Operating Efficiency And Why It's Important

Updated: Aug 13, 2021

When you hear the term "Operating Efficiency" what do you think of?





I'm not referring to the operating efficiency we all learned about in business school, where you need to calculate the utilization of your employees and capacity of your manufacturing plant to determine whether your business is operating efficiently or not. You don't need 6sigma to figure this out.


I'm referring to the operations of a small business with multiple employees performing the same tasks.

Are those tasks being performed with the same standard by every employee?


Does your business model allow for areas of variation in the product/service provided?


Variations in products and services can be a source of inconsistent quality, and a limiting factor on the growth of your business. From experience, we've seen businesses held back by not clearly defining how to perform critical tasks, and even their main service. Nailing the procedure for these can lead to faster turnover, better quality, and subsequently more revenue. Most small businesses never make it to scale, leaving the owner stuck working in the business or not profiting from it.


When your business is operating like and automated machine, it is easier to scale.


The biggest obstacle to creating operating efficiency is mapping out standardized procedures. This can take time and brain power to really break down your business into its bare bones, but it is a VERY important step. You might end up finding bottlenecks that have over time that have gone unnoticed. Once you establish what you HAVE been doing, comb through the current procedures and refine them to remove any variations that can occur from employee to employee so that every customer will receive the same experience.


SIDE NOTE: Your business might require variation in the delivery of services i.e. massage, personal training, etc. Standardize what you can, like intake, consultations, follow-ups.


After refining your procedures, you have to retrain personnel who perform these critical tasks. This can be frustrating, like breaking bad habits. However, the most important part of retraining, is getting your employees to understand why you are doing it. When you go to Starbucks and buy a coffee, regardless of the employee working, the coffee comes out the same.


CONSIDER: Terminology, phrasing, jargon associated with your business can be the hardest to standardized. This is basically your selling process, so stressing the importance of every member being on the same page verbally is critical.


Finally, there will be a learning curve. There will be mistakes made along the way. This is an ongoing process that you as a business owner should constantly evaluate... and reevaluate.


In the long run, you will thank yourself for doing these somewhat burdensome tasks because it can open your business up to the possibility of FRANCHISING!