Talking Business

Marvin Carolina Jr.: Is inefficiency stealing from your business?

Efficiency and effectiveness are not the same thing. Efficiency is doing things quickly and correctly to produce the desired result. Effectiveness is doing the right things to produce the desired result.

Inefficiency hurts your business in several ways: It increases costs, reduces profits and makes your business less competitive.

Assume you win a $100,000 contract, but the materials arrive late. Your workers arrive on-site at 8 a.m. every day, but the materials have not arrived, so all they can do is sit and wait. This wasted time costs you $10,000. Your profit margin was 15%, but it has shriveled to 5%. Can you afford scenarios such as this?

When scouring your business of profit-eroding inefficiency, you must look everywhere. Don’t overlook a department, a practice or a procedure when searching for these bad guys because they often hide out in the open.

Here are several ways to increase efficiency:

Audit

Routinely audit your business. Replace ineffective practices that no longer do what you originally intended, and revise inefficient procedures that feast on your bottom line. And get employee input. If your business is like most businesses, your employees know better than you what works and what does not. Ask for their thoughts, and trust their expertise.

Document

Keep a record of your practices and procedures, and make them available to your employees. This way, both veteran employees and new hires can quickly find answers to procedural questions. In addition, make sure your employees can easily find often-used documents.

Evaluate

Routinely review your supplier relationships, considering such things as rate of on-time delivery and customer service. If you find you are always waiting for a supplier to return your calls when you have a problem or a question, and the waiting brings your operations to a halt — making it impossible to service your customers — it is probably time to find a new supplier.

Maintain

Far too few small-business owners provide routine maintenance on their office equipment, but they wish they had when the equipment breaks down. Maintenance is not a luxury expense, so don’t put it off. It is more cost-effective to perform routine maintenance than to wait until you are forced to replace a piece of equipment.

Outsource

If you have an area where your business lacks expertise, or if performing a task takes too much time, outsource it. You can easily find service professionals to do your bookkeeping, marketing or human resources, for example. They will not only save you time, they will probably do a better job than you would have.  

Train

In today’s ultra-competitive market, your business loses any competitive advantage it had if your employees lack up-to-date skills. They also have to learn new skills if you want your business to remain cutting edge. Cross-train your employees so business continues to run smoothly when an employee falls ill or leaves for vacation.

Upgrade

It is sometimes cost-effective to replace humans with machines. For example, instead of having employees lug gravel back and forth, it may be wiser to buy a conveyor belt to do the work. The conveyor belt would require a larger one-time cost, but if you maintain it, it will lug the gravel more efficiently than your employees did. And it will never call in sick or ask about your benefit package.

Inefficiency is everywhere. If your employees are starting the workday late or leaving early, inefficiency is stealing from you. If your delivery trucks take longer routes than necessary, inefficiency is stealing from you. If you have two drivers but need only one, inefficiency is stealing from you. Look at everyone and everything, so you can rid your business of these costly culprits.

Marvin Carolina Jr. is a Vice President for JE Dunn Construction. He can be reached at marvin.carolina@jedunn.com.

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