Where should our organization focus to become our best? What can do to improve efficiency and effectiveness? Do we have any redundant or obsolete processes? What can we do to improve our results? These are the types of questions an Operational Audit can help with.
Why should Leaders in successful business ask themselves this question?
For starters, consider that we all fall into habits. This happens with organizations too. We can become complacent about our processes because they seem to be working well. Sentiments like “We have always done it this way” or “If it ain’t broke, don’t fix it”, etc…. can keep us stuck in the same place.
While it’s true we don’t want to be always trying to copy others, or just do things differently for the sake of shaking it up – it’s important that we frequently review our practices to make sure they are still serving us effectively.
What do we mean by efficiency and effectiveness? And what’s the difference?
Let’s consider a fictional example of an Office Supply company that has been in operation for 20 years. They have established a good reputation and are doing “OK”. But they don’t seem to have the same “energy” as they did in the past. Let’s start with an example of looking at their sales process.
The good old process of keeping customer files and having sales people phone up or visit customers on a scheduled basis was what everyone did back then. But does it still serve the company and their customers? Maybe that sales process they set up 20 years ago needs to be moved to a more streamlined, technology enabled approach? That may be more efficient for the company (less time to fill out paper work, less chance of missing deadlines….). It may also be more EFFECTIVE in meeting your customer needs. After all, chances are that your customers have changed the way they make decisions on purchasing.
While efficiency looks at things such as reducing time, reducing errors, eliminating extraneous processes, etc. – effectiveness is about doing the RIGHT things. And consider how that can change over time. What was effective for sales 20 years ago may no longer be effective with todays’ consumers.
Why the need for an outside perspective?
No doubt the employees and leaders in an organization have the most knowledge of how things work. And while that is certainly a strength, it can also be a weakness. It’s human nature to see things from a limited perspective. We look at the same processes every day, so it can be difficult to envision something different. We can have blind spots to problems and issues that may be obvious to someone seeing it for the first time.
Additionally, it takes a specific type of expertise to conduct a thorough and impartial audit. For example, a strategic management consultant is trained in all aspects of business administration to be able to look at the big picture. And they must have skills in conducting business research. You need someone objective that can take a systematic approach. Additionally, a consultant brings experience and best practices to be able to provide you with recommendations.
What is involved in an Operational Audit?
For starters, an experienced Management Consultant would do research into your business processes and assess how well they were meeting your goals. This could involve reviewing secondary research (reports, measurements…) as well as conducting primary research (interviews, surveys, observations). They would look at your operations from several perspectives, including but not limited to financial performance. They might compare your processes and results against benchmarks or standards for your industry. This might flag some areas of concern for delving into deeper.
Operational audits are important for all types of organizations
Doesn’t every organization want efficiency and effectiveness? It’s not all just about profits. You want to make sure you are using your resources in the best way possible. So, this is important for non-profit, public and academic types of organizations too. An Operational Review can be scaled to the size of the organization, and perhaps focus on specific areas of concern.
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