How to Improve Operational Efficiency
Operational efficiency can serve as a stepping stone towards the success of a business. Improving it requires effort across multiple areas such as measuring and refining your processes, retaining employee productivity, and using the right technologies.
Improving your business’s operational efficiency translates to boosting your revenue and profits. According to a study, 77 percent of CEOs globally agree that they focus on operational efficiency and rely on it to a great extent to increase their company’s revenue.
This should come as no surprise since when a process, from beginning to end, follows a smooth workflow, client satisfaction levels increase, which results in more revenue generated.
Any company looking to improve its operational efficiency should understand what the term truly entails and which best practices should be followed for a streamlined process.
What is Operational Efficiency?
Operational efficiency is a metric that represents the ability of a company to reduce time and effort wasted to a maximum degree while still being able to deliver high-quality service. It determines a system's overall performance.
An efficient system successfully decreases labor costs, inventory costs, and unnecessary business expenses to increase the company’s bottom line. To maintain this efficiency, operation managers need to constantly monitor important processes. This then helps them evaluate what company functions are ineffective and could be eliminated from the process.
The end goal of achieving operational efficiency is to reduce the number of resources required to produce a good quality service or product.
Why is Operational Efficiency Important?
A business’s operations include all things related to creating its products and services. If those operations are not efficient, the company’s wasting money.
Improved efficiency can help you:
Reduce costs incurred, which translates to producing more output from less input.
Increase output, which means producing more output from the same resources.
Grow your business by making much more output from a little more input.
An increase in operational efficiency eliminates outdated practices from the process. This also helps free up time to spend on other profitable areas of the business. It also helps improve customer service which increases client loyalty.
Improving your operations is not an overnight change nor is it a drastic one. It involves making the little changes where it counts the most.
How to Improve Operational Efficiency
1. Standardize Processes
Process standardization is the establishment of a set of rules that govern the way a task is to be carried out by the employees of an organization.
Every company’s operations include tasks that must be completed in a set amount of time, be it daily, weekly, monthly, or yearly. If these processes aren’t standardized, a smooth workflow is not achieved.
Each task requires rules that define its scope and the method needed to complete it. If you don’t standardize these rules, there is no ensuring that quality services are being produced.
When done well, standardizing your processes can decrease ambiguity and improve clarity, ensure quality, and promote employee productivity.
2. Use Checklists for Employees to Follow
For many employers, utilizing employee checklists can seem excessive. However, checklists are a powerful tool for any business to ensure consistent outcomes.
Having checklists that employees can follow can have the following benefits:
It helps avoid mistakes. Many jobs have multi-faceted duties. Checklists help avoid confusion and consequently, mistakes throughout the entire process.
It ensures consistent results. Each person using a checklist will take steps in the same order as outlined in the checklist, ensuring consistency within the organization.
It allows for employee flexibility. Organizing jobs into coherent steps will allow any employee to step in and cover for another employee without too much disruption in the processes.
3. Automate Repeatable Work
It is very easy to get bogged down by day-to-day administrative tasks, leaving no room for other more important things. These tasks are repeated every day but produce little to no value for the business.
Invoicing, project planning, financial reporting, perfecting that Powerpoint proposal, and much more – these are all processes that can be effectively automated.
Leveraging modern technologies to automate the boring stuff can reduce budget cuts along with decreasing any human error associated with performing tasks manually.
4. Use Cloud-Based Systems
Cloud-based systems can make collaboration easier amongst employees of a business by improving accessibility and helping everyone share digital files and documents easily. According to a survey conducted by Forbes, 64 percent of the participants agreed that cloud-based collaboration tools helped them and their teams to perform tasks better and much faster. Employees are able to stay connected no matter where they are which helps in performing efficient remote operations as well.
5. Tie Systems Together
For any business, collaboration across different teams is an ongoing process. Removing the obstacles that come in each team’s way and tying their processes together towards a shared vision helps improve operational efficiency.
Making everything work in unison captures an even flow that keeps processes simple and makes them easy to follow. For most businesses, any task or activity that is critical to its core should be tied together and standardized. Combining these systems creates a foundation that the business can operate on efficiently and effectively so that it achieves results that are exceptional.
Conclusion
Operational efficiency sits at the forefront of any business's revenue-generating capabilities. It may have started out as managers wanting to cut costs and reduce headcount. But gradually, it has come down to the smart allocation of resources in a way that produces optimal results.