Business Efficiency: What It Is and How To Improve It

By Indeed Editorial Team

Updated March 30, 2021 | Published September 25, 2020

Updated March 30, 2021

Published September 25, 2020

When a business operates inefficiently, it can end up absorbing an incredible amount of revenue each year. By understanding business efficiency and the strategies for improving it, you can help your organization waste less effort and time, allowing it to run much more smoothly. In this article, we explain what exactly business efficiency is, explore the most common types of business efficiency and describe how you can improve the efficiency of your organization.

Related: How to Measure Productivity and Increase Efficiency in the Workplace

What is business efficiency?

Business efficiency refers to how much a company or organization can produce as it relates to the amount of time, money and resources needed. In other words, a business's efficiency measures how well it can transform things like materials, labor and capital into services and products that produce revenue.

Related: Meeting Tips to Get You Working More Efficiently

Types of business efficiency

A business's efficiency can be measured in several different ways, such as:

Return on investment

An investment is usually considered any current cost that should help the company save or make money in the future. Sometimes referred to as an ROI or net present value, a return on investment could diminish a business's current efficiency but boost its efficiency in the future.

Process efficiency

Process efficiency measures certain business processes to ensure that they are effective and efficient. For example, you might examine the cost and speed of shipping a product to determine if there are ways you could improve the cost to income ratio.

Operational efficiency

A business's operations are the processes that are integral to the overall business model. Business operations are typically responsible for a majority of the company's costs, which is why most efforts to improve efficiency are focused on this aspect of the business.

Eco-efficiency

When analyzing a business's eco-efficiency, you must calculate the comprehensive impact that it has on the environment. For example, you might calculate the environmental cost as a percentage of the company's income.

Energy efficiency

Energy-efficient businesses can develop sustainable practices that allow them to reduce costs. To measure this type of efficiency, you would evaluate the amount of energy needed to operate all areas of the business. You could, for instance, analyze the energy used during every stage of a product's lifecycle.

Labor productivity

You can measure a company's labor productivity by assessing how much employees are able to accomplish or produce during an average hour at work. This type of efficiency is heavily impacted by the equipment, automation and technological tools that employees have access to.

Financial efficiency

A business's financial efficiency is measured by determining what percentage of the company's revenue is spent on expenses.

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How to improve business efficiency

Here are some steps you can take to effectively boost the efficiency of the business you work for:

  1. Opt for automation.

  2. Encourage open and in-person communication.

  3. Reduce interruptions.

  4. Implement regular, shorter meetings.

  5. Promote "single-tasking."

  6. Choose the right time to change processes.

  7. Utilize a task management software.

1. Opt for automation

One of the easiest and quickest ways to facilitate a more efficient work environment is by embracing automation for monotonous processes and tasks. For example, you could automate sending employees their pay stubs. By automating certain tasks, you can make better use of each team member's time, allowing them to focus on things that are more productive and require a human touch or critical thinking skills. Though automating processes can be expensive initially, it typically has a great return on investment because it allows you to improve the business's efficiency by cutting future costs.

It's important to note that while many business processes can be automated, that may not be the ideal choice for your business. Evaluate what can and should be automated to grow the business by getting feedback from other employees before and after you implement a new aspect of automation.

2. Encourage open and in-person communication

Make sure that employees feel comfortable offering feedback and voicing their concerns. Aside from creating a more satisfied workforce, open communication between departments can improve business efficiency because it reduces miscommunication, allows for the sharing of ideas and encourages feedback that could help management realize opportunities for improvement. It's easier for employees that are familiar with their role and department to recognize processes that could be streamlined or identify other areas within the company that could be more efficient.

In addition to fostering a more communicative environment, you can improve efficiency by helping employees recognize the value of face-to-face communication when trying to gain clarification, address a question or find a solution to a problem. Certain issues can benefit from a quick in-person chat instead of an extensive email thread. By finding a healthy balance between online and in-person communication, you can better facilitate the exchange of information and achieve optimum efficiency.

3. Reduce interruptions

Providing employees with uninterrupted work times can improve their focus and efficiency. One effective strategy for limiting the number of workday interruptions is to schedule multiple meetings on a specific day of the week instead of dispersing them across several days. Meetings can be extremely disruptive to workflow, so by consolidating them, you can give employees more days without this distraction.

Additionally, consider using a tool that reduces specific types of notifications during certain parts of the day. By giving employees the chance to work distraction-free, you can improve the business's overall efficiency.

4. Implement regular, shorter meetings

Company-wide and departmental meetings are essential for several reasons, but they can sometimes last longer than they should, monopolizing a majority of the workday. You could try implementing daily, 10-minute meetings to eliminate unnecessary meetings and keep the company running efficiently.

5. Promote "single-tasking"

Multitasking is often thought of as being an efficient use of time, but it can have the opposite effect. By focusing on one task at a time, you can achieve more and reduce the likelihood of projects taking longer than necessary to complete.

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