10 Strategies for Uncovering and Overcoming Operational Inefficiencies

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.

Operational inefficiencies happen when your business utilizes more time, labor, or resources than the minimum amounts required to complete a process or task, or maintain ongoing productivity, performance, or quality levels.

In other words, if you can accomplish a goal more swiftly, or with less effort or expense, anything expended above the base threshold to complete the business process constitutes an inefficiency from a strategic standpoint.

As a well-oiled machine, your business should be maximizing its efficiency at every turn. That not only means minimizing waste wherever possible, but also making a point to achieve peak efficacy overall by streamlining underlying operating and business models. The following strategies can help you fine-tune your business on all fronts.

What Are Operational Inefficiencies?

Operational inefficiencies within business processes can manifest in the form of mistakes, waste, slowdowns, or duplication of effort. For instance, common signs of inefficiency that you might encounter on the job are repetitive tasks, production errors, unnecessary steps in approval processes, poor communications efforts, or ventures that are hindered by lack of insights, manpower, or training.

Consider 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 are just a few of many factors that can cause or contribute to ongoing process impediments, breakdowns, or on-the-job crises. So too can outdated or incompatible technology, uncertain tasks and objectives, and lack of resources or research. 

The Importance of Identifying Operational Inefficiencies

It can be vital for businesses to operate according to financially sound strategies and have plans in place for avoiding inefficient processes. You may want automating repetitive manual tasks, eliminating unnecessary steps, and instituting functional and speedy approval processes to be mandatory within your operating blueprint. New technologies, trends, and best practices all frequently necessitate a rethinking of whether “the way things have always been done” are still the best way to be doing them.

One of the fastest ways to identify inefficiencies and bottlenecks in processes is to map them from start to finish using a flow chart, then look for duplicate or unnecessary steps. Alternately, you can start with a problem statement (e.g. we’re consistently late on delivering new products) and ask yourself the question “Why?” five times until you arrive at a root cause. (Ex: Why? Manufacturing took longer than expected. Why? Our team couldn’t source necessary hardware and parts as planned. Why? Our strategic plan didn’t account for supply chain issues encountered overseas.) Telltale signs that you may be dealing with operational inefficiencies could include extended wait times, missed project milestones, large backlogs of work, shortages of resources, and more.

Enhanced Financial Resilience for Businesses

Removing performance roadblocks can help boost your financial resilience. It can also help you reduce expenses, optimize timing and resources, and maximize your revenue potential. Likewise, doing so can further help you improve customer satisfaction, brand reputation, and employee morale. Optimizing performance can also empower your company to enhance product quality, shrink time to market with new ventures, and scale more effectively. That being said, consider identifying and eliminating operational inefficiencies a goal for managers and team leaders at every level. Let’s take a closer look at how you can do so.

1. Analyze Business Processes

Meticulously analyzing business processes can help you cut down on unnecessary steps. When doing so, it helps to start by defining key performance indicators (KPIs, or quantifiable measures that you can turn to when seeking to measure the success of your efforts) that you can track. As part of this audit, you’ll want to identify manual or repetitive tasks that are ripe for automation, and efforts that can be streamlined or enhanced via the use of technology. If a result can be achieved faster, simpler, or more affordably, odds are an off-the-shelf, pay-as-you-go, or easily customizable solution generally exists that can help you. 

2. Find Inefficiencies in Operations

As part of your efforts to eliminate business inefficiencies, define clear objectives and the scope of your analysis, then determine which business activities you wish to review. Afterwards, take a data-driven approach to analyzing for inefficiency in processes, looking for issues and concerns that are inhibiting your performance based on your KPIs. That can mean utilizing visual aids such as flowcharts and diagrams to map operational processes that show inputs/outputs, job roles and responsibilities, and the sequence of tasks and dependencies that are involved in any given business activity.

You can also consider reviewing and analyzing data from different sources (software tools, hardware sensors, research reports, etc.) and apply analytical methodologies to determine how well you’re performing against your KPIs. Note that effective communication plays a vital role in optimizing business processes as well. Taking a multichannel and multidirectional approach to communicating often proves helpful. Consider providing employees with more autonomy in decision-making.

3. Implement Efficient Operations

Consider enhancing efficiency a recurring and iterative effort in practice. Consider developing strategy and action plans for instituting process improvements, implementing solutions for gathering and analyzing data on process performance, and regularly evaluating the results of changes that you’ve implemented. Also try to clearly spell out timelines, responsibilities, and resources for instituting process improvement efforts, as well as tracking results of changes and adapting strategies 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 interview staffers yourself. Doing so can help you enhance employee engagement and uptake, standardize procedures, and provide more timely insights and learnings. Upskilling and reskilling can be considered essential for any business, with many firms providing retraining as frequently as every 3-6 months, and that continuous feedback and monitoring can help you ensure that educational efforts and process improvements stick.

5. Map and Assess Current Processes

As you work to eliminate inefficiency in process, consider mapping out every workflow and step in your business activities. As a business owner, it’s important to know who’s involved with each part of an operating process, what level of time and resources are being spent on it, and which interdependencies exist between every exchange. 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 where operational inefficiencies exist. Then you can begin eliminating unnecessary steps and looking for time-, effort- and cost-saving solutions that allow you to meet performance and quality goals without expending unnecessary resources.

6. Set Clear Business Goals and Strategy

It can also be critical to align operational efficiencies with your overall business strategy and make strategic decisions based on operational insights. That means mapping out a strategic roadmap and business development strategy for where you want to be, then working backwards to build processes that most effectively support these blueprints. It also means leveraging predictive technology, analytics, and operating insights to help stamp out any inefficiency that you may encounter along the way. Having a clear vision for your business and strategy in place can help you more effectively and efficiently chart a path to commercial success.

7. Prioritize Customer Satisfaction

As you work to improve processes and maximize efficiency, it’s also important to enhance customer service, improve relationship management efforts, and monitor customer satisfaction scores along the way. Customer loyalty hard to build and maintain – and one poor interaction can be enough to lose a longtime client. Listening to your buyers isn’t just a good business practice to get in for sake of nurturing stronger relationships and delivering better customer experiences either. It can also help you identify new areas for innovation and improvement and locate pressing problems to solve, potentially opening up new avenues for business growth and expansion.

9. Utilize Effective Communication Channels

Enhancing internal and external communication channels can help you improve processes and interactions on both the front- and back-end of your business. Better communication can help lead to less inefficiency as well as better customer service and support, not to mention enhanced customer experiences and greater client loyalty. A variety of free and paid voice, video, and text-based tools can help employees better communicate and spot or react to emerging challenges and opportunities. Many firms now maintain digital communications platforms, real-world suggestion boxes, and online messaging forums where employees, clients, and partners can speak up and share their thoughts. If you’re looking for ideas, you can also improve communications efforts by holding internal meetings and conferences, education and training sessions, or inviting customers or end-users to visit with your teams or come present on a topic more frequently.

10. Implement Visual Representation Dashboards

Data visualization tools, which help express information in the form of easily-read charts, graphs, and indicators, can help you get a better handle on monitoring day-to-day operations and your ability to deliver on KPIs as well. These tools can help provide visibility into commercial operations of all kinds, as well as deeper insights into both business performance and where operational inefficiencies might exist. Implementing these solutions can help you more effectively track time and expenses, identify redundancies, and spot areas where you save money.

Embrace Technology and Automation

A growing range of technologies such as smart sensors and analytics software can now help you improve productivity and performance. It’s therefore important to evaluate your current business systems and processes to identify opportunities for automation to enhance output, boost cost-efficiency, and improve quality control. That means conducting an internal audit of business processes to see where efforts could be saved with automated solutions. 

Pave the Way for Automation

As you can see, many business processes are ripe for improvement at any given time, and many tools, techniques, and methodologies exist for helping you enhance your performance and operations. Since eliminating operational inefficiencies may always be an ongoing challenge, consider finding ways to keep inefficiency to a minimum and enhance business processes a continual effort. 

Photo: Getty Images

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