The effectiveness of a business's management is an important factor in determining how a business transforms its resources into profit. This can be measured through the financial statements of the company including turnover rates for inventory, fixed assets and accounts receivables. However, having high efficiency ratios doesn't necessarily suggest that a company is making money. Other indicators of profitability should be considered, like cashflow, net income, or gross margins.
Efficiency and effectiveness are vital aspects of management, but they work best when they are combined. While efficiency is focused on reaching long-term goals, effective is concerned with the achievement of those goals efficiently and cost-effectively. For example, replacing repeat cost of labor with automation or increasing yields by using fertilizers are examples of efficiency gains.
In the process of improving efficiency, it is important to remember that it is not only about saving resources and time. It is also about enhancing the quality. If two people are working on the exact same job, but they do not communicate effectively, there is a lot of wasted labor. Being honest and transparent in communication between employees will increase productivity and enable managers to find and fix issues quickly.
Employees are at the heart of every company. Increasing employee engagement will improve efficiency and reduce absenteeism and turnover. Tools like Happieteams can increase engagement by utilizing one-minute weekly surveys that provide directly-visual data for here are the findings managers to act upon.