As the reality of tougher times hit home, the emphasis today is on becoming leaner and improving business efficiency.
“We really saw a lot of organisations get a bit lazy before the GFC,” says David Knowles, executive director in the business advisory and assurance division of Pitcher Partners.“They were able to make money without really having a very strict look at efficiency, cost control and a whole range of areas in their business.”
Knowles says it is clear that many businesses have responded to a wake-up call.
“There’s been a greater attention paid to efficiency and costs generally over the past two, three or four years,” he says.
Business efficiency is closely tied to productivity and entails a comparison of outputs and inputs. The key is to determine how the delivery of products and services can be streamlined to maximise resources, such as capital, time and labour. The less waste and downtime, the better.
Smart growth
While a challenging business environment is putting the blowtorch on companies, some continue to flourish on the back of smart, efficient strategies. Reload Media, a Brisbane-based digital marketing firm, made SmartCompany’s Smart50 list in 2012 and BRW magazine’s Fast Starters list for 2011 in recognition of its status as one of the fastest-growing new businesses in the country.
Managing director Llew Jury says the business has not sacrificed efficiency for growth since launching in 2008. A number of strategies have helped. First, he puts ego aside when opting to operate out of a cost-effective, converted warehouse just outside Brisbane’s CBD rather than indulging in an exorbitant corporate location in the city. “Cheap rent is a big one for me,” says Jury. “And not getting too caught up with overheads.”
Second, he and his management team have created a culture at Reload Media where there is a focus on performance and not an immediate expectation of hefty annual pay rises. The consultancy pays fair but not market-leading rates. “That then keeps your wages in check and creates efficiency that allows you to get more profit and reinvest it back into the business.”
Third, cost-control measures include keeping partner and client dinners or getaways at an affordable limit and carefully monitoring spending on suppliers for everything from business cards and cleaners to equipment hire.
Fourth, Jury says it is imperative for a digital-based company such as Reload to practise what it preaches and effectively use platforms such as Google, Yahoo! and Facebook – which are easy to track return on investment – rather than relying on expensive television ads. On the rare occasions it has used TV ads in the past, the firm has taken advantage of last-minute distress buys. “That saves a bucket of money,” he says.
Successful behaviours
The fourth annual Telstra Productivity Indicator highlights the importance of technology in modern businesses, with features such as cloud computing and video conferencing growing as organisations seek to automate processes, reduce costs and increase workplace efficiency.
According to the survey, productivity leaders are more likely to: focus on connecting people (to promote links between internal and external stakeholders); recognise the importance of a wide range of investments (to improve the chance of positive outcomes); acknowledge the significance of innovation (to help roll out new products and services); and place greater emphasis on information and communications technology investments (to finetune use of data management, business analytics and mobile technologies).
Although business efficiency is important, Knowles maintains that effectiveness is the end goal. Taking too many layers out of a business may be counter-productive and render it unable to provide the standard of products and services that the market demands. He cites the case of some major retailers that have stripped back service levels to such a degree that many disgruntled consumers have now turned to online retailers instead.
“So that’s the definition of effectiveness – am I delivering a product or service that my customer values?”
