What is operational efficiency?
Operational efficiency is the capability of companies to deliver goods or services to their customers in the most cost-efficient way possible, while ensuring the high quality of their goods, service, and customer support. It is often achieved by streamlining an organization’s core processes in order to effectively respond to the turbulent market in a cost-efficient manner.
In order to achieve operational efficiency, organizations need to minimize waste and redundancy while effectively leveraging resources to optimize their business processes, technology, and workforce. The reduced internal costs enable companies to achieve higher profit margins and be more successful in competitive markets.
Operational Efficiency: How can organizations build more efficiency?
Although there is no fixed blueprint for engraining efficiency into an organization’s genome, world class companies share a common overarching approach: Organizations ensure their efforts for improved efficiency encompass 5 essential areas:
- Strategy. Successful companies talk about efficiency and strategic planning as a large part of “what we can achieve” as opposed to “what we did.” They also make strategy an explicit element of their overall corporate game plan, focusing on the growth that operational excellence can unlock and how it can make revenue streams more sustainable. Strategic planning allows executives prepare short- and long-term goals, which will further allow them to pivot and execute as changes in the business environment occurs. Examining further, successful leaders also push for scenario and contingency planning, which explores what effect business disruptions, changes in economic conditions, or abrupt market changes might have on a company, and formulates various strategies to address them. Focusing on strategy allows management to analyze different initiatives to prepare the company to deal with the expected and unexpected.
- Metrics. Leaders face the common challenges of changing behaviors and measuring progress throughout the organization. Top companies are keen on identifying the right metrics to track change, while avoiding excessive selections. Importantly, they keep in mind the balance measures of cost efficiency with measures of improved effectiveness. In order to use metrics effectively, it’s critical to establish a rational baseline performance and set pragmatic improvement targets. Building the benchmark from the top down or relying too heavily on the previous year’s measurements is the path with the least resistance, but the results often doesn’t take into account long-term initiatives. An ideal approach should start with a careful review of costs and a thorough examination elements that can be controlled. This allows leaders to isolate the important factors, provide the right incentives, and efficiently track progress.
- Mindsets. In order to drive large-scale organizational change, behaviors and mindsets need to change. Leading companies build actionable plans to reinforce the right choices during big changes. These plans ensure that members are trained in the correct mindsets, and that leaders will follow up and reinforce new mindsets in the long-term. Furthermore, research shows that reinforcement of new behaviors is critical for sustainment. This includes feedback from supervisors and peers, as well as financial incentives and recognition from management. The best leadership teams are agile and observant, identifying critical risks and addressing them up front. They also reinforce positive behavior, which is key to sustaining new mindsets.
- Culture. Mindsets shape an organization’s culture, which in turn can cultivate a culture of continuous improvement. A culture that encourages bravado and innovation can help an efficiency-focused mentality spread throughout the company. In some organizations, a more narrow and targeted approach led by top management is essential to jump-starting the process.
- Commitment. Ingraining operational efficiency requires conspicuous and credible commitment from the top, starting with the executives and the other senior members of management. Those from the top reinforce the importance of efficiency in their correspondence and embed that mindset when they procure talent, hiring personnel with the best fit and upholding employees who deliver. Strong executive sponsorship is one of the most critical factors for success during changes. The best sponsors help anticipate and hedge risks, and encourage team members to speak up when they encounter barriers to success. Leaders should make it a top priority to adopt an operational excellence mindset. Without the right level of commitment, initiatives can fade quickly when new priorities emerge due to the lack of engagement among leaders. This not only compromises the effort of a current engagement, it undermines the reliability of future engagements.
Companies that successfully ingrain a desire for operational excellence in the genome of their organization can reap great rewards. They recognize the boom-bust cycle of initiatives in the short-run and adapt to the competitive edge that comes from a high-performance, robust culture.
How can WGA help your organization with operational efficiency?
WGA is passionate and dedicated to helping clients make and execute the big decisions on: strategy, operations, transformation, technology, organization and compliance. WGA’s guiding belief is that as trusted advisors, we must measure our results from the enduring financial success of our clients. This belief and passion can be seen in our growth, our people, our services, and our relationships.
Our experience across various industries with operational efficiency allows WGA to offer singular and unique objective recommendations and execution services that will give our clients the ability to adapt, renew, and prepare themselves to succeed in a turbulent environment. We provide operational efficiency Strategy Consulting that can help with strategic, scenario, and contingency planning, and operational efficiency Business Transformation services that can facilitate the integration of any structural changes. From strategy to operations, we are committed to helping our clients build their functional skills and sustain performance. We recognize that only through our clients’ success can we achieve ours.