Productive Efficiency vs Allocative Efficiency

When we talk about finding high efficiency in our work, there are two important components. One is productivity efficiency, the other allocative efficiency. These are two terms taken from the economics world that we can relate to a variety of our own work and life. Combining both forms of efficiency can boost your output and allow you to maximize your productivity.

​Productive Efficiency
Simply put, productive efficiency is the speed at which you can produce something. This may be a specific product or object in many businesses. It may also be something that you produce like a service or a part of your routine. Productive efficiency is how to measure productivity in terms of generating a product.

One way to look at this is to think about a Coca Cola plant. How quickly they create their product is measured as productive efficiency. Many parts may come into play with this but the efficiency we are looking at is how it is made.

Allocative Efficiency
Allocative efficiency is all about the distribution of your product. It defines how to measure efficiency in how well we take our product and get it into the hands of customers.

We can think of this like the delivery people for Coca Cola. These are the trucks and store clerks who make it possible for us to buy a coke at the gas station. How quickly and how effectively the process to distributions (allocating the product or resources) is how we can use allocative efficiency.

Putting Them Together
Thinking about efficiency in this two-fold dynamic allows us to consider the ways we can lose out on opportunity and time. If we are too focused on production itself, we may not effectively distribute what we have. Your services and work may not be delivered as effectively and the product, though it was efficiently produced, will still not reach its end goal in the time it needs. The same is true for the opposite, wasting time in the actual production leaving the delivery, no matter how quickly it goes, slower in the end.

So what's the point in talking about allocative efficiency and productive efficiency here? 

Whenever we are looking for ways to be more efficient and productive at anything in our lives (providing a service, finishing assignments, producing a product), we need to look not only at how quickly and effectively we can produce something, but how quickly and effectively we can deliver it as well. 

Not only that, but knowing there are two halves to efficiency allows us to consider how those work together. One common weak spot in a system is this transition between production and allocation. Smoothing out the bumps in this transition can increase the speed and effectiveness of your work.

This discussion is about increasing awareness around potential weak spots in your own productivity. What we do next is look at whatever our goals and tasks are for the day. What does the production look like? What does the allocation look like? Are there any gaps or slow spots? How can you improve those? How can you make the transition between production to allocation more seamless? 

Start answering these today and you'll start to see your efficiency grow.