How to Measure the Efficiency of Your Business (And What to Do Next)

Measuring employee efficiency is critical in order to determine if there is a return on the investment you make in each employee. But how do you do that? Read on, my friend…

When it comes to business-speak, ‘efficiency’ is one of those words often peppered into conversations from emails to water coolers to boardrooms – and at its simplest, we could all probably define it.

According to Merriam-Webster, however, ‘efficiency’ is defined as:

  1.  the quality or degree of being efficient (thank you, next)
  2.  a: efficient operation (clear as mud)
    b: effective operation as measured by a comparison of production with cost (as in energy, time, and money) (winner, winner)

Even trusty Merriam-Webster was slow on the uptake with that one. So it comes as no small wonder that while we all recognize the importance of efficiency, few of us could probably explain how to measure something so seemingly nebulous and subjective. In fact, we may even be inclined to argue that maybe it can’t be measured at all – that it’d be like saying you can quantify love or happiness. It’s just there or it’s not. Right?

Wrong, thankfully.

So, What Are Efficiency Metrics?

Efficiency metrics identify areas where both you and employees can improve and areas where you’re succeeding – and little is more motivating than being told you excel. But feedback is only effective and meaningful when it’s supported with cold, hard facts and data.

Measuring employee efficiency is critical in order to determine if there is a return on the investment you make in each employee. Calculating efficiency requires identifying and understanding the key performance indicators for each position and person.

It should be noted, however, that one metric does not complete an employee evaluation. How quickly someone works, how many units they sell, and how many calls they answer isn’t enough to paint a complete, wholistic picture of that person.

But for this article, we’ll focus solely on one spoke of the bigger employee picture – efficiency – so you have the important benchmarks necessary for strategic planning.

Inventory Their Current Efficiency

So how, exactly, do you measure an employee’s current efficiency?

  1.  Define: Define what ‘efficiency’ looks like according to position by identifying key indicators, such as sales, units created or clients served.
  2.  Monitor: When you track key indicators, you can then determine what ‘average’ is as a middle standard so that you can identify who hits the mark, who falls short and who exceeds status quo.
  3.  Compare: As you monitor, be sure to compare how employees perform against one another, as well as against industry standards, so you to determine if your expectations are realistic.
  4.  Calculate: Now, it’s time for a little math. Create ratios to determine efficiency, such as total sale dollars divided by total sales to identify the average per sale or by taking the number of hours that are standard for an industry divided by the actual hours worked.

Tools To Measure Efficiency

And if math just isn’t your thing or you just can’t find the hours in the day to manually identify, monitor, compare and calculate (Aside: There’s a BELAY VA for that, you know), there are countless apps and software for monitoring employee efficiency, engagement or performance. In fact, we found this article that gives 14 – yes, 14 – suggestions for the best apps and software as recommended by other entrepreneurs.

While it may have seemed, at least initially, that measuring efficiency would be like trying to catch a cloud in a butterfly net, it turns out that it is, in fact, quantifiable and can be tracked, monitored and measured. And as always, if you find yourself with too many things to do and way too few hours in the day to get it all done, let BELAY pair you with everything – and everyone – you need to grow your business today!