Whether your desire to start a business is to make a profit or to make an impact and build a legacy, the motivation behind running a business still comes down to making a profit while replenishing your stock. For example, a business is said to have been profitable within a trading period if, say, $100 was invested into the business and yields a return of $300-$500.

As an entrepreneur, you will become more profitable if you do either of these two:

  • Reduce the cost of production, or
  • Increase sales.

It would be brilliant, though, if your business achieves both. Quite frankly, businesses only record profit when output exceeds input. And at the heart of the profitability of every business is the subject of employee productivity and efficiency.

In this article, we will explore the concept of employee efficiency. We will also dive deeper by examining the benefits of employee efficiency and how you can improve the efficiency of your employees.

What Is Employee Efficiency?

Employee efficiency is about building a team or having individual employees who have a track record for making time, resources, and energy count for maximum output. A major metric used to measure employee efficiency is the amount of time or resources put into a specific task compared to the result achieved.

Getting your employees to perform at this level is one of the many duties of a Human Resource Manager. But, if you don't have HR personnel, then it is your responsibility.

Benefit of Measuring and Improving Employee Efficiency

According to a report by Gallup on the state of the American workplace, the US economy loses over $600B annually as a result of disengaged and inefficient employees.

This statistic shows that inefficiency can be damaging to both businesses and the economy.

On the flip side, there are a few benefits you stand to gain if you can get your employees to be efficient.

Two of those benefits include:

Increased Profitability

Efficient employees make more money for their employers. Which is the primary goal behind measuring and improving employee efficiency.

One of the ways a business becomes more profitable is when the cost of production — this includes both time and resources — is reduced. For example, where the cost of production is $1000 and the output is $2000, the business makes a profit of $1,000. However, if the cost of production reduces by just $100, profitability increases to $1,100.

When your employees become more efficient, you will reduce waste. And when this happens, your business becomes more profitable.

Employee Growth

Employee efficiency means hard and smart work. Employees often have to stretch themselves beyond assumable limits to get maximum output. As a result, employees acquire new skills and competencies. This often leads to more efficiency.

8 Ways to Improve Employee Efficiency

Should you improve your employee efficiency, or should you not? If you've read this far, then the answer is obviously a yes, considering the benefits you stand to gain as a business owner.

Here are a few things you can do to increase employee productivity:

Build a Culture of Excellence

As a small business owner, you must build your business on a culture of excellence. This often begins with you and flows to the employees.

You may not know it, but employees likely look up to you as their role model., so you must set the tone. Be hardworking and demand no less from those that work with you until everyone embodies a culture of excellence.

Set Clear Goals and Communicate Them Effectively

It is your responsibility to ensure that your employees know what the task is and when the job is done. Hence you should set goals and milestones — clear ones.

Setting goals and milestones can improve efficiency because it drives focus. Everyone knows there is no time to rest until the job is done and the target is met.

Closely related to this is the need for you to communicate those goals effectively. You need to let your employees know what is important to the organization at every time — it's not always as plain as you think.

Use simple and clear words and ask to be sure everyone understands the tasks at hand and what is required of them.

Conduct Routine Performance Reviews and Offer Feedback

You cannot possibly improve something that isn't measured. This is why performance reviews are an absolute necessity. Measure employee performance and improvement on a per-project basis and offer feedback.

Giving feedback goes both ways; the first is to share the performance review results with your employee, letting them know where they excel and where they need to improve. You may also want to ask them how you can support their development. This will likely improve employee engagement in your business.

Focus on Employee Well-Being

One way to improve employee efficiency is by promoting causes that help boost their physical and mental well-being.

A good way to go about this is to consider flexible work schedules, e.g., telecommuting — work from home/remote work. On the surface, one could argue against this because how can you guarantee that an employee is productive when they are out of sight. However, a study conducted recently shows a 47% increase in employee productivity despite the pandemic-driven global lockdown and remote work in 2020.

Create an environment that helps your employees achieve work-life balance.

Create a Safe and Conducive Work Environment

Happy workers, they say, make better workers. The office environment is like a second home to employees as employees spend a great deal of time at work. Hence, creating and maintaining a safe and conducive work environment can help boost employee morale, avoid distractions and ultimately increase employee efficiency and productivity.

Invest in Employee Development

Employee development is about equipping your team with the necessary skills. This can be done through individual coaching, mentoring, organizing workshops, seminars, or by putting them in teams to develop new skill sets by working with other team members.

Similarly, this could mean investing in required tools. All of these put together can help build efficient employees.

Assign Tasks Based on Strength

Expecting your employees to be great and efficient at everything is a sure-fire way to demotivate them. It's like trying to put round pegs in square holes. The contrary ought to be the norm — to put round pegs in round holes where they fit exactly.

Ensure to create complementary teams where you leverage the strength of individual team members on different tasks.

Incentivize Your Employees

To incentivize your employees is to simply give them reason and motivation to become efficient. This can be achieved by offering incentives and rewarding excellence.

It is not difficult to identify efficient employees in an organization. They usually have a very strong work ethic, great time management skills, and are highly productive. When you identify such an employee, send a personal note or a commendation letter to an employee who has just achieved some productivity. This will show them that their efforts are noticed and valued while also inspiring others to up their game.

In the end, your employees' efficiency is within your control — it is often a function of what you do or do not do.

Improve Your Accounting Efficiency With Skynova

The chances are that you may not have a degree in accounting. If you have a background in bookkeeping, it's still a good idea to leverage accounting software. Skynova takes the stress of bookkeeping away and allows you to focus on other areas of your business.

Skynova is an example of such accounting software. With our templates and software modules, you can track your expenses, issue invoices, keep records and prepare your financial statements with ease.

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Notice to the Reader

The content within this article is a general guide and may not apply to your specific situation. Always consult with a professional Human Resource Manager to ensure you're meeting human resource management standards.