What is operational effectiveness? (Definition and examples)

By Indeed Editorial Team

Published 4 December 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Operational efficiency is a common focus across many businesses and organisations. It works to increase and maximise the efficiency of an organisation, which may increase productivity and profits. Understanding what operational efficiency is and how you might increase it can help you improve the general output of a business. In this article, we define operational effectiveness, explain why it's beneficial and share ways to increase operational efficiency.

What is operational effectiveness?

Operational effectiveness is something that organisations achieve when they maximise the use of their inputs to produce any outputs. Achieving operational efficiency is key for generating an advantage over competitors, and it also increases the number of products you have available for customers. Operational efficiency is not a strategy that an organisation uses, but rather, it's the process of achieving business strategies effectively.

Related: What is an operational plan? (A how-to guide with examples)

Why is operational efficiency important?

Operational efficiency works to streamline the operations process so that it's at its most productive. Prioritising this means seeking to increase the productivity of an organisation while simultaneously reducing the costs and time spent manufacturing the products without sacrificing their high quality. It's a good idea to prioritise the achievement of operational efficiency because it enables an organisation to compete with other entities or products and helps to increase profits.

Recognising the importance of operational efficiency is essential for progressively improving and increasing your level of output. It's possible to maximise the productivity of an organisation by choosing to prioritise the efficiency of operations, including actively identifying problems, working to streamline departments and enhancing internal and external communications.

Related: Benefits, elements and key factors of an operations strategy

How to increase operational efficiency

Here are some ways to increase the operational efficiency of an organisation:

1. Identify and manage any problems

When considering ways that an organisation might increase and improve its operational efficiency, begin by identifying any problems within the existing operations. For example, you might identify areas that are too slow-paced, lowering the number of products the team manufactures. You may also identify areas where the quality of your products is at risk, meaning that customer satisfaction and the number of products sold are also at risk. Being able to identify these areas early is necessary, as you're then able to manage these problems more easily by either improving or preventing them.

Identifying and resolving any problems within your operations has the capability of significantly increasing the efficiency of business operations. Working to improve the structure of operations has long-term benefits for an organisation's productivity and profitability.

Related: How to identify market gaps step-by-step (with examples)

2. Encourage effective collaboration and communication

To ensure the effectiveness and smoothness of operations, communication is key. Encouraging both internal and external communications across your operations increases the efficiency and productivity of an organisation. Effective communication includes clearly outlining the stages of your operations and the goals of each stage. This may include outlining the number of products you aim to manufacture within a given time frame or deciding which materials create the highest quality products.

Collaboration is also advantageous for increasing operational efficiency. Fostering a collaborative culture across the organisation ensures that everyone understands what to do, from senior management to lower-level employees. Collaboration is complementary to efficiency, as strong collaboration helps streamline the operational process.

Related: A comprehensive guide to four team effectiveness models

3. Prioritise operational learning and knowledge of infrastructure management

Improving operational efficiency includes prioritising learning the infrastructure of the operational process and management. Efficiency stems from learning, training and having extensive knowledge of an organisation's operations. Operational learning involves clearly defining and outlining the best departmental practices for productivity. Working to measure productivity and the outcomes of your existing processes increases your understanding of the current management, helping you to determine where the process might improve.

Related: What are the key components of an operational business?

4. Maximise the use of technology

Technology is a valuable resource that you may use to increase your operational efficiency. Using technology, including laptops and smartphones, is a simple way to increase connection and communication amongst your employees. Technology is also a valuable resource for ensuring the proper management of your resources. Effective management of resources maintains the productivity and efficiency of your operations, meaning that maximising technology helps you keep track of valuable resources.

Maintaining effective communication via technology keeps everyone informed of your operations while providing accessible information to employees. Teams can maximise the effectiveness of their technology by using it to share, update and regulate schedules and meetings about the operations within an organisation.

Related: Scheduling vs. planning: what's the difference?

5. Prioritise the retention of customers and employees

Making the retention of both customers and employees a priority within your operations works to improve the effectiveness of your operations. Prioritising the retention of customers is beneficial, as it's expensive to consistently attract new customers if you fail to generate a loyal customer base. You may work towards improving your effectiveness and retaining your customers by using these simple tips:

  • ask customers for feedback on products and operations regularly

  • reward customers that remain loyal to the organisation with discounts

  • offer purchasing incentives to customers to increase the success and the profitability of the organisation

  • communicate and encourage positive relationships with your customers to make them feel valued

Prioritising the retention of employees is equally important because employees contribute to cultivating and maintaining a productive and efficient workplace culture. Retaining employees reduces waste on training new employees regularly. Working to retain employees and using resources to strengthen and develop their value to the organisation is more important and efficient than hiring new, untrained professionals without necessity. You may retain your employees with an effective HR department that makes employees feel comfortable and valued. A strong HR department increases the operational efficiency of an organisation by helping to design and implement specific business practices across operations.

Related: How to improve employee retention (with definition)

6. Use delivery management to enhance the customer experience

Delivery management is an area of operations that's frequently overlooked, yet it's key to improving operations and increasing effectiveness. It concerns product management and maintaining the high quality of your products. Delivery managers play a central role in overseeing the execution of a product and its delivery to customers. This management works to enhance customer experience, which helps to regulate demand for a product.

Having a steady demand for your product significantly improves your operational efficiency, as it helps to keep your operations running smoothly. Successful delivery management requires effective communication between employees and departments and also requires access to resources.

Related: Operations management: definition and department roles

7. Encourage alignment across the operations process

Alignment across the different operational processes can help achieve an increase in operational efficiency. Promoting alignment means ensuring that employees are all consistently working on the same goal within operations. You may encourage alignment by working to improve regular communication amongst employees by using technology or networking activities. When employees are able to work together as a larger team, with their responsibilities being closely aligned and clearly understood by all, the operational efficiency of an organisation is likely to increase.

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8. Standardise your operational processes

Standardisation is a valuable investment for an organisation to increase its operational efficiency. Introducing standardisation into an organisation's operations is an effective way of reducing the number of flaws and errors that may occur during the process while simultaneously reducing costly expenses and saving valuable time throughout. Standardisation not only increases the efficiency of your wider operations but also helps increase the efficiency of your employees.

Standardisation improves the efficiency of your employees by helping them clearly understand the process and their responsibilities within it. As a direct result of standardisation, employees avoid any confusion about what their role is or what their next responsibility might be, as they have access to the process.

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