Quantity versus quality: Which is more important for a growing business? Should the focus be on more products and more customers? Or do you target quality — flawless products and impeccable customer service?

The answer is both.

As a business grows, it's important to look for ways to maximize efficiency and effectiveness. While a successful business requires both, these concepts are achieved in different ways.

This article defines efficiency and effectiveness for mid-market businesses. It explains how the concepts differ, common challenges, and how to improve efficiency and effectiveness for a growing mid-sized business. 

Table of Contents

• What is business efficiency?
• What is business effectiveness?
• Business efficiency vs. effectiveness
• Should your company prioritize business efficiency vs. effectiveness?
• Effectiveness challenges for growing medium-sized businesses
• How to improve and measure business effectiveness
• Business efficiency challenges for growing medium-sized businesses
• How to improve and measure business efficiency
• Take your growing business to the next level
• FAQ

What is business efficiency?

Business efficiency is how well a company uses its resources to deliver a product or service. It's about maximizing time and resources and minimizing waste. It's about reducing costs and increasing profits.

In order to grow and stay competitive, mid-sized businesses can increase efficiency by leveraging tools like AI and financial management software. This can reduce time-consuming manual tasks, freeing up staff to focus on more strategic goals that help drive profits.    

What is business effectiveness?

To reach maximum effectiveness, everyone needs to be working toward the same goals and objectives. A business becomes more effective when everyone is focusing on the right tasks. An effective mid-market business produces high-quality products and services that generate revenue.

In today's economy, mid-sized companies need to be ready to pivot and reprioritize goals as new technologies and challenges emerge. Strong communication, constant planning, and forecasting are necessary to accommodate an ever-changing business landscape.

QuickBooks Online Advanced features project-based collaboration tools to keep everyone working toward the same goals. You can also create detailed reports to track projects and share information.  

Business efficiency vs. effectiveness

A business can be efficient without being effective.

For instance, your HR team might do a great job of hiring staff quickly, but if the new hires aren't a good fit and don't stay long-term, this isn't effective.

On the other hand, a business can be effective and inefficient. In this case, the team is working toward the same goal but there's a lack of efficiency and optimization.

For instance, your company might produce engaging marketing content that attracts a lot of views. However, it's not efficient if your marketing team is spending hours manually sending emails and posting content instead of automating these tasks.

While efficiency focuses on speed and resources, effectiveness is all about performance and delivery.

To be efficient, you have to optimize your processes. To be effective, you must have clear goals and achieve them. To reach the greatest levels of success, you want efficiency and effectiveness.

Should your company prioritize business efficiency vs. effectiveness?

Whether you should prioritize business efficiency or business effectiveness will depend on the needs of the business.

If your company needs to work on both, where should you start?

Ideally, you want to establish clear tasks and initiatives to work toward your goals before focusing on speed and efficiency. There's no point in moving faster if your team doesn't have a clear vision of what they're working toward.

Once you've improved effectiveness, you can look for ways to maximize efficiency.

For instance, if you want to improve the effectiveness and efficiency of hiring new staff, start by defining the type of employees you want to hire. Consider the qualities and skills you're looking for. Then work on creating clear job descriptions and strong interview questions.

Once you start to attract the right talent, you can turn your efforts toward maximizing hiring efficiency. Consider how you can use technology to automate the resume screening process, book interviews, and onboard new hires.  

Effectiveness challenges for growing medium-sized businesses

As your company continues to scale, it's normal to encounter pain points related to business effectiveness.

Some examples include:

• Task prioritization. How to prioritize new tasks and ensure they're properly communicated to the growing team.
• Predicting cash flow. How to make predictions about expenses, cash flow, and resources as your company continues to expand.
• Hiring new staff. How to build and maintain a team of talented workers that align with the company's vision and mission.
• Company culture. How to maintain company culture as you hire new employees.
• Effective reporting. How to ensure information is effectively shared and communicated across the company.

How to improve and measure business effectiveness

Here are some tips to help improve business effectiveness as your mid-sized business continues to grow.

• Focus on forecasting. You can use a sophisticated tool like QuickBooks Online Advanced to forecast your income and expenses for the year and beyond.
• Create reports. Gain insights into your business financials by creating powerful reports. QuickBooks Online Advanced offers a variety of ready-made reports. Alternatively, you can create your own report and save it as a template to use later.
• Monitor KPIs. To ensure you're reaching your goals, outline your key performance indicators (KPIs) and monitor them. With QuickBooks Online Advanced, it's easy to track important numbers at a glance by creating custom dashboards and charts.
• Share a clear vision and mission. Ensure every member of your business knows and understands the company's vision and mission. Having clear vision and mission statements helps maintain company culture and ensure everyone is working toward the same goals.

To measure if your company is achieving its goals and objectives, you can look at key performance indicators like growth rate, net sales, or the number of contracts signed in a quarter. Also, consider tapping into customer feedback. 

Business efficiency challenges for growing medium-sized businesses

Your mid-market company might also encounter pain points related to efficiency.

Some examples include:

• Limited resources. As a medium-sized company, you might be working with a leaner budget and more limited resources.
• Payroll inefficiencies. As you hire more employees, you have more payroll responsibilities, which can consume more time.
• Cash flow management. It's common to experience fluctuations in income and expenses as the company scales, making it more difficult to manage cash flow.
• Payment processing. Can your current payment processing system keep up as the company grows? Or are you spending too much time on manual tasks like following up on payments or cashing cheques?
• Tracking inventory. You may find it challenging to keep track of how much inventory you need on hand as the company expands.

How to improve and measure business efficiency

When it comes to improving efficiency for mid-sized businesses, there are several strategies you can use, including:

• Automate tasks and processes. Look for opportunities to replace inefficient and redundant tasks with automation. With QuickBooks Online Advanced, you can automate everything from invoicing and payment reminders to workflows and marketing emails.
• Use forecasting tools. To gain a deeper understanding of your company's financials, you can use QuickBooks Online Advanced to create custom forecasts to predict future revenue and cash flow based on historical data.
• Document workflows. Design and create custom workflows to ensure consistency for key internal processes. Using QuickBooks Online Advanced, you can use premade workflow templates for common tasks or build customer workflows tailored to your team's processes.
• Improve training. Ensure employees are properly trained during onboarding to increase their knowledge and confidence. When employees have a clear understanding of their role, it can help reduce errors and optimize workflows.

The type of measures you use to track business efficiency will depend on your specific company and industry.

Some examples of measures include:

• Overall profitability. Use different profitability measures to determine if your company is moving in the right direction.
• Reduced waste. Are you producing less waste with your new efficiency measures in place?
• Return on investment (ROI). See if your investments in new tech or new team members are paying off.
• Time to complete a task. Measure to see if employees are spending less time on tasks after implementing efficiency improvements.
• Productivity. Are your employees becoming more productive as you take steps to improve efficiency?  

Take your growing medium-sized business to the next level

While business efficiency and effectiveness are two distinct concepts, they are equally important for the success of your growing business.

An efficient business uses less to deliver more. An effective business is one in which every member is working on the right tasks to achieve the same goals.

If you can improve efficiency and effectiveness, this can lead to higher profits, loyal customers, and employee retention.

From prioritizing work and automating tasks and processes to creating custom financial forecasts and building useful reports, QuickBooks Online Advanced has everything you need to run your mid-market business, manage your team, and stay effective and efficient as you continue to scale.

Get in touch with QuickBooks for more information.

Connect with our consultants to discuss your goals, explore solutions, and get started with a QuickBooks tech stack that fits your business and your budget.