What Is Business Efficiency? Benefits & How To Improve

What Is Business Efficiency? Benefits & How To Improve
Understand what business efficiency is and the different types of business efficiency. Get tips on how to improve business efficiency. Learn more with Square.
by Square Dec 11, 2021 — 4 min read
What Is Business Efficiency? Benefits & How To Improve

It doesn’t matter how smoothly your business appears to be running; you know it could always be better. Maybe a project takes three days too long to complete. There are many types of efficiency issues that business owners face, but you can make a difference by learning how to improve efficiency in your business.

What Is Business Efficiency?

Business efficiency is a measure of how efficiently a business uses capital, labour, services/products, and materials to create revenue. How productive are your employees? How much waste do you produce? Is every dollar used wisely? Your business can always find new ways to become more efficient.

Types of Business Efficiency

If you want to learn how to improve efficiency in a business, you need to first learn about the different types of business efficiency. There are also many ways to measure your business efficiency. Here are a few:

1. Labour Productivity

How much can your employees accomplish in an average working hour? This is influenced by the task and tools an employee has. It’s a good idea to have a benchmark of how much someone should accomplish in an hour, so you can easily keep track of productivity. Likewise, you can increase your own efficiency by using team management tools that allow you to set and track hours and adjust as needed.

2. Financial efficiency

What percentage of your revenue is used on business expenses? This is a key performance indicator that should provide insight into how financially efficient your business is. The lower your expenses are the better, but they should be no more than 30% of your revenue. While operational costs should be kept to 60% of revenue.

3. ROI (Return on Investment)

Every investment you make should either make you money or save you money. For example, training employees is an investment because improved performance may drive sales.

4. Operational & Process efficiency

These two are closely related. Operations are processes crucial to your business model. The operational side of the business makes up the majority of your costs, which is why improving operational efficiency can be an important step in improving overall business efficiency.

On the other hand, process efficiency is the measure of how efficient your actual business processes are. If you want to know how to improve efficiency in a business process-wise, then look to things like shipping, packaging, speed and cost. Or an internal process that is constantly flagged as being over-handled.

5. Energy efficiency

What impact does your business have on the environment, and what steps can you take to be more efficient? You can develop sustainable energy-efficient practices that reduce costs. Office air-conditioning, lighting, heating, and equipment all contribute to the energy you use. Auto-lights can help you cut costs immediately, as can energy-efficient bulbs. There are a wide variety of ways you can drive down your energy usage to improve overall business efficiency.

How To Improve Business Efficiency

1. Team Management Software

The beauty of team management software is it keeps all of your team’s work progress in one central place. It means your team can work together and do so efficiently. Everyone is always in the loop, and they don’t have to shoot emails back and forth all day to keep up.

2. Automated Email Marketing

Opting for automated email marketing will help you improve business efficiency by taking those repetitive tasks out of your hands. Your team can still pour their creative energy into crafting timely, personalised emails, but the software will take care of the rest.

3. Further Automation

You can automate much more than your email marketing, and if you want to truly improve business efficiency, you will look to automate as much as possible. There are several reasons this improves efficiency. First of all, automating as many tasks as possible means you free your team up to focus on more important things. There are plenty of tasks that require the critical thinking skills only a human can provide. Additionally, it helps boost morale by taking monotonous tasks and processes out of their hands, making them more productive and efficient at the tasks they do handle. Evaluate which tasks in your business you can automate to improve business efficiency. Start by seeking feedback from the employees who do the jobs.

4. Face to Face Communication

Employees often express frustration at how much time and energy emails sap from their day. Just like many meetings could be emails – many emails could be two-minute face-to-face chats.

What could be an hours-long email chain might have been easily resolved over a five-minute chat. Having said that, you should avoid those off-the-cuff meetings that only take a minute. People are more efficient when they have a clear plan for their day, and unscheduled meetings can throw that off. If you’re honest, you know that nothing of value takes a minute, so that unscheduled meeting will last far longer and eat up much more time. Instead, email the office and schedule a ten-minute chat at a specific time.

5. Manage & Limit Interruptions

How many meetings are your employees attending in a day? If your team is struggling to work efficiently, it could be down to all the interruptions they face. Rather than scattering meetings throughout the week, make one specific day a designated meeting day. That allows your team to block out the time on their calendar and schedule their week accordingly. Giving your team the information, and tools they need to operate as efficiently as they possibly can.

Meetings aren’t the only interruptions your team will face; look at what other tools you can put in place to help them curb those interruptions. Studies show that once interrupted, it can take 23 minutes to regain focus. Interruptions are the enemy of business efficiency.

6. Short Morning Meetings

You can start each workday with a quick ten-minute scheduled information meeting if there’s business news to announce. It can also be a good time to set the tone for the day and boost team morale.

7. Encourage Single-Tasking

Studies have consistently proven that multi-tasking is not an efficient way of working. Encourage your team to single-task. Focus on one task before beginning another because if you’re spreading yourself over multiple jobs at once, nothing will get done well.

8. Follow Processes

You can revisit whether a process is as efficient as it can be, but it’s just as important that your team sticks with the established process. You might get it done quicker if you cut corners, but that’s when mistakes happen, and mistakes cost money and time. A process change to improve business efficiency should be official and intentional.

9. Open Communication

It is important to maintain open lines of communication, so your team can come to you with ideas, solutions, and suggestions. Your team is hands-on, doing the work, and you need them to help you make better decisions to improve business efficiency. Try operating an open-door policy for specific hours when your team can come to you about anything.

The Bottom Line is brought to you by a global team of collaborators who believe that anyone should be able to participate and thrive in the economy.


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