How To Improve Operational Efficiency (10 Proven Steps)

Optimizing operations is like trying to hit a constantly moving target as technologies change and customer expectations evolve. It’s hard; we get it. However, making a few adjustments to how you operate can really lighten the load.

Think about it this way: streamlining your processes means less time wasted on what doesn’t move the needle and more focus on what actually matters. This can lead to happier customers, more efficient teams, and even a nicer-looking bottom line.

If you’re ready to shake things up and make some impactful changes, you’re in the right place, because this guide explores how to streamline your business processes, reduce waste, and maximize productivity to improve your operational efficiency and reach your target goals.

TL;DR—Key Takeaways

• Operational efficiency relates to how well you use resources versus how much you produce with said resources.
• Operational efficiency benefits, like increased revenue and customer satisfaction, help you surpass competitors.
• Optimizing your operations is easy when you follow our 10 practical steps, learning from other businesses along the way.
• Using a productivity time tracker app (like Toggl Track) demonstrates how much time you spend on valuable and wasteful activities.

Why operational efficiency matters

Operational efficiency is about doing more with less to maximize productivity and minimize waste in your processes. While productivity relates to how much you produce, efficiency tells you how well you use those resources. 

The purpose of operational efficiency is to reduce the time your employees spend on activities that don’t add value to your company. Some non-value-adding tasks, like payroll or paperwork, are necessary to keep your company afloat. Others are completely useless.

Operational efficiency as a goal (or practice, really) can help you identify these wasteful tasks and show you which ones to eliminate and which to automate. 

Benefits of achieving operational efficiency

Operational efficiency is about more than doing certain things faster or cheaper. It’s about starting a chain reaction that affects every part of your organization, from business agility to customer satisfaction.

According to Gallup estimates, 62% of employees report ‌feeling disengaged, costing the global economy $8.9 trillion. Improving operational efficiency, therefore, frees employees from frustrating bottlenecks and helps them grow, boosting their engagement.

Other benefits include…

Reduced costs

When you pinpoint the steps in your processes causing waste, you can lower operational costs, reduce overhead, and ultimately achieve significant cost savings.

Imagine your supply chain management is becoming too costly. Dedicating time to becoming more operationally efficient can help you notice this and take appropriate action.

For example, you might reduce inventory holding costs by implementing just-in-time delivery. Now, you have a more cost-effective solution with the same high level of service quality.

Increased revenue

Efficiency can increase output by maximizing existing resources, such as labor or machinery. By producing more with the same input, businesses can offer better deals to their customers — boosting sales and ultimately driving higher profits.

If you can outperform your competitors through proper resource allocation, you essentially take all their clients and enjoy better profit margins. 

Thanks to operational innovation, Walmart overpowered competitors like Sears and Kmart, going from $44 million in sales to $44 billion between 1972 and 1992.

Cross-docking, for example, saved them a lot of money in operating expenses, reducing them to lower costs, attracting more customers, and causing their revenue to explode. 

Quicker go-to-market times

Reducing waste in your production and distribution chains gets your products to market faster. Not only that but meeting customer demands quickly and outpacing competitors makes you more competitive.

And, sure, speed isn’t everything. We know that. You know that.

However, in a world where new tech keeps popping up every second, and customers want more and more, speed is important for capturing market opportunities. It allows businesses to respond quickly to trends and meet customer demands ahead of competitors. 

Improved business agility

Efficient operations are the backbone of a business’s ability to adapt to market changes swiftly. Prioritizing operational efficiency ensures your team can pivot quickly, make informed decisions, and implement new strategies with speed and precision.

This agility helps in navigating market fluctuations and makes it a whole lot easier to capitalize on emerging opportunities.

Boosted customer satisfaction

Customers appreciate speed — but more than that, they want quality products and services. When you make your operations more efficient, you give them the best of both worlds.

Amazon is one of the most obvious examples of operational efficiency, which directly leads to improved customer satisfaction.

They make the shopping experience seamless with personalized recommendations, a user-friendly interface, 24/7 customer support, and some of the quickest delivery times. 

10 proven ways to boost operational efficiency

Boosting operational efficiency doesn’t have to mean inventing the next great thing or reinventing the wheel. Here are ten practical steps any business can take to improve operational efficiency.

1. Automate processes

Earlier, we mentioned the types of tasks necessary to keep your company running but don’t add any value.

One of the first steps is to conduct an audit of your existing processes to identify these time-consuming activities. Then, you can see what’s possible to automate in an effort to reduce human error and improve efficiency in the process. 

77% of employees report routine task automation would make them more productive, according to Slack. The same survey found those who perform process automation save around 3.6 hours each week, which adds up to a full month of work each year.

Some popular automation tools include:

• 🤖 Artificial intelligence chatbots: AI makes automation easier than ever. Implementing an AI chatbot for customer service allows your support team to work on fixing problems rather than listening to them.
• 🫂 Customer relationship management (CRM): A CRM tool like Salesforce makes it easy to automate tasks your sales team might waste hours on. Tip: Integrating Salesforce with Toggl Track will streamline your workflows even further by using Pomodoro timers and idle detection to become more productive.
• 📲 Social media management: Give your marketers time back in their day by automating repetitive tasks. When your social media manager isn’t bogged down by scheduling posts, they have more time to consider new creative campaigns.

2. Optimize your resources

Are you sure you’re using your resources effectively?

Resource optimization can refer to everything from human resources to machinery. To use your people in the most optimal way, assign tasks based on individual strengths and skills.

Don’t assign a task to a senior-level position when a junior-level employee can complete it just as easily. This ensures you’re not underutilizing your employees and failing to maximize your ROI. 

3. Improve internal communication

An efficient workplace requires everyone to be aligned and working towards the same business goals. This will also prevent any misunderstandings that lead to delays. Tools like Slack, Microsoft Teams, or Zoom make it easy to practice open communication. 

Ensure internal teams know what others are working on by meeting regularly and sharing clear documentation. This way, if the product team is getting ready to launch a new service, the marketing team can start preparing a relevant campaign ahead of time.

When everyone is coordinated, on the same page, and aware of each others’ plans, business operations can flow smoothly, and you’ll avoid bottlenecks.

4. Reduce silos and bottlenecks

When departmental silos break down and bottlenecks are unclogged, information flows more freely, leading to improved workflow and increased productivity. Teams can better understand each other’s roles and collaborate more effectively, reducing delays and speeding up processes. 

To create a work culture that embodies collaboration and transparency, try implementing regular cross-functional meetings, shared communication platforms, and joint projects.

5. Make data more accessible

To continue growing your business and improving operational efficiency, you need a bird’s eye view of what’s working and what’s not. Historical data can give you the information needed to make transformative changes to your operations.

But (and this is something many businesses get wrong), the data must be accessible so team members can easily find the metrics they need. So, invest in user-friendly data management systems that integrate with your existing systems.

6. Think further into the future

Operational efficiency is about setting yourself up for success in the long run. To make the most of anticipated growth, you must be ready to handle the challenges and opportunities that will come your way. 

You can do this in a couple of different ways:

• Lead capacity planning: With this strategy, you increase your resources in anticipation of a high demand to avoid any silos and bottlenecks. That might look like hiring more senior-level positions to lead future projects or obtaining new software to make future collaboration and cross-functional teamwork smoother.   
• Capability building: Promoting internal change among your existing workforce ensures you’re more prepared to meet future goals. Maybe that’s transforming your company culture, communication styles, or how higher-level positions lead their teams. 

7. Offer employee training

You might find ‌your organization lacks the necessary skills to manage your projected growth. But that doesn’t mean it’s time to reduce headcounts or hire an entirely new team.

It just means it might be worth investing in additional training or upskilling. This keeps your team skilled and adaptable, allowing you and your business to remain competitive.

AT&T, one of the world’s largest brands, invested $1 billion into retraining its workforce after discovering only half of its employees had the necessary science, technology, engineering, and math skills.

8. Set realistic key performance indicators (KPIs)

KPIs give you clear, measurable targets that help your team understand what success looks like in real-time. Breaking down your long-term goals into smaller, manageable benchmarks is better. Not only will this motivate your team, but it’ll give you more information to inform your data-driven decision-making. 

Here are some tips on how to align KPIs with your business goals:

• 🧠 Involve stakeholders: Make sure all high-level parties get a say so you can make sure the business performance metrics you’re tracking are meaningful and relevant.
• 💡 Use the SMART framework: Each KPI should be smart, measurable, achievable, relevant, and time-bound. If it checks all these boxes, it’s good to go!
• 💎 Regularly review: Set a routine for periodic check-ins, whether monthly or quarterly. You can assess your performance so far, adjust the KPIs as needed, and identify areas where your operational efficiency is lacking.

9. Invest in time tracking tools

Time is money, and every minute counts when you’re running a business.

By keeping tabs on how long tasks take, you can spot any inefficiencies slowing your team down. Employee timekeeping also encourages accountability and self-awareness among your team, helping them manage their time better and prioritize tasks.

Time tracking tools can improve efficiency by monitoring and optimizing time use. Might we suggest Toggl Track? It’s a user-friendly option great for teams. You can generate detailed reports to visualize where your time is going and how to get it back.

10. Create a culture of continuous improvement

Improvement should be a constant goal if you want your organization to experience any long-term success or growth. But you need to set that precedent by encouraging organization-wide feedback and innovation. Here are a few ways to do so:

• 📆 Schedule regular check-ins: You should set up team meetings and one-on-ones to discuss progress, roadblocks, and new ideas.
• 😶‍🌫️ Offer anonymous feedback channels: Sometimes, team members are afraid to speak up. Give them platforms where they can offer honest feedback to show you care.
• 📚 Provide professional development resources: Giving your employees the opportunities to train and develop their skills keeps them inspired and equips them with the right tools to innovate.
• 🔁 Create feedback loops: Make sure you’re not listening without responding. Act upon the feedback you receive and communicate outcomes to your team.

Start implementing techniques for increased efficiency

If you want to keep up with today’s increasingly competitive market, it’s time to start doing more with less. With operational efficiency at the forefront of your focus, you can maximize your productivity by streamlining processes and limiting time spent on wasteful tasks. 

Continuous improvement within your organization is an ongoing process that can significantly enhance your productivity and profitability. Using the right tools makes this journey smoother and quicker.

Speaking of the right tools, you can create a free Toggl Track account today and start tracking how much time your team spends on valuable and wasteful tasks.