What Is Business Efficiency In An SME And How Can You Improve It?
- Mar 21, 2024
- 5 min read
Written by: Tim Rylatt, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
Business efficiency and effectiveness strategies are invaluable ways in which your business can reduce waste and maximise profit across everything from your operations, people, sales, and more. The key is in understanding where things are at currently, and in the documentation and monitoring.
What is business efficiency and effectiveness?
Efficiency and effectiveness are often mixed up, but they are in fact different things. Efficiency is all about maximising productivity and ensuring the best use of time, resources, and effort, whereas effectiveness is about the impact and result from the allocation of your resources, time, and effort.
Why business efficiency matters to business owners
It is at the forefront of any SME business owners’ mind, how they can maximise the profitability of their company.
Profitability is a function of the efficiency and effectiveness of all the people, systems and operations involved in running your company. Wherever there is inefficiency, there is waste in the form of both costs and reduced profit.
How to discover where the inefficiencies of your business are
Regular key performance indicator tracking, monitoring, analysis, and the actions derived from this, will give business owners the answers as to how efficient and effective their business is. Understanding the important numbers in your business, having standard benchmarks for performance either measured from within your own company or gathered from industry norms, and assessing yourself against those, is something all business owners should be doing regularly.
What you are looking for is constant improvement in those metrics, whether it is reducing waste, completing things in a faster time, achieving a better margin on everything from your marketing, sales, finance, operations, people performance, and more. All these areas have KPIs.
Systemisation is the way forward
It may not be the natural forte of an SME business owner to create a system and a process for all aspects of their business, but once you’ve done the analysis, you then need to create a consistent system and process that will help you with reducing waste.
With our clients, we break it down into four aspects:
1. Overview Map
This acts as an index to all your systems. If we use an analogy of a book, this is your index page.
2. System Map
A system map is a visual representation of the sequence of processes undertaken by different team members and other stakeholders. Carrying on with the book analogy, the system maps summarise each chapter in a visual format.
3. Process and procedures
A process is the condensed title summary of a more detailed procedure that can be seen behind it (e.g., Book an appointment). The procedure behind each process details what is to be done, by whom, and in what order (e.g., step 1, open the appointments diary).
A procedure is a guide, in the form of a step-by-step explanation of how to do something. Procedures used to solely be text documents, but now also make use of visual aids such as screen grabs, photographs, video walkthroughs, and more.
4. Tools
Alongside your procedures are the tools that enable, empower, or support the completion of it (e.g., forms, checklists, PPE, software) It is important to note here, that we work from a top-down approach and the tools / technology are support assets rather than the processes themself.
Too often businesses come beholden to technology and follow its logic rather than their own, and that approach will lead to inefficiencies and ineffectiveness – so avoid the temptation! A great book I would recommend reading to help with this is Systemology by David Jenyns. You may see the above elements referred to by different names, but the same over-arching logic applies.
Your first step to creating efficient and effective systems
The very first step is to create the overview map (index) to all the systems that already exist in your business. Regardless of whether they are currently formally documented and written down, create the Overview Map.
There are two different sets of systems that exist which should go into your Overview Map.
1. Front of house – Customer journey systems
How you attract interest
How you convert into orders
How you take those customers through their service experience
How money and payments are managed
How you interact with those clients for the long term – lifetime value, referrals and referencing, etc
2. Back-office systems
How you recruit
How you induct and onboard
How you will train and develop staff
Supply chain management
Financial management.
With this in place, you can then start to look at what systems, processes, and tools you currently have for each of them, what is written down, and importantly also understand what you don’t have currently!
Only once you have your processes documented, can you then look at appropriate strategies for making them more efficient and effective.
Business effectiveness and efficiency is your goal, and the systems are how you achieve it
When you are working day-to-day in the business, or are the sole person undertaking a process, it is unlikely you will yet have written it down for others to follow. It is one of those things which feels like a ‘nice to do’ when you’ve orders to fulfil, sales to secure, accounts to submit, and a recruit to onboard.
However, this ‘nice to do’ is the difference between you being tied to your business and the same process forever, versus being able to delegate to others and giving yourself freedom to perform other tasks within your business!
When you ask yourself what business systemisation exists in your company – it is important to recognise the connection between your answer and what will give you more freedom as a business owner and increase your profit!
Getting an external perspective on how to create better business efficiency and effectiveness can help you ‘see the wood for the trees’ and challenge some of the habitual ways of working. We’d be happy to offer you a 90-minute complimentary Business Review to support you with this, simply book a time that works for you in our diary now.
Tim Rylatt, Executive Contributor Brainz Magazine
Tim is a business coach to smaller/medium-sized business who have found themselves on a ‘plateau’ in terms of performance and want to make a change. He gets real pleasure from seeing business owners reclaim control and create personal/work-life balance. His valuable real-world insight and experience spans many sectors and industries, with businesses at all stages of their journey from start-up through to exiting a business. You would be hard pushed to find a more experienced business coach, having worked with around 250 companies throughout his career. He is also a published author on the subject.
