Understanding Operational Efficiency
Improving Operational efficiencies improves profitability but also customer satisfaction.The trick is to balance between profitability and customer satisfaction.These two are often seen as disparate aspects of business solutioning…rather than 2 sides of the same coin.
Before I proceed there are some critical definitions one should be clear about:
1) Difference between Efficiency and Effectiveness –
Efficiency – “A measure of whether the right amount of resources have been used to deliver a process, service or activity. An efficient process achieves its objectives with the minimum amount of time, money, people or other resources.”
Effectiveness – “A measure of whether the objectives of a process, service or activity have been achieved. An effective process or activity is one that achieves its agreed objectives.”
So using these definitions in order to be efficient we must also be effective.
A common practise to achieve operational efficiency is by reducing the costs of delivering service,this could be applicable in any business environment i.e. B2B or B2C. Though this could have an immediate negative impact to an extent of going out of business as the customer realizes the drop in services and moves on to competition, publicizing across known social media leading to poor VOC.
Most organizations have a knee jerk reaction.This also happens when timely action is not taken to correct recognized and acknowledged issues.Typically in a service industry the operational issues could arise due to
– Inappropriately designed contractual agreement,
-Hasty resource hiring due to high attrition or mismatch of demand vs supply,
-Short cuts in training due to high inflow of manpower and sudden increase of volume /new business opportunities,
-Ineffectively designed training modules impacting Operational KPIs and eventually Customer Satisfaction.
With all or some of these prevailing travesties the most common action to reduce cost are:
-Permanent Headcount Removal
-Travel ban,cancellation of bonuses or postponement of promotions
-Loss of key headcount resulting in stretching of existing resources
-Reduction in motivation and thus productivity impacting service quality leading to loss of customers and revenue.
This forms a cyclic pattern usually taking place between six to nine months. Very often all such issues can be resolved by focussing on tools and people, redesigning processes and making them clear & repeatable , investing in automation and overall improvement in Service Quality.
The key of providing the right kind of Quality at optimal cost is:
-Using the available resources and tools efficiently to deliver cost effective service in the best possible manner.
-Pick up the top call drivers and products driving maximum revenue to improvise efficiencies rather than lower value products.
-Management buy-in to strike a balance between cost and quality, thus building a culture of driving efficiencies.
– Promoting a realistic thought process that prevails across all lines of businesses i.e. cutting cost will not lead to efficiencies.
-Standardization and implementation of processes which are baselined across competition so that best practises can be replicated.
-Improvement should be planned not only be at strategic but also at tactical levels.
-Considerable Improvements can be attained at operating core levels by bridging gaps in AHT,Forecasting,Shrinkage,Attrition, revisiting support spans.
-Timely testing of products and services and launching them for the right customer base also giving the partner teams appropriate time to plan for resource hiring and training.
Whats important is to learn from good and bad experiences and appropriately plan realistic targets. Its not important that success is achieved in the first attempt thus any new solutions should go through a documented pilot phase before moving into full fledged implementation stage. All phases of implementation should be subjected to internal governance and regular checks.
The balance between providing services and managing costs is critical to survive in today’s highly competitive world.