Efficiency measures the level of performance achieved against a standard. A high level of efficiency generates the highest possible amount of outputs with the smallest amount of inputs. An efficient process typically contains the minimal amount of wasted labor, materials, energy, and processing time. Highly efficient processes tend to be those that deal with high volumes, since a business is more likely to benefit from improvements in these areas.

A business that focuses intently on efficiency is more likely to be competing in the marketplace as the lowest-cost producer, though efficiency improvements can enhance profits under any type of strategy. A business can find itself in trouble if it pursues efficiency to an excessive extent, taking the focus of management attention away from the effectiveness of the overall corporate direction.