Five Steps to Running a More Efficient Business

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Improvement is the name of the game. Most of us go into something—whether that’s our job or coaching our kid’s soccer team—wanting to make things better.

Creating efficiencies in business is especially important because nothing affects your day-to-day operations more. Running an operationally-efficient company can help save time and money, improve employee productivity and retention, increase sales, and build credibility with your customer base.

Those of us in the business of operations have developed a pretty tried-and-true process to make things run more smoothly. Based on my 20+ years of helping improve the way organizations do business, I’m sharing five steps that leaders can take to not just establish—but also optimize—operational efficiencies. And while these tips are universal and can benefit companies of all sizes (based on both revenue and number of employees), they may be especially valuable for SMB owners who work with teams.

Step 1: Measurement Matters

Some might think it’s cliché, but I live by the basic mantra: What gets measured gets done. To put it simply: In order to really improve the way we do things, we must have a way to compare yesterday to tomorrow (or tomorrow to yesterday). This baseline—an actual number—should measure whatever resource is most important to you and/or the success of your business. Some examples of metrics that companies typically measure are sales per hour or per employee, hours worked, dollars spent, and gross or net profit. What we’re trying to assess with this figure is how efficiently your business is running.

Step 2: Set a Goal and Define the Problem

Once you’ve identified what you’re going to measure, determine your goal of how much improvement, and in what time frame.  Then ask yourself, What, specifically, is preventing you from achieving this goal? Participate in a brainstorming activity, and then formulate a laundry list with the things that are holding you, your team, or your company back from this target. This could include something along the lines of having too many tasks on your plate in any given dayy spending too much time on administrative work (to run the business), or spending too much time at trade shows or networking events (to grow the business). Figure out what you are actually spending your time doing that doesn’t directly support your measurement.

Step 3: Focus on One Course of Action  

Next, pick a problem from your list to work on—and only one. Select the key lever that has the most impact. The decision can be tough to make because finding solutions to all of these problems may greatly improve your day-to-day operations and, ultimately, your company’s livelihood. In other words, it may seem like they’re all priority. And that’s where the well-known (and wildly-popular) Impact Effort Matrix can help. Designed for the purpose of deciding which of many solutions to implement, the 2x2 grid helps you assess solutions for their relative impact given the effort required. In other words, it’s a quick way to filter out solutions that might not be worth the effort. Ultimately, you’re gearing towards actions that are high impact and low effort, or easier to implement with visible results. From there, create a hypothesis and state what you’re going to do and what you expect the outcome to be. Tie this hypothesis statement back to your measurement to gauge success.  

Step 4: Implement the Change

Having a clearly-defined course of action, you’re in a position to get started actually making the change. Whether that’s bringing on additional team members or introducing new systems or tools, this is the fun part because you’ll start to see progress. As you are making the change, frequently remind yourself and your team of what you are doing and the expected outcome by revisiting your hypothesis statement.

Step 5: Assess and Adjust  

Improving operations and the way we do things is an iterative process or a repeated cycle. That means you should constantly study the situation, evaluate what’s happening, and ask yourself Did I do what I said I would? and Did it produce the outcome I thought it would? Then, it’s time to course correct—and that’s a good thing. Don’t look at changing what you’re doing, mid-process, as the sign of failure. Most times, what we do doesn’t produce the exact outcome we anticipated. Recognizing the cyclical nature of this practice, there’s a need to continually revisit and then determine what to do next. This is normal and necessary, my friends.

A Real-Life Example

Noodle on this: Here’s an example of what the art and science of improving operations can look like in real life. At AIA, one of our top priorities is to pay our Owners and Suppliers faster—whether it’s their commission check or payment for goods. As VP of Operations, it’s my job to ensure this occurs at optimal efficiency (and I love the challenge). Because no one should ever be satisfied with the status quo, I started by analyzing our current process and then followed the same steps outlined in this article. By 1) making performance visible to all through measurement, 2) making a quick and efficient billing process a priority, 3) enhancing our processes and technology programs to support this effort, and 4) recruiting an expanded team of account coordinators and billing specialists, we have effectively accelerated the cash cycle. In fact, this is one of AIA’s hallmark improvements over the last year.

Our team continues to take this key learning and apply it to other areas of our business for continuous improvement for AIA and the Owner Community.   

Three Phases to Change

While there are five defined steps to take towards realizing positive change within an organization, I’ve found the process typically falls into three phases:

  1.     Planning: When you’re creating the measurement system and identifying gaps in getting from Point A to Point B.
  2.     Doing: When you’re taking specific actions to fix a particular barrier.
  3.     Assessing and Adjusting: When you’re studying the result, and forming your next plan.

Once you standardize and document your process, it should be repetitive going forward. So, the good news is that one major investment (i.e., establishing your process) will pay dividends over time.

Tell me all about it. I’d love to hear how you create operational efficiencies within your SMB: