Experts believe that businesses can lose as much as 30% of annual revenue because of inefficiencies in the operation of their business. This figure is quite staggering, especially in view of the fact that these inefficiencies can be tackled quite easily.
According to Pareto Principle, named after the Italian Vilfredo Pareto, a renowned micro-economist, 80% of negative results are down to 20% of the inefficiencies. When these inefficiencies are identified and adequately dealt with, a business can run far more efficiently and quickly see a considerable increase in revenue.
How to Identify Inefficiencies
Taking the decision to identify and deal with inefficiencies is the first and most important step. On many occasions, the day-to-day stresses and strains of running a company may not be very conducive to carefully analyzing work processes and business operation in general.
Once management has taken the decision to tackle inefficiencies, they may wish to invite outside consulting firms to help with the identification process. There are a number of ways in which inefficiencies can be highlighted:
- Brainstorming Session: Employees are perhaps the most important source of information, however, before asking employees to highlight bad work practices, management must clearly outline the benefits of a tighter-run operation. Rather than admonishing employees about work efficiencies, management ought to invite staff to positively participate in the process.
- Customer Feedback and Complaints: Client complaints are also key in the identification process. An unhappy customer may help management to recognize inefficiency and make the necessary changes.
- Measurables: Inefficiencies can also be identified by examining the numbers. Such measurables may include output figures, spending patterns, worker efficiency, and time management. If workers are found to be wasting time or even money, changes in work practices must follow.
- Financial Inefficiencies: A good accountant can identify where money is being wasted and put forward a cost-saving plan.
- Workflow Management: Workflow processes need regular analysis geared toward maximizing work efficiency. If a factory or office procedure is deemed inefficient, this procedure must be altered and rectified.
How to Deal With Inefficiencies
The task of dealing with inefficiencies is rather simple and largely falls under one heading: Simplify!
Documenting processes and procedures is the best way to initiate this process. Staff document each step of the workflow and present it to a superior or business consultant. Workflow bottlenecks or de-tours can then be removed and replaced by simplified work procedures. In most cases, steps can be dropped or speeded up, and work processes are considerably faster as a result.
An outsider’s view is often best, because she/he has no vested interests and is merely keen on improving work practices and eliminate inefficiencies.
Communication is key throughout the entire process and in the day-to-day running of a company. The better and more clearly staff communicate with each other, the more smoothly the business will operate. Open and continual exchange of information is crucial for effective collaboration.
The Importance of Regular Reviews
Holding regular meetings to review work practices is essential. Management must integrate such a review process in the everyday operation of a company and ensure that staff participates fully without feeling threatened by the process.
Eliminating Inefficiencies – A Thoroughly Worthwhile Exercise
Given the staggering revenue loss figures documented by experts, eliminating inefficiencies is undoubtedly a worthwhile exercise. Though management and staff need to invest time and effort in this process, the benefits far outweigh the investment in time and perhaps even money.
Subsequent to such a process, a company runs more smoothly, customer satisfaction ratings rise, and staff, as well as management, appreciate and enjoy the benefits of a more smoothly run operation.