December 5, 2021

What is Operational Efficiency? How to Improve and 5 Strategies for Operational Efficiency 2022

What is Operational Efficiency Definition?

Operational efficiency is the measure of how well an organization is able to perform the tasks that are required to run it.

Also read: Six ways to increase operational efficiency and margins
Driving success metrics with an operations flywheel

Operational efficiency can be measured in a number of ways, but one of the most common methods is using a ratio. This ratio looks at the cost of production divided by revenue or profit.

The operational efficiency ratio can also be looked at as a percentage, which is calculated by dividing 100 by the cost of production to produce revenue or profit.

An overview of driving operational efficiency via people, process, tools, outliers, and automation.

Fin Analytics gives customers the ability to do time-and-motion studies at scale. The full-data-set of how each team member is completing specific each task serves as the baseline for a handful of specific strategies that help drive operational efficiency.

While there are nuances to how each organization uses fin to optimize, there are 5 key patterns for driving efficiency using the Fin Analytics data set:

what is operational efficiency and how to improve it

1- Improving People with Better Coaching and Training

With Fin Analytics you can easily identify the top performing team-members by workflow (p80) and compare that to the average (p50). Size the opportunity for improvement and focus coaching on moving average performance ‘up’.

2- Improving Process

Fin Analytics enables you compare your actual team process (and best demonstrated process) to documented SOP, to find opportunities to improve. We find the maximum leverage for teams that focus process improvement work on the ‘average’ 30th to 70th percentile of cases by workflow type & work on improving process on ‘average’ cases.

3- Improving Tools

Fin Analytics lets you identify the specific tools and workflow components most heavily used in each given workflow. Focus on improving the speed and efficiency of the most heavily used tools and services first for for maximum impact.

4- Drive Down Outlier Impact

Using Fin Analytics many teams find that the the slowest 5% of cases take 25%+ of total active operations team time. Focusing on bringing the time spent on those cases down by zeroing in on specific workflows and team members that drive outliers has an outsized impact on efficiency.

5- Targeted Automation Efforts

Rather than letting averages guide automation, Fin Analytics helps teams look across workflows and target repeated-patterns for automation based on best demonstrated practice. Fin further enables teams to size the automation opportunity and complexity before execution.

Productivity vs. Efficiency: What is Difference?

Productivity is the amount of work done in a specific period of time. Efficiency is the ratio between what has been done and how much effort was put into it.

Productivity can be measured by how much work is completed during a given period of time. This could be calculated by dividing the total number of hours worked by the total number of hours in that period.

Efficiency, on the other hand, can be measured by what proportion of work has been completed in relation to how much effort was put into it. This can be calculated by dividing the total amount of hours worked by the total number of hours spent on that task.

How to Measure and Improve Operational Efficiency

Operational efficiency is the ability of an organization to make more with less. It is the ratio of output (goods or services) to input (resources).

There are many tools that can help measure operational efficiency, such as benchmarking, process mapping, lean six sigma.

Benchmarking: This technique can be used to compare your company’s performance against other similar companies in the industry. It can help identify what you are doing well and what you need to improve on.

Process Mapping: This technique uses a diagram to visually show all the steps involved in completing a task or project. It helps identify where time is being wasted and how these wastes can be eliminated.

Lean Six Sigma: This technique uses data from previous projects and compares it with current projects in.

Operational Efficiency Metrics and Ratio

Operational efficiency is a measure of how efficiently a company is able to produce goods and services.

The following are some key metrics that can be used for operational efficiency:

  • Total revenue generated per employee
  • Total revenue generated per square foot of space
  • Total revenue generated per hour of production time

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