be accidentally misleading if you’re looking at outdated metrics or “conversions” that aren’t set up/maintained properly.

Don’t create benchmarks on incomplete data. Please say that to yourself three times and then tape it to your monitor. I’m not talking about forecasts, I’m talking about benchmarks. A forecast is a way to look at information and say with relative accuracy what will come next. If you’re using your forecast as a benchmark, you’re creating serious risk for your company.

Tip 3: Long Term Sustainability

When I talk about sustainability here, I’m actually talking about your health and the health of your team.

You need to set benchmarks that define success for your company. By all means, compare your company side by side with an industry leader. Fine. That’s great.

But while you’re toiling away to reach that level, watch out for your team. Industry leaders didn’t jump to their position, they had to grow there just like you are now. They have more people with a higher expertise than a budding company does, they can invest more in advertising and they have a loyal customer base.

You’re the little guy screaming into the storm and if you’re not paying attention to the ground under your feet, you can drag your team through the mud. Losing a loyal team member to burnout or stress can seriously impact a company’s moral—plus it’s timely and expensive to train replacements (read: not efficient).

Focus on internal long term sustainability of your team—think about what stressors you’re putting on your team by creating huge benchmarks for success, listen to them if they need help reaching goals, and don’t place crazy expectations on them or double their workload without compensation.

How do you choose benchmarks for your company’s success? Leave a comment!

Resources:
https://www.smartsheet.com/blog/how-calculate-productivity-all-levels-organization-employee-and-software
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