Optimization of production factors plays a central role in efficient milk production operations. Causal relationships between production parameters (health, fertility, feeding, performance and farm size) on the one hand and efficiency parameters on the other have been identified in several studies. In recent years, structural equation modelling (SEM) has not only gained importance in agriculture but also in milk production, providing the opportunity to investigate multilateral relationships. Additionally, SEM enables an estimation of parameters which are not themselves measurable, the so-called latent variables. The current study was based on the data of 943 branch settlements (including the years 2012 and 2013) of dairy farms keeping German Holstein cows in Schleswig-Holstein (Northern Germany) which provided a combination of the structural parameters, economic parameters and biological performance of the farms. An SEM using this combined data was applied to investigate the complexity of influences on efficiency parameters in milk production. Efficiency was sub-divided into and evaluated by two effect variables (economic efficiency and biological efficiency). Economic efficiency was defined as a conventional efficiency assessment criterion from full-cost accounting, whereas biological efficiency was used to evaluate the quality of herd management. Performance was identified as the key parameter for independent evaluation of efficiency by assessing biological (gamma(41) = 0.644) or economic efficiency (gamma(42) = 0.266). The SEM explained more than three times higher proportion of the variance in biological efficiency than in economic efficiency. The investigation proved the eligibility of partial least squares SEM for the evaluation of efficiency in milk production.