EU businesses are losing an average one per cent of their revenue each year due to a lack of effective working practices, according to new figures revealed last Friday.
The European Efficiency Report looks at the level of commitment and investment businesses place on streamlining operations and office infrastructure, and highlights that around €60 billion is lost in revenues every year as a result of inefficient working practices.
The UK business market is the worst performer, with annual losses of €24 billion (36 per cent), equivalent to the amount of extra funding needed by Irish banks to survive the financial crisis.
The research, based on in-depth telephone interviews with 500 organisations across France, Germany, Spain, Italy and the UK, each employing more than 1,000 people locally, identifies the key business issues and trends within the largest European economies.
The research focuses on six sectors (financial services, banking, hospitality, utilities, retail and professional services), revealing inefficiency costs of €20 billion in banking alone; while hospitality and professional services are seeing relatively nominal losses, valued at €1.4 billion and €1.8 billion respectively.
In contrast to rising costs and large gaps in procedures across all countries surveyed, organisations feel that, on average, improving the level of business efficiency by five per cent would deliver a signi- ficant four per cent increase in revenues, and a massive 13 per cent increase in profits on average.
In the UK, the corresponding figures are six per cent (€106 billion) revenue increase, and a very high 17 per cent (€33 billion) profit uplift.
In the same vein, UK companies estimate potential savings of €21 billion simply by conducting business in a more strategically and operationally efficient manner, a significant opportunity in troubled economic times.
Areas for improvement are in waste reduction, IT innovation investment and process re-definition. Additionally, three quarters of UK organisations believe investing in new technology is necessary to achieve greater business efficiency.
Despite evidence that business efficiency, specifically with regard to IT, is high on the corporate agenda, only a third of firms have a fully developed strategy in place. Of those, a fundamental barrier to successful implementation is poor internal communication, raising the issue of effective people management as a recurring theme throughout the study.
Chris Price, managing director of Epson UK, comments: “The Epson Efficiency Report has raised several concerns for the UK, including operational company guidelines and the subsequent impact these have on the bottom line. We were not expecting to see such dramatic annual losses as a result of inefficiency.
“There is clearly an important message to British businesses to focus more attention on internal best practices, high prospect investment areas like technology infrastucture, and reconsideration of the credentials of the external supply chain.”
He continues: “Epson takes efficiency very seriously and has been investing in R&D and meticulous engineering for decades, continually striving for top quality products, services and innovations to meet our customers’ strategic and operational needs.”
Almost all the organisations surveyed agree that efforts to improve performance are strongest when led by department heads and supported by the board, with realistic targets and investment levels, measured primarily by reduced waste, reduced costs and faster time to market. One of the greatest challenges to achieving this is proving the return on the investment.
Almost a third of companies fear that if there is an upturn in the economy, the drive for business efficiency may take a back seat.
Seventy-eight per cent of UK firms report that the drive for efficiency is more important now than 12 months ago and fully 89 per cent of the same firms (the highest across Europe) agree that the drive for increased efficiency will be more important in the next 12 months compared with now.
This clearly highlights an increased focus on business efficiency in UK companies now and for the foreseeable future.
Many UK companies, like those across the whole of Europe, are equally aware of several areas of opportunity to improve business efficiency over the next 12 months, with 60 per cent pointing to greater staff productivity, 54 per cent reduction in costs and 46 per cent IT innovation investment.
Interestingly only a third of UK enterprises identify human resource allocation as an opportunity for greater business efficiency over the coming year.