As businesses grow in complexity, they can also become less efficient. As you add more and more people to your team, you’ll require more sophisticated infrastructure to keep your company running smoothly. Without a plan, it can be hard to tell if you’re maximizing productivity across all areas of your growing business.
Understanding business operations can help business leaders maintain efficiency as they scale. Here’s how to optimize business operations to support your company’s success.
What are business operations?
Business operations are the collection of routine tasks and processes a business performs to generate revenue. Efficient operations make the most of a company’s resources, reducing costs associated with day-to-day activities and increasing the company’s output.
As a business grows, its operational needs become more complicated. The owner of a small business in the ecommerce space might handle every aspect of business operations on their own, or they might outsource a few tasks, such as accounting or payroll processing.
An enterprise company, on the other hand, might employ more than 100 people in its accounting department alone. Enterprise companies typically delegate business operations management to achief operating officer (COO), who is responsible for overseeing and improving every aspect of daily business activities.
Elements of business operations
The four key elements of a business operations strategy are people, processes, technology, and location. Here’s what each brings to the table:
As companies grow, business owners tend to become less involved in daily operations, instead focusing on business development tasks like meeting with investors or engaging in long-term capacity planning. This means a company’s employees are responsible for carrying out all (or almost all) of its daily business operations.
People considerations include hiring the right people for the right tasks and paying attention to employee morale and employee productivity. At large companies, human resources departments typically handle people-related tasks like hiring, onboarding, training, and development.
Business processes are clear protocols for how your business gets things done. Successful businesses define clear processes for everything from developing products to scheduling social media posts. Best practices include establishing and recording consistent processes, which can help you identify and mitigate operational inefficiencies, reduce errors, and increase transparency.
Business processes can also make it easier to onboard new employees and help you ensure compliance with state and federal laws. For example, it’s much easier to confirm that your payroll system is legally compliant if you’ve recorded your process and followed it as written.
Technology refers to the tools you use to accomplish operational tasks. It can include software, hardware, machinery, and other physical resources.
Companies in different industries have different equipment needs. For example, a manufacturing company might require hundreds of thousands of dollars worth of heavy machinery, while a small ecommerce business might primarily invest in software-as-service (SaaS) platforms.
Location refers to any physical location associated with your business. It can include office space, manufacturing and warehousing facilities, and retail stores.
In each case, the optimal location cuts costs and maximizes revenue. For example, a retail business might invest in a brick-and-mortar store in a location that experiences high foot traffic and a warehouse close to a major shipping hub.
How to improve business operations
- Set goals and identify KPIs
- Improve existing processes
- Automate processes
- Invest in the right tools
- Evaluate your resource allocation
- Stay informed
- Seek outside help
- Make a plan
At its core, improving business operations is about increasing efficiency, which means that improvements either reduce how long it takes or how much it costs to accomplish a goal. These eight strategies can help:
1. Set goals and identify KPIs
Improving business operationsis a long-term game. Set goals and identify key performance indicators (KPIs) to focus your efforts and keep track of long-range performance targets.
Have various departments set specific operational goals that ladder up to your larger business goals. For each goal, identify the KPIs you’ll track to measure performance and determine success.
For example, if one of your business goals is to grow your customer base by 10% in Q4, your customer service department might set the goal of increasing your customer satisfaction score by 15%, and your marketing department might aim to boost organic search traffic to your online store by 20%.
2. Improve existing processes
Once you’ve set goals, you’re ready to examine the different business operations that can support them.
Start by confirming that you’ve recorded your current processes and that what’s written down accurately reflects the reality of your business practices. If it doesn’t, have the relevant team member take notes on what you’re doing.
For example, your company handbook might contain a 10-step process for onboarding a new employee, but a better starting point for optimization is the process your human resources manager currently uses.
Once you’ve recorded a process, look for redundancies, use of outdated technologies, or misalignment with your company values, and work with the relevant team members to identify improvements. Optimization is an ongoing task, so empower your employees to test and iterate on new processes over time.
3. Automate processes
Process automation technology is improving rapidly, which means even if you audited every aspect of your business operations last year, new relevant automation opportunities have probably emerged since then. Look for automation opportunities for any process that you have to do more than once.
For example, a retail company might be able to automate inventory management, social media scheduling, and some aspects of customer service and support.
4. Invest in the right tools
You’ll evaluate the tools your employees use to perform key operational tasks as part of your process improvement strategy, but in some cases it can be hard to know what you’re missing. You can get ideas by reading industry publications or looking at competitors’ tools.
For example, if you own a technology company, you might compare your sales team’s tools to those used by your competitors. If your top competitors are using a sales-focused customer relationship management (CRM) tool and you’re relying on Google Sheets, you might gauge your team’s interest in adopting CRM technology.
You can also ask team members to identify the processes that take the most time (such as prospecting or negotiating contracts) and estimate how much time they spend on each task. You can use this information to perform a cost-benefit analysis before investing in a new tool—and if you decide to go ahead, you can share your reasoning to increase team member buy-in.
5. Evaluate your resource allocation
Evaluate your current budgets, infrastructure, and team capacity.
For example, if your accounting team is at capacity, your marketing team isn’t, and you have the funds to make a hire, you might plan to add to your accounting team or invest in contract help to support your accounting department. You might also task the head of your marketing department with using their extra resources to support the goal the marketing department identified during your initial goal-setting session.
6. Stay informed
Monitoring industry and market trends can help you remain competitive by ensuring you focus your efforts appropriately. For example, if monitoring retail industry trends tells you that your target audiences increasingly prefer to buy products on social media platforms instead of in person, you might devote more budget to developing a social commerce strategy instead of opening a new brick-and-mortar location.
7. Seek outside help
Business operations directors are responsible for maintaining a high-level focus on business goals, managing daily operations, monitoring market fluctuations, and keeping up with advances in technology. It’s a tall order—and even the best operations managers can benefit from an outside perspective. Consider contracting with a business operations consultant who can audit your current practices and recommend improvements.
Business consultants typically specialize in a particular sector, so hiring a consultant can also provide you with industry-specific operational insights. For example, a manufacturing industry consultant might specialize in supply chain management strategies that can help you reduce shipping costs. They can also help you source quality raw materials more efficiently and find production system improvements to reduce your energy needs.
8. Make a plan
Optimizing your business operations is an ongoing task—that’s why a chief operating officer is a permanent C-suite role at most major companies. In addition to periodically engaging in intensive operations audits or employing the help of an operations consultant, make business operations improvement a daily task—or, in other words, an area of business operations.
Monitoring KPIs to track progress toward your previously identified goals and KPIs to help you stay accountable. You can also consider setting recurring times to check in with specific departments, gather feedback about new processes and tools, and identify additional areas for improvement.
Business operations FAQ
What do business operations managers do?
Business operations managers oversee daily business activities and lead a company’s operations optimization efforts.
What are the types of business operations?
The four main types of business operations are production, financial, marketing, and human resources.
- Production operations create goods and services for distribution
- Financial operations manage money and handle accounting tasks
- Marketing operations promote and sell a company’s products or services
- Human resources operations manage a business’s employees
What is the goal of business operations?
The primary goal of business operations is to increase efficiency. A business operations strategy can reduce costs and increase a company’s output.