Did you know the average employee is only productive for 2 hours and 53 minutes a day? That sums up the secret to running an efficient business.
Regardless of the surface cause of any inefficiencies in running a business, it comes down to people. It’s the people in the business who create, lead, support, and produce. So understanding your team is imperative.
But of course, you can’t rely on that alone. As the saying goes, it’s a team effort. So as a leader, how can you make sure your team’s motivated? Do they have everything they need to help run an efficient business?
Read on as we’ve got the answers.
What Makes an Efficient Business?
There are many ways of envisioning efficiency. But they all center around the same principles: Best results for little effort. Here’s what that looks like in business terms.
Return on investment, as it’s known, results in high turnover with minimal overheads. And, depending on the business, that expectation needs managing with precision and care.
It’s tempting to increase dividends to shareholders. Again, consider it an investment in the following year’s dividends! But could you make an even bigger turnover the next year by giving all your staff a well-deserved 5% pay rise?
The efficiency of business processes focuses more on issues with your workflow itself. For example, suppose you have a factory with brand new equipment. But your strategy for quality control is sub-par.
That’s not an issue with operations because the machinery is doing its job. Suppose the quality control process starts halfway.
Yet, there’s an issue with the dimensions. Even the highest inspection standards would suggest your process should cover earlier stages.
Operational efficiency refers to what happens after process efficiency. You can have the perfect process efficiency through an optimized workflow. But if your factory has old equipment, then your business operations are inefficient.
Or maybe you could do with automating and managing your back-end, admin, or HR. Consider HR Software – Workbright is a great tool to help streamline your labor and HR processes.
Morality depends on your business values. Are they environmental, ecological, sustainable, or sociological?
Are you withholding the visions and values of your business and local community? Is there anything more that you can do to support these commitments?
You might find that investing in values boosts the morale and spirits of everyone. That’s true whether that’s your team, shareholders, or customers. Moral visions and values are the skeletons of any workforce.
Alongside moral upkeep, labor efficiency is the value a worker has to your business. Think of it as a micro-business in that respect.
Your top salesperson may bring in the most revenue. Yet, the salesperson costs you the most in HR and Legal hours or fees for non-compliance.
And, suppose that person is demoralizing the rest of the team. The expense to the business is now even higher. Bear in mind that we’re talking about profit margin, not revenue.
This measurement focuses on how well employees use skills to perform tasks. It also takes into account factors such as employee training, motivation, and morale. Labor productivity compares output produced per hour with the total hours spent working.
How to Improve Efficiency
To make a business successful, you have to improve efficiency first. But by starting at the beginning, you’re building a platform that makes your end goal easier to reach.
There will be some cross-over along your journey. You might realize a potential issue in the future.
Step One: Analyze Your Processes
You’ll need to start from the ground up. That means looking at every aspect of your processes.
From the way they work now to what could change them in the future. And, once you’ve done all that, you’ll want to look at ways to streamline those changes.
For instance, let’s say you run a manufacturing company. The production line is currently running smoothly. Yet, one day you notice something odd about the end product.
So, you investigate further and discover that the machine broke down last week. Now, you know where things went wrong before, which leads you to ask yourself, “What else needs fixing?”.
How to Approach Your Analysis
There are two main approaches when analyzing your processes. You can either focus on the big picture or break everything down into its parts. Whichever approach works best for you depends on the type of analysis you’d like to conduct.
For example, suppose you want to identify improvement areas within your current process. Then breaking everything down would help you better understand each part. Focusing on the bigger picture proves useful if you want to see which steps needed changing.
Execute an Audit Strategy
An audit strategy is a plan of action for your assessment stage. If you’re a small business, you might not have the resources to plan this far ahead, and it might be easier to get stuck in. Make a high-quality audit strategy part of your current plan to improve efficiency.
Chances are you’ll find you’ll need to tweak the strategy at every interval. In that respect, it’s no different from other audits throughout your business career!
Big Picture vs. Component Parts
When conducting an analysis, you should always keep the big picture in mind, even if it’s not a priority. That way, you won’t miss out on important details. If you do only analyze the components, you risk missing out on key information.
So, while you don’t need to go through every step of your entire process, you still need to note any issues you find. Otherwise, you’ll never know whether there’s anything worth improving.
Step Two: Categorize and Prioritize
Suppose you’ve got all your ideas down about what needs to improve. You’ll want to look at planning an execution strategy. And to do that, you can use Covey’s Quadrant Matrix to assist.
What Is Covey’s Quadrant Matrix?
Covey’s Quadrant Matrix is often used in time management training to make the most of task execution.
Doing so gives you a clearer picture to plan your execution strategy. That way, you can envisage a chain of events that could sort out other issues.
And, suppose you’ve conducted a successful, extensive audit of all your processes. Knowing your team’s strengths and weaknesses allows you to delegate with efficiency.
Here are the four quadrants to consider:
Urgent Quick-Fix Solutions
Quick, urgent wins are the easiest to spot. They take little effort to put in place and will provide you the biggest success right away.
Quick wins are great because, in a worst-case scenario, they give you a little breathing room. In this time, you can fix what may be a larger issue underneath.
Examples of these might be a typo on the website, such as the wrong email address or an overdue report. Quick wins provide an immediate solution that avoids further losses or inefficiencies.
Urgent Resource-Intensive Issues
Note we didn’t put this first. That’s because the chances are you’ll find urgent quick wins are easier to manage. They’re also easier to get started.
We aren’t saying to put quick wins first all the way through. But a good workforce will pull together to tackle the projects in the most efficient way.
Long-term issues often stem from labor issues. Whether it’s yourself as a leader, or someone in the team underperforming, it needs fixing. But remember, you’re a leader, not a manager.
In these cases, take time to get to the root cause of the problem. It’s this quadrant that will take up most of your time and resources. But if you’ve fixed the urgent tasks to high quality, then your long-term gains will happen sooner.
Quick-Fix, No Rush
Chances are, this is what most of your team are trying to sort first. Why bother? Unlike urgent tasks that provide big gains or buy you some extra time, no-rush fixes are a waste of resources. All they do is bring very little benefit to the workflow.
Plus, most businesses that adopt this strategy find the quick fixes sort themselves.
Step Three: Review
The secret to maintaining efficiency is to revisit this quadrant at regular intervals. You can conduct smaller audits monthly. And do a larger audit every three, six or twelve months, depending on the needs of your business.
The hope is that, after three months, your quadrant should look very different. Some of those long-term gains will become mere top-ups, aka quick fixes. Have a team member that’s transformed themselves but lacking in one KPI? One KPI is much easier to support than six!
And, you’ll have more energy for future improvements. So don’t wait until there’s a crisis before you start making changes.
Rinse and Repeat
This process isn’t perfect. There will always be things that slip through the cracks.
And sometimes, even when you do everything right, you still end up losing money. That happens when you make mistakes or fail to expect problems.
But over time, you’ll see how well you’re managing your workflows. If you notice any trends, you can adjust as needed.
For example, you need to add another person to help with certain processes. Or you could automate something, so you spend less time doing manual data entry.
Remember, efficiency doesn’t mean perfection. Like anything else, it takes practice. And, as long as those quick fixes aren’t reappearing, you’re on track to succeed.
Step Four: Reassess
By focusing on fixing issues in the business, you’ll find it easier to foresee future issues. Knowing that your business is operating well, you’ll have a clearer mind to re-assess on a larger scale.
Imagine a talented young racing driver. When they become the best at go-karting, they move onto larger vehicle categories. Then, when they excel at those, they move up a formula.
After two or three seasons, they notice a pattern. They learn more about their strengths and weaknesses. In doing so, they gain a better understanding of how to reach the pinnacle of their career.
And your business is the same. With a motivated, hard-working team and a steady cash flow, you can then look to building on that. Here are some factors to consider:
Don’t Think Bad, Think Better
The auditing stage involved a more negative-led mindset in problem-solving. But looking to the future requires a positive mindset approach.
Now you’re not fixing problems but nurturing and encouraging growth. And it’s here where many businesses fail.
Plus, your re-energized team is most likely sorting out many of the quick fixes. And, they’re doing so without you even hearing about them until it’s fixed!
They are stuck in the negative mindset of pointing out the worst. What needs to happen now is to encourage the best.
Revisit Your Business Strategy
At this point, you should have a wealth of results to show for your success in stabilizing a sinking ship. When looking forward, think about your business goals. Before, you may have found yourself hoping to achieve a higher turnover.
But what if your transformation means you’re 5% down on turnover but 15% up on profit? That’s still a huge success. And, it gives you the perfect platform to set your next goal.
Which is, how do you recoup that 5% turnover while maintaining your profit margin? Soon you’ll be maximizing the efficiency of your business. And that will put you in good stead for building on your successes.
Running a Business to Become an Efficient Business
So there we have it – the ultimate guide to running an efficient business. You’ve got all the tools needed to make sure your business runs smoothly from start to finish. But remember, don’t get too comfortable.
Even the best leaders are always finding new, inventive ways. Ways not only make their business more efficient but also better themselves!
Keep reading for more high-quality content!