The efficiency of the company management is a crucial indicator of how a business turns resources into profits. This can be assessed by studying the company's financial statements, including accounts receivable turnover, inventory turnover and fixed asset turnover rates. It is not enough to have high efficiency ratios for a company to be profitable. There are other indicators of profitability that must be looked at, including cash flow, net income, and gross margins.
Efficiency and effectiveness are crucial aspects of management but they are more effective when they work together than independently. While effectiveness is focused on achieving long-term goals efficient processes can help achieve these goals in the most cost-effective way possible. For instance, replacing repeat cost of labor with automation or increasing yields with fertilizers are two examples of efficiency gains.
One of the most important things to keep in mind when trying to increase efficiency is that it'sn't just about reducing time and resources. It's about increasing the quality of work. For instance, if have two people working on the same project but they're not communicating effectively with each other it will result in a significant amount of time wasted. Open and honest communication will increase productivity, and managers are able to identify and address problems quickly.
Employees are at the heart of any business. Engaging employees will improve efficiency and reduce the amount of time employees are absent and increasing turnover. Tools such as Happieteams, which offer managers visual data from weekly surveys lasting a minute, can improve the level of engagement of employees.