What Is Efficiency In Business 

Text image representing the concept of efficiency in business.

What is efficiency in business? Efficiency is a word that’s thrown around a lot in the business landscape, but what is it and what does it mean for your business?

In this post, I answer the question what efficiency is in business and share more insight on the concept. 

Meaning of Efficiency in Business – What is Efficiency in Business 

Efficiency is the effective use of your company’s resources, time, and effort to produce output. 

Put simply, efficiency measures a company’s ability to turn its resources into products and services that help it generate revenue. 

It is a business’s ability to use the fewest resources to generate more output. 

So, if your company can produce more products while using the smallest amount of labour, time, effort, and other resources, then you can say your company is effective. 

However, this doesn’t mean you should compromise the quality of your output. 

You would not be working efficiently if you did this. 

This is because efficiency focuses on minimising input (resources) and getting more output, while also ensuring high-quality output.

Let’s use an illustration to help you understand this concept better. 

Let’s say there are two competing companies. 

One of these companies has 6 employees and generates about 4 million dollars annually. 

Whereas the other company has just 4 employees but generates about 6 million dollars annually. 

The other company’s input (labour) is greater.

Yet, it isn’t able to generate as much revenue as the other company, which has fewer employees. 

In this case, the 2nd company is more efficient than the 1st because it uses fewer resources to generate more income. 

This is why efficiency can go a long way in influencing a company’s growth because you would be spending less money but producing better results. 

Types of Efficiency in Business – What is Efficiency in Business 

There are several ways to measure a company’s efficiency. 

These different ways are the different types of efficiency. 

If you want to know how efficient your company is, you would have to consider all these various types. 

Doing so can also make it easier for you to figure out the areas where your business is lacking. 

And how you can work towards improving in that area. 

Return on Investment (ROI)

When you invest in your business, it will either help you make more money or save money. 

This is your return on your investment. 

However, you won’t start enjoying your ROI immediately after you make the investment. 

It would take a while for your investment to start generating a return. 

So, this type of efficiency is futuristic. 

While an investment may reduce your current efficiency, it will likely boost it in the future once you start getting your ROI. 


Your business’s operations refer to your core processes. 

Those are the basic things that your company has to do to stay operational. 

A lot of the expenses you incur in your company are because of your operations. 

So, if you are efficient in this area of your business, you will significantly reduce the cost of running your company. 


This focuses on how efficient and effective a particular process in your business is. 

If you evaluate certain processes in your business, you may find that you can make them more efficient, which would also help you reduce your expenses. 

Eco-Efficiency – What is Efficiency in Business 

A lot of businesses are now environmentally aware. 

Companies are becoming more aware of the impact their processes have on the environment. 

And they are trying to make their process more efficient to reduce this impact. 

This is where eco-efficiency comes in. 

The thing about eco-efficiency is that it can help you reduce costs while ensuring you reduce your impact on the environment. 

If you are not sure whether or not your company is eco-efficient, then you should consider evaluating it. 


How well do you manage your company’s finances? 

What percent of your company’s revenue do you incur as business expenses

You should be able to reduce the amount of money you spend while ensuring you get the best results. 

This is what being financially efficient is all about. 

You can evaluate your finances to see if you are efficient in this aspect of your business. 

All you have to do is calculate the percentage of your company’s revenue that you spend on expenses. 


Labour efficiency is among the most important types of efficiency for any business. 

If you can get your employees to be more productive and efficient, you will generate more output, even if you do not increase your labour force. 

However, several things can impede labour efficiency. 

This includes a lack of equipment, outdated tools and technology, and so on. 

So, if you are looking to improve how efficient your workforce is, you may have to invest in these areas. 

This way, you would provide your employees with the necessary things they need to work to their full potential. 

Measuring labour efficiency is quite easy. 

All you have to do is calculate how much your employees produce or accomplish per hour. 

Or even at the close of work. 


Regardless of the type of business you run, you will always need energy. 

And the money you spend on energy can become significant without you even noticing. 

This is why you need to come up with energy-efficient strategies that can help reduce costs. 

For example, you can opt for auto lights or energy-efficient light bulbs. 

Effectiveness Vs Efficiency – What is Efficiency in Business 

A lot of people tend to use effectiveness and efficiency interchangeably. 

However, this usage is not correct, as both words do not mean the same thing. 

Effectiveness is when a company achieves what it sets out to achieve. 

That is to say, if a company has a goal and achieves that goal, then the process is effective. 

However, just because a process or company is effective does not mean that it’s efficient. 

This is because a company may use a lot of resources to achieve its goals. 

Whereas, it could have gotten the same result with a smaller amount of resources. 

So, a company can be effective but not efficient. 

But when effectiveness and efficiency go hand-in-hand, then the company will get the best results.

Therefore, if you are working towards improving efficiency in your company, then you should also put in the same effort to improve effectiveness. 

This way, you’d achieve your goals while keeping the costs of doing so to the minimum. 

Importance of Efficiency – What is Efficiency in Business 

Now, the big question is, why should you care about making your business efficient? 

Why is efficiency important in business?

Well, the truth is that efficiency is very important for business growth and success. 

This is because it helps companies use fewer resources to achieve more output. 

When a company is efficient, it can generate more revenue without having to spend more money. 

The business owner can then use this extra revenue to expand and grow the business. 

All of which will make the business more successful. 

So, one of the ways to make your business grow and become successful is to make it as efficient as possible.

Aside from this, an efficient business also stands to enjoy several other benefits. 

Let’s look at these benefits below. 

Reduces Cost 

One thing about having an efficient business is that you won’t have to spend more money than is required. 

Efficiency will even help you spend less than you would originally spend. 

This is because you would be using your resources efficiently. 

Aid Business Growth 

Business growth is any form of increase in a business. 

It can be in the size of your business or an increase in revenue or profitability. 

And all of these are things that efficiency can help you achieve. 

When you generate more revenue than you normally do, you will have more money to reinvest in your business.

You can choose to invest in another market or just expand your business. 

Both of which will increase the size of your business.  

Helps Businesses Meet Their Demand 

It is one thing to have a high level of demand, and it is another thing to meet the demand. 

For some companies, meeting demand (especially when there’s an unexpected spike) can be quite a challenge. 

However, an efficient company won’t have this issue. 

This is because they would be productive and competent with their processes.

So, you can always be sure of meeting demand, regardless of how high it is. 

Increases Profits 

When you use fewer resources to run your business, you will be cutting down on your operational costs. 

You would also be generating more revenue than you normally would. 

These would help increase your profit margin. 

How to Improve Your Company’s Efficiency – What is Efficiency in Business 

Now that you know what you stand to gain from making your company efficient, you are most likely thinking of how to boost your company’s efficiency. 

The good news is that it is possible to make every aspect of your business efficient. 

The not-so-good news is that it is not exactly an easy feat. 

However, this does not mean it is unattainable. 

All you need is focus and know-how. 

The focus you would have to develop by yourself

But this article can help you with the know-how. 

Below, we’ll look at 6 sure tips that would help you improve efficiency in your company. 

All you have to do is follow these tips and make sure you keep practising them even when you feel you have gotten to the level of efficiency you desire. 

This way, you won’t go back to being inefficient. 

Automate your Processes 

Technology is just great at making our lives easier and better. 

Gone are the days when you had to spend hours on monotonous business tasks and processes. 

Now, you can simply automate them. 

Automation is among the best ways to promote efficiency in business. 

All you have to do is invest in a software application that can help you carry out certain processes. 

Then, you won’t have to waste labour, time, and other resources on this task. 

When you automate certain processes and tasks, then your employees can use the time they would have otherwise used to carry out that process or task to do something more productive. 

Yes, you need to spend money to automate any business process; sometimes, it may be quite expensive. 

However, it will be worth it in the end, as it will help you become more efficient. 

Remember return on investment efficiency?

That is what this is. 

Even though you have to spend money now, you can rest assured that it will help you reduce costs in the future. 

Automation is great and all, but you should do so with caution. 

Not every process or task should be automated. 

So, take your time to properly evaluate your process to figure out which ones you can and can’t automate. 

Also, evaluate the impact of any automation process after implementing it by asking your employees for feedback. 

This way, you’ll know whether or not the automation is generating the desired result.

Or if you should go back to your regular way of carrying out the process. 

Provide the Right Tools for Your Employees 

Your workforce won’t work as efficiently as they should if they do not have the right tools and equipment to do so. 

Without the right tools, your workers may experience delays and unproductivity. 

This is why you need to provide them with the right tools and equipment. 

When you do, there won’t be anything holding them back from working to their full potential. 

Practice Sing-tasking – What is Efficiency in Business 

One common myth about efficiency is that multitasking promotes it. 

But the truth is that it does quite the opposite. 

There is a very big difference between being busy and being efficient. 

Just because someone is doing different things at once does not mean they are doing them efficiently. 

Rather, doing so much at a time can cause a person to make mistakes that will increase the time they spend on their tasks. 

This is why you should discourage your employees from multitasking. 

And encourage them to single-task instead. 

This way, they can focus on the task they have at hand and complete it in record time. 

Practice In-Person communication 

Do you practise email communication more than in-person communication?

If you do, then this may be one of the things hampering efficiency in your company. ‘

The truth is, it is easier to get confused and misunderstand information when it isn’t done face-to-face. 

But when you communicate in person, the person you are passing a message to can gain clarity better. 

Not only are the chances of miscommunication less with in-person communication, but it also makes communication faster. 

When you communicate via email, there may be a lot of back-and-forth.

You and the person or people you are communicating with will spend valuable time responding to emails.

But with in-person communication, you can quickly pass on your message, clarify everything, and get back to important tasks. 

So, practise in-person communication to increase efficiency in your work environment. 

A great alternative to this is video meetings, in case your employees work remotely or you are not available to talk to them physically. 

Encourage Open Communication 

Aside from having face-to-face communication, you also want to make sure that communication is clear and open in your company. 

Encourage your employees to communicate with you or their superiors openly. 

They should not be uncomfortable or scared to share their feedback and suggestions. 

Open communication is great in any workplace, as it helps create a positive workplace culture where people can openly express themselves. 

It also mitigates the chances of miscommunication. 

Also, because people can express themselves freely, they can share ideas that can help the company move forward. 

Employees are usually the ones at the forefront of most company processes. 

So, they often have the best ideas when it comes to streamlining processes and making them more efficient. 

If you encourage them to communicate openly, they will be able to share their suggestions with you. 

Reduce Interruptions – What is Efficiency in Business 

Interruptions in the workplace can significantly affect your employees’ focus. 

And when a person can’t focus, it becomes harder for them to work efficiently. 

So, you want to give your employees uninterrupted working hours. 

One way to reduce interruptions in the workplace is to reduce how often you hold meetings. 

Meetings are great, and they help ensure everyone in a team or workforce is working on the same page. 

However, they can be quite disruptive and can affect workflow. 

You can also use one day to hold several meetings instead of having meetings every day. 

When you do this, you can tackle everything on the meeting day, and then your employees can have uninterrupted work hours on other days. 

You also do not want to waste time during your meetings. 

Make sure your meetings do not last more than necessary. 

Conclusion: What is Efficiency in Business 

Efficiency is all about using the minimum input (resources) to generate more output (products or services) to increase revenue. 

If you make your company efficient, you stand to enjoy several benefits, including more profit, business growth, reduced operational costs, and so on. 

Luckily, improving your company’s efficiency is not rocket science. 

There are several ways to do so, including automating your processes, providing the right tools and equipment for your employees, practising in-person communication, reducing interruptions in the workplace, and so on.