The 7 Types of Business Efficiency

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In our How to maximise your business productivity” article, we talked about what business efficiency means and a couple of tips to get the most out of your resources. But what are the different types of business efficiency and how do they affect your overall productivity?

Return on investment

An investment is usually considered any current cost (towards an asset, item or resource) put down with the goal of generating or saving money or appreciation. Remember, a return on investment might diminish a business’s current efficiency or cost in the short term, but boost its efficiency in the future.

Process efficiency

Process efficiency is the amount of effort or input required to produce your business’s product or offering. .Process efficiency measures business processes to ensure that they are effective and optimised. An example of this could be examining the cost and speed of shipping a product to determine if there are ways you could improve the cost to income ratio.

Operational efficiency

Operational efficiency is the ability of a business to reduce the waste of time, effort and materials as much as possible, while still producing a high-quality service or product.  Business operations are typically responsible for a large portion of the company’s costs, which is why most efforts to improve efficiency are often focused on this aspect of the business.

Eco-efficiency

Eco-efficiency is a management strategy of doing more with less. It is based on the concept of creating more products and services while using fewer resources and creating less waste and pollution. When analysing a business’ eco-efficiency, you need to calculate the comprehensive impact that it has on the environment. For example, you might calculate the environmental cost as a percentage of the company’s income.

Energy efficiency

Energy efficiency simply means using less energy to perform the same task – effectively reducing or eliminating energy waste. Energy efficiency has a variety of benefits: reducing greenhouse gas emissions, reducing demand for energy imports, and lowering costs on a personal and economy-wide level. 

Labour productivity

Labour productivity, also known as workforce productivity, is defined as real output per labour hour. Labour productivity should not be confused with employee productivity, which is a measure of an individual worker’s output. You can measure a company’s labour productivity by assessing how much employees are able to accomplish or produce during an average hour at work. This type of efficiency is heavily impacted by the equipment, automation and technological tools that employees have access to.

Financial efficiency

Financial efficiency is a big-picture measure of how successful a company is at turning expenses from product development, sales, and marketing into revenue. A business’s financial efficiency is measured by determining what percentage of the company’s revenue is spent on expenses.

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