Improving business efficiency should be a key objective of any business strategy, and one that remains consistently monitored for potential improvement. Improved efficiency supports the achievement of two overarching goals: increased revenues and reduced costs.
Whilst improving operations is good business sense at any time, this is particularly important to enable strategically important transformations, such as M&A activity or attracting external growth capital, leading to a tangible impact on business value.
A cohesive improvement process should be underpinned by a clear, focused sales strategy that allows the business to allocate or redistribute resources to key areas of strength. That is, those areas of the business that will generate maximum returns, rather than chasing revenue for its own sake. It is not efficient to try and change everything. From the very outset, the strategy for improving efficiency must be aligned with the sales strategy.
Businesses must consider the evolving operational environment, such as technological advances or changing customer needs, which can have an impact on what efficiency means for a business. The pandemic-driven boom in online retail for example, highlighted how a rapid change in the market meant processes that were efficient in one kind of operating environment are no longer suitable for another.
Technological advances can also open the door to new kinds of efficiency. A decade or two ago, the prevailing wisdom was that decentralisation within a business would help to increase efficiency. However, with modern technology making it easier to communicate and share information digitally, the benefits of decentralisation are not so clear, particularly for digitally-driven or cloud-based functions, such as IT, treasury or finance.
So how do you improve business efficiency?
The first stage is to review and streamline work processes. Map out a workflow to describe the processes your employees should follow. Looking at all the tasks your people, or teams, need to carry out makes it easier to identify opportunities to avoid duplication and save time, or where additional resource could improve the workflow. This may include redesigning the way your staff work with digital and physical information and tools to ensure they use their time efficiently. It can often be useful to bring in external professional support as part of this process, with our experts offering the industry experience and independence to ensure a truly objective assessment. Our teams can support you to identify key priorities in your management and organisation, with our specialists guiding you through to a more efficient resolution using bespoke tools such as our Optimize platform.
Secondly, people play a critical role in the process of improving efficiency. Having the right talent in the right roles, providing the training, tools and technology people need to perform at their best, putting in place appropriate incentive schemes – people-focused actions like these can make or break an efficiency program.
As, too, can funding. The whole idea of improving efficiency is to reduce costs and increase profits, but achieving these goals will often require increasing expenditure in the short term - investment that is repaid in due course as business efficiency improves. Efficiency programmes therefore need to be fully costed and budgeted before being implemented.
Another way to improve efficiency for the business is by preparing a financial capital forecast. This can tell you whether it is worth investing in a new piece of technology or additional resources, for example, or what the difference might be over three or five years. It can be especially important when looking at efficiencies that may be less tangible in the short term, such as ESG metrics. A financial capital forecast can show if the business can fund the investment out of its own reserves or whether external funding will be required. If it is, then external funders will expect to see a fully costed plan to base their decision on.
The importance of accurate reporting is also critical. Without having the right information and data to base decisions and budgets on, it is almost impossible to achieve business efficiency. Wrong numbers lead to wrong decisions. Not only at the beginning of the process, the planning stage, but also during implementation, to enable you to monitor performance as changes are introduced.