10 Steps of Operational Efficiency at The Executive Level:
What is Operational Efficiency? To be precise Operational Efficiency is the most well-crafted business practice where an organization targets to achieve maximum output by cutting all the irrelevant and unnecessary costs. Apart from cutting the cost, achieving the utmost operational competency is the ultimate target of any successful business. However, the crucial part is that process itself always follows the age-old Trickle-Down method of economics. That means it is only viable and feasible when the executive level of an organization identifies all the issues and implements the smartest resource allocation measures at every level.
According to BTOES (Business Transformation & Operational Excellence):
“Companies in pursuit of operational excellence do two things significantly differently than other companies: they manage their business and operational processes systematically and invest in developing the right culture.”
Broadly there are two types of businesses in this world; the first type is manufacturing-based and the second type is service-based. Often, achieving operational efficiency in the manufacturing sector is much easier than in the service sector. As per observation, executives dealing with people often fails to achieve that golden point of utmost operational efficiency when they are in a service sector. Though there are various reasons behind that and in this article, all those points will be discussed with common crises along with the proposed solutions.
Operational Efficiency Begins with Recording Performance Gap:
Any service sector that wants to achieve operational excellence should begin with measuring present gaps in performance. In service sectors often executives believe all the performances are the responsibilities of the people working under them. However, the reality is executives should begin with self-accountability, and with proper assessment of the performance gap, it’s impossible.
Therefore, the very first step here should be to record the performance gap within the system and compare it with the best industry practices. It is always a wise step to compare with the best practitioners; since in that way striving towards the best becomes easier.
Ensure Best Training for Optimum Operational Efficiency:
Once the performance gap has been recorded and it has been compared with the best industry standards then it is the time for training. Many organizations take training as a mere formality and a waste of resources. Meanwhile, the reality is training not only ensures efficiency at every level; rather, it also clarifies accountability among workforces. Once everyone in the system knows their responsibilities then they just can’t roam within the system.
As a starting accomplishment increasing a mere 2% of employee accountability can increase the overall accomplishment of the business to a great extent.
Update KPI of Workforce:
The next most crucial task of executives is to develop proper Key Performance Indicators (KPIs) for every staff. Many executives cannot develop perfect KPIs for the system and it always ends up in the wastage of valuable resources.
The Boston University’s Questrom School of Business had carried out a study under the supervision of consultant Erin Reid and the topic of that study was measuring employee efficiency. According to that study, the apparent performance of staff who were working 40 hours every week was almost equal to the staff who were working 80 hours every week. It shows, that often managers could not even identify which staff is working actually and who is just pretending to work. A proper KPI is the only solution to that problem.
Identify Repetitive Functions:
Any service-based system that deals with lots of people often struggle to complete too many repetitive functions. Though these administrative functions are necessary still they are extremely time-consuming. A wise executive always identifies these repetitive functions at first.
According to a study conducted by McKinsey, 79% of all companies have attempted to cut costs during the global crisis, and 53% of the executives found it helpful for the system. Both PwC and McKinsey’s study agreed on one point simultaneously and that is cutting the cost should not be the sole purpose of a business. Every business must not compromise the quality in the quest for cost-cutting. In that context identifying repetitive functions usually consumes a great amount of resources.
Automate Process Selectively:
Once an executive identifies the repetitive tasks within a system then they must execute an appropriate Professional Services Automation Software (PSAS). The purpose of the PSAS is to automate those repetitive administrative functions which are important but extremely resource consuming.
The Return on Investment (ROI) of PSAS is phenomenal. According to a study, the $200,000 investment in a PSAS can give a $23 million return as revenue over the next 5 years. Therefore, it’s not only a smart move to reduce cost, in fact, it’s also a smart investment and revenue generation tool as well. A perfectly designed PSAS works as a one-stop solution for the business. It ensures higher productivity with complete transparency in the system.
Reduce Painstaking Administration:
Executives with vicious micromanagement can be a real curse for the system. Often, these types of managers waste too much time in meetings and presentations and too little on actual execution. These types of managers also waste huge resources on those activities which are not that important. At the end of the day, they are nothing but resource wasters and they also demotivate their subordinates to a great extent.
According to a recent study conducted by MIT, the employees always offer their best under the best supervisors. On the contrary, they hesitate to perform or even take any decisive steps under incompetent managers. Such types of managers can be a great discouragement for the employees and every system should get rid of them as soon as possible.
Customer-Centric Resource Allocation:
Perhaps the most challenging task at the executive level is resource allocation. At the same time, that resource allocation has to be 100% customer-centric. In a service-based industry, the manifestation of the smartness of any manager is how well they allocate resources without compromising customer service. At the executive level, it’s something that simply cannot be overlooked. Every manager must address that with a unique level of excellence.
As per a study post-2018 period, has suffered from poor resource allocation in the UK. It has been the second-most critical business issue in the United Kingdom alone. In another study conducted by McKinsey worldwide, 83% of managers find resource allocation as the most critical aspect of the business. In this same context, PwC – UK had conducted another study among businesses and they found only 30% of businesses had achieved their operational efficiency within a 12-months window period and the rest of the 70% of businesses simply surrendered. All these studies show in real-time how difficult it is.
Uncompromisable Customer Service:
The heart of any business is the customer and a clever team of executives always put their best feet forward to introduce unique customer service. It is especially difficult if they are dealing in a service-based sector, where each customer is a potential critical review for your business. In modern days when the digital world records and openly displays all those reviews vividly to the world then customer service has to be uncompromisable.
According to thought-leader and entrepreneur Steve Glavenski, a whopping 80% of your revenue comes from your mere 20% of regular customers. Therefore, gaining new customers is important for business. At the same time, a smart manager always identifies that crucial 20% of customers are going to contribute the most. Not only identifies them, but they also develop path-breaking plans to retain those customers.
Uncompromisable Employee Engagement:
Another most critical aspect of businesses is developing an employee engagement program that is irresistible for employees. However, in the service-based sector where employees deal with people instead of products their employee attrition is a vicious waste of resources. In general, here employees work under tremendous pressure and sometimes even under life threats as well. As a direct consequence now and then even skilled employees just give up and move on. Retention of those employees is a challenge and a smart team of executives always develops that perfect employee engagement plan which customized, employee-centric, and absolutely out of the box.
Marianna Virtanen of the Finnish Institute of Occupational Health has found a really strong link between overwork and various health problems. All these health problems include stress, anxiety, depression, substance abuse, insomnia, poor memory, diabetes, blood pressure, heart disease, and that list just goes on. As a consequence, a business pays the price in the form of unstable attendance, unstable revenue, customer complaints, the rising cost of health insurance and even that list also goes on. A smart team of managers never overlooks these issues and always offers something that is in favor of both employees and business.
Be Open To Feedback:
Finally, despite all the above initiatives the ultimate litmus test comes in the form of feedback. A successful business never hesitates to receive feedback. They not only receive feedback, in fact, they also work relentlessly to improve the system without any compromise.
A massive study conducted by Google over two years has proven the system that allows open feedback from every stakeholder always excels in the long run. Stakeholders need psychological safety that they would not be punished for their honest feedback and their feedback would bring positive changes to the system.
In a conclusion, it is evident that achieving the highest level of operational efficiency is a continuous process. It must evolve with time and that evolution has to be stakeholder centric. In a service-based sector, operational efficiency can make or break the fate of the business. Therefore, a smart executive team never compromises operational efficiency, and they also never give up on any pretext. They just set their goals one after one and achieve them with persistence.
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