Abstract Measurements of the star formation efficiency (SFE) of giant molecular clouds (GMCs) in the Milky Way generally show a large scatter, which could be intrinsic or observational. We use magnetohydrodynamic simulations of GMCs (including feedback) to forward-model the relationship between the true GMC SFE and observational proxies. We show that individual GMCs trace broad ranges of observed SFE throughout collapse, star formation, and disruption. Low measured SFEs (${≪} 1\hbox{ per cent}$) are ‘real’ but correspond to early stages; the true ‘per-freefall’ SFE where most stars actually form can be much larger. Very high (${≫} 10\hbox{ per cent}$) values are often artificially enhanced by rapid gas dispersal. Simulations including stellar feedback reproduce observed GMC-scale SFEs, but simulations without feedback produce 20× larger SFEs. Radiative feedback dominates among mechanisms simulated. An anticorrelation of SFE with cloud mass is shown to be an observational artefact. We also explore individual dense ‘clumps’ within GMCs and show that (with feedback) their bulk properties agree well with observations. Predicted SFEs within the dense clumps are ∼2× larger than observed, possibly indicating physics other than feedback from massive (main-sequence) stars is needed to regulate their collapse.