Amid a challenging economic environment, businesses must minimise waste and maximise efficiencies to remain competitive. But many Australian business leaders are struggling to maintain growth compared to their international counterparts.
CPA Australia research shows Australian businesses are lagging behind their Asia-Pacific neighbours when it comes to growth over the 12 months to March 2024, with just 53% of local business leaders expecting near-term growth compared to nearly 70% across APAC.
Addressing inefficiencies helps maximise productivity and set businesses back on a growth trajectory. When your business uses more time, labour and resources than necessary to complete a process or task, it has a significant impact on performance over time. If it’s possible to accomplish a goal faster or with less effort or cost, anything you do beyond that threshold constitutes a strategic business inefficiency.
Your business should be a well-oiled machine that maximises efficiencies at every turn. That means minimising waste wherever possible and streamlining operating and business models to boost productivity.
What are operational inefficiencies?
Operational inefficiencies within business processes include mistakes, unnecessary waste, slowdowns, and the duplication of effort. Common inefficiencies are things like repetitive tasks, production errors, unnecessary steps in approval processes, poor communications efforts, or ventures hindered by a lack of insights, manpower, or training.
CONSIDER MAKING IDENTIFYING AND ELIMINATING OPERATIONAL INEFFICIENCIES A GOAL FOR MANAGERS AND TEAM LEADERS AT EVERY LEVEL.
Improper planning, poor scheduling, and lack of quality control or supervision, outdated or incompatible technology, task uncertainty, and a lack of resources all cause or contribute to ongoing process impediments, breakdowns, or on-the-job crises.
Recognising operational inefficiencies
One of the fastest ways to identify inefficiencies and bottlenecks is to map processes out from start to finish using a flow chart and look for duplicate or unnecessary steps. Alternately, you might start with a problem and ask yourself the question “Why?” up to five times until you arrive at a root cause. For example:
Statement: We’re consistently late delivering new products.
- Why? Because manufacturing takes too long.
- Why? Because our team couldn’t source the necessary hardware and parts as planned.
- Why? Because we haven’t planned for supply chain issues encountered overseas.
Telltale signs that you’re dealing with operational inefficiencies include extended wait times, missed project milestones, large backlogs of work, shortages of resources, and more.
Enhanced financial resilience for businesses
Removing performance roadblocks helps boost your financial resilience, reduce expenses, optimise timing and resources, and maximise your revenue potential.
It also empowers your company to enhance product quality, shrink time to market, and scale more effectively. Consider making identifying and eliminating operational inefficiencies a goal for managers and team leaders at every level using these 9 strategies:
1. Analyse business processes
Meticulously analysing business processes helps cut down unnecessary steps. That starts by defining a set of key performance indicators that you can proactively track.
You’ll want to identify manual or repetitive tasks that could be automated and efforts that can be streamlined or enhanced with technology. If something can be achieved faster, simpler, or more affordably, there is often an off-the-shelf, easily customisable solution that can help you.
2. Find inefficiencies in operations
Once you’ve defined clear objectives and determined which business activities you want to review, use a data-driven approach to look for issues that are inhibiting performance based on your KPIs.
That might involve using visual aids like flowcharts and diagrams to map operational processes that show inputs/outputs, job roles and responsibilities, and the sequence of tasks and dependencies involved in the business activity. Consider reviewing and analysing data from different sources – such as software tools, hardware sensors, and research reports – to determine how well you’re performing against your KPIs.
3. Implement efficient operations
Enhancing efficiency is a recurring and iterative effort in practice. Consider developing strategy and action plans for instituting process improvements and regularly reevaluating the results of changes.
Ensure you clearly spell out timelines, responsibilities, and resources for instituting process improvements and continue to make changes based on feedback. It’s important to document your efforts, communicate clearly with colleagues about what’s going right or wrong, and adjust processes and project roadmaps based on learnings as you go.
4. Enhance employee training and skills
As part of evaluating current processes, it’s also important to assess employee learning and education programs, provide adequate training tools, and encourage continuous learning efforts.
Consider sitting in on employee training sessions and interviewing staffers yourself to learn about how they’re adjusting. This also helps boost engagement and buy-in for new processes. Continuous upskilling and reskilling may also be necessary to ensure staff feel supported and process improvements stick.
5. Map and assess current processes
Mapping out every workflow and step of business activities helps you identify who’s involved in each part of the process and understand the time and resources being spent on it.
Once you’ve visually charted how operating efforts work using real-world data, you can begin to simulate and track how you’re performing against your KPIs, getting a better sense of where operational inefficiencies exist.
You can then start eliminating unnecessary steps while looking for time-, effort- and cost-saving solutions that allow you to meet performance and quality goals without chewing through resources.
6. Set clear business goals and strategy
Operational efficiencies must be aligned with your overall business strategy to be a long-term success. Consider mapping out a strategic roadmap and business development strategy and working backwards to build processes that most effectively support these blueprints.
You may also want to use predictive technology, analytics, and operating insights to help stamp out any inefficiencies that you encounter along the way. Having a clear business strategy helps you more effectively and efficiently chart a path to commercial success.
7. Prioritise customer satisfaction
Customers are at the heart of every business, so they should be prioritised when you’re making decisions to improve efficiency. As you make changes, monitor customer satisfaction metrics to assess impact.
Customer loyalty is hard to build and maintain and one poor interaction is often enough to lose a longtime client. Listening to your buyers helps you nurture existing relationships and identify new opportunities.
8. Use effective communication channels
Enhancing internal and external communication channels helps you improve processes and interactions on both the front and back end of your business, reducing inefficiencies and improving customer experiences.
There are a range of voice, video, and text-based tools that help employees communicate more effectively, allowing them to improve how they react to emerging challenges and opportunities. These include web chat customer support functions, real-world suggestion boxes, and online messaging forums where employees, clients, and partners can speak up and share their thoughts.
You can also improve communications efforts by holding internal meetings and conferences, education and training sessions, or inviting customers or end-users to meet with your teams.
9. Implement visual representation dashboards
Data visualisation tools display information using easily read charts, graphs, and indicators. They can help you get a better handle on monitoring day-to-day operations and your ability to deliver on KPIs.
These tools provide visibility into commercial operations of all kinds, offering deeper insights into business performance and where operational inefficiencies might exist. Implementing these solutions helps you more effectively track time and expenses, identify redundancies, and spot areas where you save money.
Working towards sustainable, long-term success
As businesses look for efficiencies, they’ll find that there are a wide range of processes and tasks that they could improve. It’s important to identify the most cost-effective initiatives that will reap the best results for your business and its customers.
While it’s tough to eliminate every inefficiency, the best approaches will use business insights and key performance indicators to track the process every step of the way, in line with business objectives. This will help you monitor results and make changes as needed to achieve long-term growth and success.
This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
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