The efficiency of a company’s management is a key factor in determining how a business converts resources into profits. This can be determined through the financial statements of the company, such as turnover rates for fixed assets, inventory, and accounts receivables. It is not enough to have high efficiency ratios for companies to be profitable. There are other indicators of profitability that should be looked at, including cash flow, net income, and gross margins.
Effectiveness and efficiency are important aspects of management but they are more effective when used independently. While effectiveness is focused on achieving goals over the long term, efficient processes assist in achieving those goals in the most cost-effective way that is feasible. For instance, replacing repetitive cost of labor with automation or increasing yields by using fertilizers are just two examples of efficiency improvements.
In the process of improving efficiency, it is important to keep in mind that it’s not just about saving money and time. It is equally about improving the quality. If two people are working on the exact same job, but they aren’t communicating effectively, there is plenty of wasted time. Having open and honest communication between employees can boost productivity, and also allow managers to find and fix issues quickly.
Employees are the lifeblood of any company. An increase in employee engagement can improve efficiency by reducing the amount of time employees are absent and increasing turnover. Tools like free board portal software Happieteams that give managers the ability to see data from weekly surveys lasting one minute, can increase employee engagement.