How Do These 7 Types of Efficiency Influence Your Business Model?

How Do These 7 Types of Efficiency Influence Your Business Model?

Business efficiency is a way to quantify how well a business converts assets, labor, and resources into products, services, and profits. To put it another way, it is the antithesis of waste. However, when company leadership discusses improving business efficiency, there is more to it than reducing waste. In fact, there are several types of business efficiencies.

  1. Eco-efficiency. This is how a business affects the environment. Running a green operation is growing in importance as millennials place a premium on businesses that are eco-friendly. Companies need to start looking into green options that can recoup costs as well as tax incentives to help offset the cost of making the change to be more eco-efficient.
  2. Energy efficiency. Despite the name, this does not mean investing in alternative energy sources. It means manufacturing products, providing services, and continuing business operations in the most efficient way possible. It is a measure of business sustainability.
  3. Financial efficiency. This type of efficiency is straightforward. Businesses can gauge their financial proficiency by measuring their expenses against their total revenue.
  4. Employee productivity. Technology and available resources are significant factors in how productive employees can be. Businesses can calculate staff productivity by determining how much work they can complete in an hour.
  5. Operational efficiency. This is a measure of how well businesses manufacture and deliver products or services. Many efficiency reports focus on this area as it represents a significant portion of business expenses.
  6. Process efficiency. This relates to operational efficiency as it relies on operations to complete a good or product. An example of a process efficiency is determining the expense involved in delivering a finished product.
  7. ROI. Businesses make investments to generate revenue for the future. Measuring ROI (return on investment) gives businesses an idea of how well their investments performed. It can also help them make educated decisions for future investments.

It is important for business leaders to distinguish which type of productivity they are targeting for improvement. Business efficiency is complex and may require a multi-pronged approach to improve it as a result. To learn more about enhancing business efficiency, contact the experts at MMA Trion.