Operational Efficiency: What It Is and Why You Need It

If you ask a CEO to define operational efficiency, they might tell you it’s determined by measuring the difference between output gained from a company versus the input necessary to successfully run the business.

In layman’s terms, however, it’s centered around efficiency and productivity. Studies show that when these two factors are optimized, revenue increases and there’s a marked improvement in satisfaction –from both employees and customers alike.

Rather than a fad or simple buzz phrase, the success of your organization depends on maximizing this integral business process.

Understanding the Term

Though often used interchangeably, there’s a difference between efficiency and effectiveness. In a business setting, being efficient is achieving maximum productivity with minimum wasted effort. Effectiveness gauges whether the goals of the project have been successfully met.

For instance, if a manager is focused on saving money, he or she might choose to take drastic measures such as cutting staff, forcing employees to work longer hours, and/or sacrificing the quality of the product or service. The trouble with that plan is that it can easily backfire.

Less staff means work quickly piles up and project deadlines are missed. Overworking employees damages morale and motivation, which directly hurts productivity. When customers are faced with higher prices and lower quality, they will find alternate suppliers. That initial effort to save money at all cost does just that by costing sales for the organization. This is difficult and in some cases almost impossible to recover.

How to (Responsibly) Improve Efficiency

That’s why it’s essential to look beyond mere cost cutting. While reducing expenses related to labor and resources is important, it’s equally, if not more important, to take an objective look at company operations as a whole.

Begin by investigating your business structure and processes. Are there areas where operations could be streamlined without having to make cuts in the quality or output? Address those areas first.

For instance, when company tools — including technology — are out-of-date or otherwise not functional, they no longer effectively serve their intended purpose. Neglecting tools necessary to increasing productivity is detrimental to success.

Next, forge a workplace culture centered around collaboration and optimum use of each team member’s strongest skills. This will minimize duplication of efforts, and will allow each employee to contribute at their maximize capacity.

The main idea is to avoid being so hasty to cut hard costs such as labor and resources that you overlook maximizing, or upgrading, essential tools that ensure maximum operational efficiency. This is no easy task, and many professionals reach out for assistance in accomplishing this weighty goal.

We love helping companies improve collaboration and create positive workplace cultures where every idea is heard and considered. We’d be honored to help you take your organization’s success to the next level. Begin a conversation to get started today.