How to improve operational efficiency in business
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Operational efficiency is an issue faced by many Operations and IT leaders every day, caused by everything from poor or siloed planning and scheduling, to complex approval processes and asset distribution. These blockers can be the source of economic woe for many businesses, slowing down their ability to deliver on KPIs or client needs. In a time of recessions and proverbial belt-tightening for many, unlocking efficiencies once and for all can make a considerable difference.
What is operational efficiency?
In its simplest terms, operational efficiency means improving the underlying processes and systems that govern how a business and its staff operate. How improvements are made differ between businesses, but often include automation and the removal of ‘walls’ or blockers that prevent processes (and teams) from working together cohesively.
Operational efficiency ratio
The Operational Efficiency Ratio (OER) is the measurement by which an organisation can judge how well it’s using its resources by comparing the difference between its operating expense and net sales. This makes it a really important metric for understanding how to improve profitability, as it outlines how efficiently or inefficiently a company is currently running. To calculate the OER, operating expenses are divided by total revenue. A lower ratio – somewhere between 60% and 80% – is a good sign, as it means a company is bringing in more revenue relative to its operating costs. Monitoring the OER helps businesses to understand where they’re overspending and which solutions, such as automation and process orchestration, can help reduce the ratio. This is valuable for any kind of business, but particularly for those industries where margins tend to be small, and even the slightest improvement can lead to bigger profits. Understanding your OER will help you to make the right decisions about where to focus your efforts, what technologies to invest in, and how to significantly improve operational efficiency in your business.
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Operational efficiency by industry
Reasons for poor operational efficiency
For many businesses, the reasons behind poor operational efficiency can be reduced down to issues in a few key areas - each of which can be developed upon by operations leaders looking to improve efficiency KPIs.
Lack of cohesion
Strong planning and scheduling can be one of the most important operational areas to develop in order to generate greater efficiency. The use of project management systems to schedule day-to-day activity as well as inform longer range planning can make significant differences to how team and department time is spent, and often allow for straightforward adjustment to outside conditions as well as integration more broadly across a business. Strong task and progress tracking can also be beneficial in the face of complications or problems that arise naturally outside of the business’ control.
Lack of standardised processes and accountability
Effective workflows and processes dictate your ability to plan and schedule, as well as ensuring that there are minimal redundancies or gaps in team task lists. Having clearly defined tasks and roles can increase the performance of your teams, which naturally has an impact on your wider operational efficiency as well. Consistent reviews of your workflows and processes allow you to see what procedures should be changed or removed to create long-term improvements, as well as areas of unnecessary complexity such as approvals processes and stakeholder involvement.
Lack of visibility
Without a clear view of what's going on in your business, workflows cannot properly operate. Keeping track of tasks, assets, communication and resources is vital to developing greater efficiency, ensuring that your teams have exactly what they need at the right times throughout process pipelines.
Operational efficiency game plan
When you’re trying to decide how to improve operational efficiency in your organization, it can be a bit overwhelming. There are a number of tried and trusted tactics for delivering much-needed change to a businesses’ operations that provide solutions to the reasons for inefficiencies identified above, as well as providing a game plan that can scale with the degree of deployment required.
Tactic 1: Manage ops from one place
By using one end-to-end platform for all work, you allow for greater visibility over processes, as well as moving away from siloed teams and disjointed planning efforts.
Tactic 2: Assign the right work to the right employee
Many Operations Managers tell us that ensuring the right task goes to the right employee or digital worker results in time being wasted as often it's not clear who is meant to be doing what. Again, working from one centralised system allows for joined-up resource planning. Meanwhile, workflow management means less time wasted and more effective teams.
Tactic 3: Standardise your processes
Streamline how your teams operate, and create a system for working that can be applied across a business.
Tactic 4: See the full picture
If you want to make an impact you need to have full visibility over your operations. It's only in this scenario that you can get updates on task status in real time, allowing faster and more efficient operations management.
Tactic 5: Automate repetitive tasks
Doing the same repetitive tasks over and over again is a time drain for your business, and its mind-numbingly boring for employees, too. Intelligent automation can help you to speed up otherwise manual tasks and free up resources to focus on more challenging work.
Tactic 6: Get real-time data
Want to know why your Berlin finance team is more productive than London? Actionable data and insights are also a key element of any operational efficiency strategy. Utilising real time data to identify bottlenecks and fix problems as or before they occur. A robust data strategy also integrates with other elements of an ops game plan, highlighting areas where processes can be standardised, or tasks that could be automated - and a singular centralised system is able to produce data that automatically provides a complete overview of business processes.
Improving operational efficiency by industry
Operational efficiency priorities often vary by industry as different team structures or methods of working can make solutions highly situational - and for operational efficiency to be truly scaleable, it must be applicable to all areas of a business despite these differences. We’ve gone into detail for each vertical so you can see how implementing operations management software can have a real impact.
Operational efficiency in banking
The introduction of Fintech has disrupted financial services with its superior accessibility and innovation, whilst for customers there is a rapid shift towards digital banking. Omnichannel support, chatbots, and tailored experiences are just a few of the services that digital-first customers expect, and achieving a full end-to-end digital transformation can be challenging for traditional banking institutions.
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Operational efficiency in insurance
The need for change within many insurance businesses can be a significant roadblock in maximising productivity as the expectations of customers and employees have shifted, resulting in an industry that can struggle to see operational efficiencies realised. However, if businesses are willing to undergo digital transformation in order to reach their workforce and capacity potential, it can be possible.
Operational efficiency in finance / accounting
The introduction of digital transformation to the finance industry has seen a cumulative affect on traditional process-oriented functions such as transaction processing, payroll management, and accounting - all of which are prime candidates for workflow automation, and the use of new digital technologies to replace spreadsheets, ledgers, ERP systems and more. These technologies have also empowered companies to identify processes that lack efficiencies and can be improved through automation.
However, the real challenge lies in facilitating finance & accounting process efficiency while ensuring the human workforce and automation technologies work in tandem to improve operational return on investment.
Operational efficiency in pharma
In the fast-paced and ever-evolving world of the pharmaceutical industry, operational efficiency is not just an aspiration; it's an absolute necessity. The importance of streamlining operations cannot be overstated, as it directly impacts innovation, regulatory compliance, and overall business success.
Efficient processes enable timely drug development, manufacturing, and distribution, ensuring life-saving medications reach those in need promptly. Moreover, operational efficiency minimizes costs, optimizes resource allocation, and enhances productivity, enabling pharmaceutical companies to invest in research and development, innovation, and better healthcare solutions. By prioritizing operational efficiency, the pharmaceutical industry can maximize its potential to save lives, improve patient outcomes, and shape a healthier future for all.
Operational efficiency in healthcare
Harnessing the power of operational efficiency in healthcare revolutionizes patient care by optimizing processes, streamlining workflows, and leveraging advanced technologies. It enhances the quality and timeliness of care while maximizing resources, cutting costs, and improving financial stability. Through the adoption of digital solutions and automation, healthcare organizations reduce errors and improve productivity.
Operational efficiency also drives innovation, enabling the implementation of predictive analytics and real-time monitoring for better patient outcomes. Furthermore, it contributes to building a sustainable healthcare system by minimizing waste and energy consumption. The result is a transformative approach that ensures the right care, at the right time, for every patient.
Operational efficiency in HR
Efficiency is the cornerstone of a thriving HR department. By streamlining processes, leveraging technology, and optimizing workflows, HR teams can revolutionize their operations and drive significant value for the organization. From recruitment and onboarding to talent management and employee development, operational efficiency in HR ensures smooth and seamless experiences for both employees and HR professionals.
By automating repetitive tasks, digitizing paperwork, and leveraging data analytics, HR departments can focus on strategic initiatives, foster employee engagement, and attract and retain top talent. Embracing operational efficiency in HR will unleash the true potential of your workforce while fueling organizational success.
Operational efficiency examples
As you consider how to improve operational efficiency in your organisation, it’s helpful to look at the different ways it can be achieved across industries and departments. Below are just a few examples.
Insurance: Claims processing
Claims processing has been a notoriously slow procedure in insurance businesses, involving a lot of paperwork, multiple systems, and numerous stakeholders. Bringing the entire process onto one platform reduces delays and makes it easier to track the progress of each claim. Plus, automation and technologies, like intelligent document processing, get everything done quicker. As claims processing represents such a significant aspect of an insurance business’ work, this change will make a big contribution to the organisation's overall operational efficiency.
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Banking: Invoice processing
Any company that handles large volumes of invoices will be acutely aware that it is a time consuming task. Between manual data entry, cross-checking with purchase orders or other documents, authorisation, and payment, there are a lot of opportunities for hold-ups and mistakes. Consolidating everything onto a single platform, one that integrates with existing systems, makes it easier to manage. Plus new automation technologies make short work of repetitive tasks like invoice processing, saving both time and money.
Healthcare: Patient scheduling
The primary focus of any healthcare organisation is patient care, but often there are unavoidable administrative tasks that require time and attention. Automating these tasks, such as patient scheduling, is a game changer. This not only means finding the best time for an appointment, but also automating the inputting of patient data and sending out reminders to reduce missed appointments. This gives time back to healthcare providers so they can focus on providing the best care possible, reduces costs, and helps improve operational efficiency.
IT Services: Email triage
IT departments and shared services centres can receive thousands of support tickets every week. When these are all read and distributed to different personnel manually, it can take a long time and there’s a higher risk that important requests may get missed. Plus, prioritising the most pressing tickets from those that are less urgent is very difficult. An automated system like email triage can prioritise messages and get every ticket to the right person. This removes the need for anyone to manually sift through and assign tickets, so work gets done quicker and overheads are reduced.
HR: Employee onboarding
Human Resources is another culprit for operational inefficiency, as HR professionals have to manage a lot of paperwork on top of their higher-level duties. Employee onboarding, for example, usually involves a lot of forms and several different systems, meaning it can take several weeks to complete. However, it’s possible to improve operational efficiency in this area with the right technologies. Employee onboarding can be centralised onto one system, slashing the amount of time it takes and allowing HR teams to focus on tasks like employee development and recruitment initiatives. As a result, resources are used more efficiently and HR departments can provide a better experience for employees.
Increase operational efficiency with Enate
Enate lets you manage all your operations in one place, allowing you to become smarter, faster and more agile. View, manage and track all work in real-time, assign the right work to the right resource, identify automation opportunities and transform the way you work.
