13 Ways to Improve Business Efficiency

You may already know the benefits of operational efficiency – but how do you get your business into a more agile, resilient state? 

Improving efficiency can lead to lower costs, increased output, lessened space requirements, and decreased time to market. All of these are crucial to the long-term health of your business. 

Want your business to be efficient in the marketplace and essential to your customers? Get started with these methods: 

First, Investigate 

1 - Identify Problems

To find issues, you could monitor your key performance indicators that reflect how your business is performing in various functions, gather feedback from stakeholders about operations, conduct reviews and audits of your processes, finances and operations, or create a visual representation of all steps in your business processes.
These activities can identify redundancies, bottlenecks, or activities that don’t add value for your business or customers.

2 - Discuss Operational Challenges 

Your key staff members can provide perspective on operational issues and how they affect your production, productivity, staff, customers, and revenue. They can identify specific problems that recur and highlight opportunities you’re missing out on because of a lack of efficiency.

3 - Find the Root Cause

When you identify an issue, follow it to its root cause. You can do this using the five whys (asking “why” repeatedly to every answer you receive until you get to the root cause). For example, say a newsletter is repeatedly being sent out late. The initial reason is that the content is always provided at the last minute, but by repeatedly asking why you uncover that the root cause is a lack of clear protocol for creating content for the newsletter and no person taking accountability for making sure it gets sent out on time. Now you can address that deeper issue to prevent future problems.

Second, Set the Standard

4 - Define Goals

Clearly outline what you hope to achieve by improving your efficiency. By defining your goals, you can better lay out your plan of action and monitor your progress. You may have any number of objectives including saving costs, increasing production, and improving customer satisfaction.
Your goals should be quantifiable, such as reducing customer service response times by 10% in the next six months. You can set your goals based on industry standards, competitors’ benchmarks, and even input from stakeholders.

Set aside time to periodically review your goals, assess whether you’re still progressing towards them and determine whether they’re still relevant to you and your business. As your business evolves and changes, some goals may no longer be as important to you, or other priorities may arise.

5 - Track KPIs (Key Performance Indicators)

Your key performance indicators (KPIs) determine how successful you are at achieving certain targets. Industry KPIs vary, so it’s important to set and track KPIs based on your industry and your specific goals. 

Examples of efficiency KPIs include:
•    Process performance 
•    Productivity 
•    Cycle time
•    Overall equipment effectiveness 
•    Waste percentage

6 - Create an Accountability Framework

To be successful, everyone involved needs to know and understand their roles and responsibilities in reaching the new goals. They must be aware of the expectations, timelines, and deliverables they’re responsible for achieving, as well as how to monitor progress and when to alert the team that targets aren’t being met.

Next, Take Action

7 - Implement Temporary Fixes 

It’s tempting to wait for a perfect solution but often taking some action will enable you to take further action and possibly free up the resources to find better solutions. A quick reaction can provide a stopgap to prevent further complications, maintain your operations, and ensure customer satisfaction while you work on a long-term solution.

For example, if you have a sudden need for more staff members, hiring temporary workers can get you through until you can hire new employees. If your equipment breaks down, you can rent equipment until you’re able to finance something new.

8 - Evaluate Resources

Any action plan requires resources. It’s important you have the resources you need to achieve your goals. Such resources include financial backing, labor, and technology. You may need to find or free up capital to increase your efficiency.

If you don’t have the resources readily available, explore your options. You may be able to lease or rent the equipment you need or hire contractors to help with the labor.

9 - Prioritize Changes

Many businesses will find numerous areas that could be made more efficient. In most cases you won’t be able to undertake them all at the same time. This means you’ll need to identify those areas that are the highest priority, based on those that will have the highest impact. By starting there, you can often free up resources for subsequent improvements.

One way to prioritize changes is to start with those that are high impact and low effort, followed by high impact and high effort. Last is low impact and high effort. Financial cost, timeline and any interdependencies may also play a role in how you prioritize changes.

10 - Identify Financial Needs

Your plan to increase efficiency may require financing to cover the costs of equipment upgrades, redesigned production processes and additional employees. Make sure you understand how much your operational changes will cost and identify sources of funding. You may have enough in your business to cover your costs, or you may need to find additional sources of funding by finding investors or applying for a business loan or line of credit.

11 - Optimize Office Processes

Your client-facing and back-office activities can be optimized to reduce activities that don’t add value, are redundant, lead to errors, or make tasks more complex. Find ways to automate or eliminate where possible. Ask how something can be done more effectively, without creating waste, and with less room for error.

12 - Improve Inventory Management

Many businesses tie up their cash flow in inventory, which creates a need for storage or warehousing and can result in excess waste. Implement a just-in-time inventory system, where inventory is purchased only as needed. You’ll need a responsive supply chain but will likely save money in the long run.

13 - Document All Changes

Documenting all changes, processes, and rationales for decisions enables you to monitor and adjust in the future. If you know why you’ve made certain decisions, you’re in a better place to analyze those decisions and determine whether you need to make different ones in the future. Perhaps you chose one option because it was less expensive but, in the future, would go with a different option when you have more money available.
 

Don’t forget to celebrate wins

The road to efficiency might be long and complicated. Celebrating as you pass milestones will keep your team motivated and remind you of the benefits of taking these important actions. It will also increase morale.

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