Operational Efficiency

How to Improve an Organization’s Operational Efficiency | SMB Compass

Ezra Cabrera | December 17, 2020


    Business owners are constantly finding ways to increase operational efficiency. Thanks to technology, larger organizations have the capacity to establish seamless process improvements that are critical to mitigating risks and improving customer satisfaction.

    For small and medium businesses (SMBs), it can be challenging to implement consistent operational improvements due to the complexities of modern best practices, the constant search for the right talent, and evolving consumer demands. These factors require a huge amount of investment both in time and budget, which SMBs are currently grappling with due to the COVID-19 pandemic.

    Since no business can carry the dead weight of inefficient operations, this article will present the practical ways SMBs can consider when increasing their operational efficiency.

    First, what is operational efficiency?

    Operational efficiency is a company’s ability to reduce as much waste in time, effort and materials as possible without sacrificing on its final product. It essentially measures the efficiency of the company’s profit earned as a function of its operating costs.

    It’s not enough for a company to just hit, or even exceed its sales targets. Part of maximizing revenue is evaluating the various processes required to generate it. Let’s say a small business owner who runs a grocery store is doubling his or her gross earnings year-over-year, but the profit is being off-set by the cost of repairs, procurement issues, mismanaged inventory, and miscommunication with suppliers. While these issues on their own may seem insignificant, when added up they really affect the company’s bottom line.

    Ensuring round-the-clock operational efficiency is proven to solve these types of reoccurring challenges that a company may have previously been sweeping under the rug. It requires the expertise of different personnel – the CEO, IT, marketing, finance, procurement, etc. – to come together and streamline internal processes and bridge operational gaps.

    How to improve operational efficiency

    Leaders in a company need to quickly identify and amend any bottlenecks in the operations process without affecting or interfering with the other parts of the process that are working well. We have identified fundamental ways to help managers increase operational efficiency to yield long-term optimal results.

    1. Invest in people, process and technology

    About how to achieve operational efficiency, three factors must come together: people, process, and technology. Processes need to be put in place to bring order to every aspect of the business. Through technology, companies are able to create products for their customers, optimize the flow of work, and save time and money through automation. It is the employees’ job to utilize these technologies and create process improvements that will yield the best result to the company’s bottom line.

    It’s almost impossible to bring success to the organization if any of these three factors are compromised. For example, if technologies and processes are topnotch but you don’t adequately train your staff, you can’t expect that they will properly follow operational protocols or utilize the technologies correctly.

    If there’s no process in place, employees will clash. Tasks will remain uncompleted, customer’s demands won’t be met, and there won’t be any transparency in the finance department. Processes are what tie people and technology together.

    Technology then bridges the gap between a productive worker and a seamless process. For instance, a company’s accounting department is responsible for producing financial reports each year for tax purposes and as a tool for monitoring and evaluating the company’s financial health. This is a process set in place so that the company can make informed financial decisions moving forward. Accounting automation tools allow the accounting team to do this job quicker and more efficiently.

    Particularly in the current landscape with so many businesses operating remotely, collaboration and productivity apps allow companies to maintain their various processes from home. These tools allow teams to track and oversee the progress of current projects to keep all members aligned, even though they are not working out of the same physical space.

    2. Improve customer service

    No matter what the nature of the business is, interacting with customers efficiently will encourage brand loyalty, which results in continuous purchases. Product- and service-oriented industries put customers at the heart of everything they do – always listening to their needs and eagerly addressing them.

    Experts from the Forbes Agency Council summarized 12 ways for companies to offer an unforgettable customer experience:

    • Personalize at Scale – Treat customers as real people with urgent needs.
    • Be Brand Evangelists – A customer’s brand experience starts with front-line staff. Lead the team when showing brand love, and reward employees who show high brand awareness.
    • Let Customers Be the Guide – Listen and respond to customer feedback to gain valuable insights.
    • Improve Employee Experience – Employees who love and appreciate the brand are motivated to do their best at work.
    • Focus on What the Customer Needs – Provide ways on how to improve the life of the customer.
    • Educate Customers – Offer tips that will give them a new perspective.
    • Focus on Relationship-building – Find a way to remember customers’ special occasions and moments.
    • Make Sure Customer Experience Meets Expectations – Work on building the customer’s trust to earn their loyalty.
    • Offer a Platform To Tell Their Stories – Create a platform for consumers to share their personal experiences with the brand.
    • Collect and Leverage First-Party Data – Offer personalized content to customers using the data collected from their purchases, inquiries, etc.
    • Focus on Post-Sale Process – Have a follow-up plan to nurture customers even after they receive the product.
    • Hire from Within the Target Demographic – Get insights directly from your in-house target audience.

    To streamline customer service and communications, some companies use CRM solutions to build customer relationships, generate leads, and improve the customer’s purchasing journey. Doing so will allow organizations to focus on how to achieve operational efficiency, which has a direct effect on customers.

    3. Keep things simple

    Many small businesses strive for perfection with high, unrealistic targets. However, entrepreneurship is a journey in itself, and there will always be roadblocks along the way. Businesses should really keep their operations simple and easy to navigate so they have enough cushion for when things go wrong.

    It’s key for company leaders to avoid overcomplicating their internal and external processes especially when they’ve just started running the business. Some sophisticated technologies may be proven to improve bigger organizations’ operational efficiencies, but that won’t always do the trick for smaller ones. Stop striving for perfection; instead, strive for what’s right and what works for the business.

    4. Automate repetitive tasks

    Traditional ways of running the business usually take time, which could have been spent on tasks that will actually bring the company more money. Some administrative, marketing and bookkeeping activities can be best accomplished when the company leverages automation. However, not all companies are able to leverage automation as a competitive advantage, therefore they miss out on opportunities that will transform their operations.

    Those who see the benefits of automation need to first identify which parts of their business are repetitive and are taking a huge chunk of their time. Come up with a list of operational bottlenecks that either need to be automated or completely cut out. Using automation for operational improvement will go a long way in mitigating human error and making better use of the company’s most important resource: time.

    5. Run operations through the cloud

    Smaller organizations are more lenient when it comes to remote working since overhead costs are not cheap. With cloud-based solutions readily available at a price that small business owners can afford, companies can now ensure employee productivity even as they work at home.

    Businesses are now adopting cloud-based technologies to monitor the progress of their projects, oversee the whole financial spectrum using different devices, and collaborate with the team even when they’re not in the office.

    With the advent of the global COVID-19 pandemic, more and more organizations are adapting to cloud usage, mainly because they want to: 1) Cut down on operational expenses; 2) Switch from on-premise storage to a scalable cloud solution; and 3) Optimize cyber security measures.

    On the accounting side of the business alone, cloud technology has been proven to make jobs easier. Sage Advice’s “The Practice of Now 2020: The Essential Report for Accountants” study revealed that 67% of its respondents – who are mostly accounting and finance professionals – said that cloud computing has been helpful in enhancing the quality of their work.

    These outstanding benefits of using cloud technology alone promises tremendous improvements in operations, allowing businesses to focus on growth as they adapt to the new normal.

    Now is the best time to optimize operational efficiency

    Business owners who set their company up for success don’t settle for Band-Aid solutions to mitigate recurring problems. When operational inefficiencies are addressed immediately, the organization will undoubtedly become competitive in the fast-paced world.

    5. Collect the Documents and Fill Out Paperwork

    Once you have picked the right loan and decided on a lender, the next step is to find out what documents they’ll need. As outlined above, the lenders will require you to submit financial statements, tax returns, business plans, and more. Locating these files now will help streamline the loan application process.

    Don’t forget to fill out the paperwork you need beforehand. Some of the fields in the application forms may require you to consult with a business attorney or accountant, so be sure to do that to avoid mistakes that could affect your application.

    6. Submit Your Application and Wait for Approval

    After getting everything ready, it’s time to submit your application. Some lenders may offer online applications (i.e., online lenders). If that’s the case, you will need to convert your documents into soft copies and upload the files on the lender’s database along with your application form.

    Other lenders may require you to visit one of their branches personally to submit your application. As you submit your application, the lenders may conduct a short interview and ask you questions like how you’ll use the funds or repay the loan. One thing to remember in these situations is to be transparent and honest as possible. If the lenders find out that you’re providing false information, it will hurt your chances of approval.

    Once everything has been submitted, the only thing left to do is wait for the lender’s decision. For online lenders, approval can take as fast as one business day. For non-profit lenders, approval could take a few weeks, so best apply for it if time is on your side.

    Get the Funds You Need to Start a Business Today!

    Starting a business can be the most exciting but overwhelming experience of your life. But to keep it open, you need to be able to secure enough funding. Business loans are a great financial resource, and while navigating the entire application process could be daunting, there are many resources that can help make the whole thing easier.

    Use the guide above as your starting point. Once you get a grip on how business loan application works, it will be easier for you to get the funding you need to see your business succeed. Good luck!

    About the Author

    Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.