Using right words in the right context can solve a lot of misalignments. This is my attempt to document my opinionated understanding of some of the engineering management terminologies, and use them as a reference in my other documents.
Effort, Output, Outcome, Impact
Effort: This is the input and investment in an initiative or a job that needs to be completed. In a software project, this may be the number of engineers working for a specific period with a particular capability, the computing resources allocated to it, and all the supporting roles, such as product or project teams.
Output: As part of the input investment, we will get some output and deliverables. In the above example, it can be a software product running in our production environment.
Outcome: The output (running software in a production environment). If our hypothesis were valid, this product should solve a customer problem and create value. This translates to changing customer behaviour and a change in our measure of success - e.g. increase conversion or reduction in abandonment of shopping cart.
Impact: Achieving our outcome by creating unique value for customers should result in our ability to extract value for our team or organisation. In the above example, an increase in conversion will lead to an increased number of paying customers and ultimately a better financial position for the organisation.
As we move from effort to impact, it gets harder to measure, predict, and influence. For example, effort can be measured by looking at the financial and accounting records, and we have complete control over them. On the other hand, achieving the outcome requires a lot of criteria to be met, including a valid hypothesis and problem statement in the first place. Conversely, impact tends to be very laggy and susceptible to many external factors, such as macroeconomic conditions or competitor actions.
Read more about productivity in tech here.
Efficiency, Effectiveness, Productivity
Efficiency is simply the ratio of usable output product (P) to the cost of input resources (C). Efficiency is predominantly a quantitative metric, mathematically calculated, and concerned with input (effort) and output. In general terms, efficiency is sometimes referred to as “Doing the thing right”.
Effectiveness is about “doing the right thing”, focusing on the “outcome” and possibly and hopefully resulting in final “impact”. Effectiveness can still be achieved in a low-efficiency system, but at the cost of side effects such as longer working hours, low wages, inhumane working conditions, or pollution.
Productivity is the relationship between effectiveness and efficiency. A high-performing system (including an organisation or team) can achieve a desired outcome with minimal effort required. Effectiveness is essential for productivity, as building the wrong thing more efficiently can lead to more negative outcomes sooner (more efficiently).
For example, an organisation is deemed productive when it manages to build a high-quality product that customers need and are willing to buy (effectiveness) with resources and investment lower than the baseline (efficiency).