What is Operational Efficiency and How Does a Company Achieve It?

Operational efficiency is a broad term that has different meanings across different sectors, but for businesses and corporations, it is one of the most important terms to know. In the business world, operational efficiency measures costs incurred as a result of business, economic, and financial operations. Lower costs are thought to equal greater efficiency.

But is this true?

Today we will look closer at the term operational efficiency and why the lowest initial cost does not always translate to achieving overall efficiencies as desired. We will also discuss other ways to achieve operational efficiency and why measuring progress is so important.

Achieving Operational Efficiency Through Improving Operations

A fast way to achieve operational efficiency is to streamline and improve operations. This means reducing cumbersome and ineffective overheads such as duplicate positions and procedures. Automation is one way to achieve this type of streamlining.

However, automation means technology, and technology comes at a cost. Here is where we see our first look at how being purely cost-driven can negate the effects of operational efficiency.

How Being Cost-Driven Can Hurt instead of Help

Corporations must show continual growth and profits to remain viable, and this can lead to short sighted actions in the short term. For example, let’s say that ABC Corp wishes to automate part of its call center service by using an auto-dialler to contact/respond to clients, then direct them using the phone’s keypad to the right department or person. This frees up personnel for other tasks and reduces equipment overhead.

There are two phone technologies the company is interested in to achieve this. One is several thousand dollars more than the other. The cheaper one has known issues… but the company has not had a great year financially and there is an important board meeting around the corner. Going with the cheaper system shows the board that ABC Corp is saving money, right?

When the system fails and customers are irate, unable to communicate with the correct department, and leaving negative review online, we see that the cheapest option costs more in the long run. The better answer would be to wait on the automated upgrade or to show the board the long-term value in going with the more expensive option.

Before improving operations, always do a complete, long-range cost/benefit analysis to ensure that cutting costs doesn’t incur greater expenses in the future.

Reduce Waste to Improve Operations

Another way to achieve operational efficiency is to reduce waste across the board. This means time waste, product waste, etc. When is the last time you checked to see how much your team was using social media for non-work activities? That is time waste. If your company produces a product, how much non-recyclable by-products are you also producing? Are sections, such as storage, in your building heated 24/7… and do they need to be? Are the florescent lights left on overnight? Should you switch to LED lights? These may seem like small things but when you do a full waste audit, you will be surprised at how many efficiencies can be found to improve operations at every level of the company.

Measure the Progress

Doing a full cost/benefit analysis to avoid the "lowest cost" trap and reducing waste in your operations are great starts to achieving operational efficiency, but all is lost if these efforts are not tracked and monitored. Every quarter, or annually, your company should be able to produce data that show how your operational efficiencies are impacting your brand financially, environmentally, and with employee morale.

Don’t Go it Alone

Achieving operational efficiency is a demanding task for businesses of any size, and the thought of continually monitoring and coming up with new efficiencies can be daunting. Thankfully, you can rely on the experience of The Burnie Group, a business management consulting firm in Toronto that specializes in helping businesses achieve operational efficiencies that streamline your company and make it more effective. Contact The Bernie Group today to learn how quickly your brand can improve operations and become even more efficient, productive, and profitable.

Hi! I'm Stevie, and I'm interested in everything that surrounds the topic of personal finance. I hope my articles will be of some use to my readers!