24th April 2013 - Business News

Every business should be efficient, but how do you pin down your strategy?

Business efficiency can often be achieved by implementing a number of small changes. Matt Levington shares his suggestions

women production line

Many company owners might think that greater efficiency derives from applying some sort of overarching process change to a business, perhaps tied to a new IT system that gets the company’s employees accounting for their time in crushing detail all day long. I take a different view.

Efficiency comes from doing more of what’s most profitable in your business, and less of what’s least profitable.

How? Try this: nearly all companies are selling a range of products or services, but not many smaller companies have ever found the time to analyse the profitability of the different parts of their proposition. Usually, they have an array of customers and markets that they serve, but no clear vision of which ones are worth more and which are worth less.

An analysis of the situation – of each customer, potentially, and certainly each product line or service – will get you closer to the truth of your business. What you find might be surprising, but the effort will pay off.

Because the reality for many companies is that some customers will have become unprofitable. The cost base can change, what’s being delivered can incrementally increase in an effort to please – and suddenly that trophy customer is now losing you money.

It can be a painful process to go through, there’s no escaping that. Pricing may need to change, and there may be a cleansing process to reset the client mix or move existing clients onto a different footing. Those aren’t easy steps to take but they are necessary to run an efficient business.

The other side of the efficiency equation is getting staff working really effectively, which usually comes down to having greater clarity around everyone’s respective roles. To get the ball rolling, a staff engagement day can help, followed up by analysis of which staff to retain and in some cases re-train, and which roles need to be recruited for or phased out.

Companies grow organically – but not always logically, because needs change all the time. One question to ask, with efficiency foremost in your mind, is what structure today’s company would have if you took a blank sheet of paper and started again. What you come up with is not necessarily something you’d look to apply in practice, but you can learn a great deal.

Remember, the end goal is getting people working more smartly, more accountably and more efficiently as individuals – and aligned to and motivated by a shared goal that they can believe in.

And this last point is crucial. If you clearly define the contribution of every individual it becomes straightforward to reward excellence simply because the company now knows what it looks like.

Profit-sharing and other kinds of rewards can be fantastic tools when properly applied. If you can give individuals confidence about the role they are performing and its importance, and clarity about the benefits to be had if they deliver, then you’ll often see productivity soar.

Being in business is about teamwork. So look to make individual efficiency, targets and rewards part of the mix, but also work hard to develop a sense of shared ownership among staff to get the best out of them. Team targets and rewards could well be part of that, but at the very least you should be engaging with everyone about the vision for the company.

You can’t expect the best from your people if any of them feel like passengers – they have to be involved at every step of a company’s journey if you want them efficient and motivated. Once they are on board, though, the sky’s the limit.

Matt Levington is the founder of Business Doctors

Via The Guardian