Understanding Business Operations & How to Improve Them
Discover what business operations is, how to improve it at your organization, and how to create a business operations strategy.
Hiring candidates, developing products, and providing customer support are just a few of the operations that keep a business running.
To run and grow a business, these operations must work as efficiently as possible. Operations management can help by supporting these various operational areas with the processes, data, technology, and personnel they need to achieve their goals and advance the company’s overall business strategy.
This guide will cover what business operations are in more depth and how to improve them. It will also explain what a business operations manager and strategy are and why they’re important to achieving a company’s short- and long-term objectives.
What is business operations?
Business operations refers to the day-to-day tasks that a business performs in order to run and ultimately make a profit. More specifically, business operations are the core activities that transform inputs like raw materials, labor, and capital into outputs like products and services.
While these vary for different industries and businesses, business operations typically include marketing, sales, and service. For certain companies, they might also include product, manufacturing, and order management.
Take a restaurant, for example. Their business operations might include:
- Inventory management
- Order management
- Food preparation
To learn more about what business operations are, check out this video by Operations Management Consultant Laurence Gartside:
What is business operations management?
There is typically a dedicated team in charge of optimizing the day-to-day tasks and carrying out high-priority initiatives across all the operational areas of a company. This team is the business operations management team.
It is responsible for resource coordination and management, capacity planning, forecasting, and more. This team reports to the chief operating officer, who is responsible for managing the daily business operations of the company as a whole.
Here’s an example of an organizational chart for a manufacturing company that includes an operations department.
We’ll talk about the individuals that make up a business operations team in more depth later. For now, let’s take a closer look at the different elements that make up business operations.
Elements of Business Operations
While they vary widely, business operations for any company or industry are related to four major elements. Business operations teams are responsible for managing and improving these elements, as outlined below.
Processes are essential for business operations. They outline how a company does things from start to finish, like developing a product or submitting an expense sheet. By ensuring that employees are completing tasks in the most efficient and error-free way possible, processes can boost productivity and profitability when done right.
A company’s workforce also has a major impact on its productivity and profitability. So another key pillar of business operations is calculating how many employees are needed and in what job functions, deciding whether employees should be hired full-time, part-time, or on an “as needed” basis, and ensuring employees have clearly assigned roles and responsibilities that align with their skill sets.
Technology or equipment is another key element of business operations. Understanding what technology is needed to help employees achieve their day-to-day tasks is essential to running and growing a company and estimating costs. Another operational decision is whether you should build that technology internally or buy it.
Location is the final important element of business operations. Some businesses may require a location in a city or one with parking. Others may be able to operate entirely remotely. The optimal location will vary according to industry, company size, and other factors. When picking a location, consider factors like square footage, layout, traffic flow, parking, and storage. Also, consider what location would enable you to reach a wide enough pool of customers and be accessible to employees (even if that’s just yourself) as well as vendors.
Now that we have a better understanding of what business operations is let’s take a look at more examples of business operations below.
What are business operations examples?
Below we’ll look at examples of common business operations across a variety of industries and companies.
Product operations is designed to ensure the product team works as efficiently as possible by providing them with business processes, best practices, budgeting, reporting, and infrastructure. It also helps improve alignment, communications, and processes among the product, engineering, and customer success teams of a company to ensure products are successfully created and launched to market.
Daily tasks might include:
- Performing market research, including user interviews
- Analyzing and reporting data to product management teams
- Creating and optimizing processes to streamline product development
- Managing and sourcing new tools for the product team
- Working cross-functionally with engineering, sales, and customer service
- Overseeing the testing process for new features
Human Resources Operations
One of the most common business operations for companies in a range of industries is human resources. HR operations is responsible for optimizing all stages of the employee lifecycle, including recruitment, onboarding, performance management, and offboarding.
Daily tasks might include:
- Outlining HR compliance policies
- Creating and maintaining onboarding materials
- Planning headcount for the recruitment team now and as the company scales
- Launching initiatives to improve employee relations
Sales operations consist of all the processes and initiatives designed to reduce friction in the sales process so the sales team is more productive and successful. Lead management, territory structuring and alignment, compensation plans, and sales automation can all help salespeople work more efficiently.
Daily tasks might include:
- Creating and optimizing the sales strategy
- Gathering external market and competitor research
- Reporting internal sales performance data
- Scheduling appointment bookings with leads and contacts for sales reps
- Defining and assigning sales territories
Marketing operations are also common in any type of business. This operational area is made up of all the personnel, processes, and technology that allow marketers to function efficiently.
Daily tasks might include:
- Developing and documenting workflows
- Gathering customer, market, and competitive intelligence research
- Managing all the marketing automation platforms the team uses
- Creating a review and approval process of marketing materials to ensure compliance
Financial operations is a business operation that consists of overseeing all workflows and processes related to a company’s finances and financial decision-making. This includes the accounts receivable and accounts payable processes and data collection.
Daily tasks might include:
- Creating financial reports
- Overseeing financial transactions
- Developing investment strategies
- Ensuring daily operations comply with the law and standard practices
Supply Chain Management Operations
A common business operation of manufacturing and retail companies is supply chain management. This involves optimizing and managing the processes, personnel, technology, and locations used for sourcing, producing, and delivering products or services to customers.
Daily tasks might include:
- Evaluating suppliers
- Negotiating contracts with vendors
- Forecasting demand to maintain a lean inventory
How to Improve Business Operations
- Define and measure key performance metrics.
- Identify inhibitors to growth.
- Create new processes.
- Analyze and improve existing processes.
- Stay informed about industry trends.
1. Define and measure key metrics.
Before you can launch improvement efforts, you need to define and measure key performance metrics and benchmarks. This will enable you to better assess your operations and understand where to target your improvement efforts.
These metrics should be tailored to different business operations. For example, for service, KPIs may include:
- Net promoter score
- Customer churn rate
- Number of support tickets
- Wait time for callers
KPIs for supply chain management, on the other hand, might include:
- Inventory turnover
- Fill rate
- Customer order cycle time
- On-time delivery
2. Identify inhibitors to growth.
Defining, tracking, and analyzing KPIs will begin to reveal operational inefficiencies or issues that are impeding profit or growth.
For example, if the supply chain management team consistently underperforms in terms of customer order cycle time, then you may need to evaluate the current processes, personnel, equipment, and location of that team. It’s possible that no one currently predicts and manages the demand for the company’s products so products are constantly on backorder. Or maybe someone is manually determining and scheduling the resources needed to fulfill and deliver orders instead of using a tool to simplify or automate those tasks.
3. Analyze and improve existing processes.
Once the company’s operational performance has been mapped to some inhibitors to growth, you can begin to improve existing processes across the organization.
For example, you may find that the HR department uses several tools to store, manage, and track requests, which is resulting in delays, duplication, and other issues. To improve these processes, you may implement new technology for storing, managing, and tracking all HR requests in one place.
4. Create new processes.
In addition to improving existing processes, an operations team may need to create totally new processes.
For example, say the satisfaction of employees who have been at the company for less than three months is much lower than employees who have been there for at least a year. One explanation may be a lack of a solid onboarding process. You can therefore create a process made up of activities like an introductory phone call, follow-up email, and virtual training in order to set expectations for new employees as well as existing team members who should be involved (like managers).
5. Stay informed about industry trends.
In addition to looking at your performance data, staying informed about industry trends can help you optimize or create new processes. For example, new technology, regulations or taxes may prompt changes in processes that help you outperform your competitors, cut costs, or stay compliant with changing state and federal laws.
While all employees can help improve business operations in these ways, there may be one individual who leads these optimization efforts. Let’s take a closer look at this individual’s roles and responsibilities below.
Business Operations Manager
A business operations manager is responsible for designing, improving, executing, and leading the operations of a company to drive its growth. To achieve this, they must be able to collaborate cross-functionally across teams, manage various projects from product launches to board meetings, and track and report on KPIs, OKRs, and other key metrics.
This only covers a portion of the breadth of work that business operations managers do. They may also be responsible for hiring people, restructuring teams, negotiating contracts, addressing budget matters, and creating company-wide policies for operating most efficiently as well.
When looking on job posting sites, you may see titles like Operations Supervisor, Solutions Consultant, and Operations Research Analyst. These titles have similar job responsibilities to the ones listed above — the naming convention just varies by company and industry. You may also see titles like Chief Engineer or Production Line Supervisor, which have some operational responsibilities in addition to others. It’s common for companies to combine operational responsibilities into other roles like this.
To get a better understanding of this role, check out part of this job description for a Business Operations Manager role at RapidSOS that is posted on LinkedIn:
In short, a business operations manager is responsible for helping to plan, execute, and adapt a company’s overall business operations strategy. Before we discuss this type of strategy, let’s take a quick look at how much a business operations manager can expect to make annually.
Business Operations Manager Salary
Business operations managers made a median salary of $103,650 in 2020, according to data from U.S. News & World Report.
Glassdoor estimates the median salary is a bit lower at $82,073 per year based on salaries collected from its users, with the most likely range from $58,000 to $128,000. Where a business operations manager falls in the estimated pay range will depend on location, years of experience, and other factors.
To truly understand the role of a business operations manager, you must understand what a business operations strategy is. Let’s take a look at this term below, then check out the different types of operations strategy and some examples.
Business Operations Strategy
Business operations strategy is a decision-making framework for planning, executing, and analyzing a company’s operations in order to achieve its core objectives. A comprehensive operations strategy can help a company boost productivity, increase revenue, and achieve growth.
Every organization faces the same challenge of trying to manage multiple working aspects across different operational areas with a limited amount of resources. To overcome this challenge, an organization needs an operations strategy that aligns with its mission and helps them manage workflows and processes, maintain business goals, and measure performance. It should also help guide structural decisions and how operational capabilities must evolve to remain competitive.
An operations strategy is therefore critical to the overall business strategy of a company. While the business strategy is the “what,” the operations are the “how.”
Now that we have a better understanding of the benefits, let’s take a look at what elements make up an operations strategy below.
Elements of an Operations Strategy
An operations strategy is shaped by a number of factors, including what products a company produces, how they are produced, where they’re produced, if technology is used, and how many total resources are available for operations. We’ll briefly look at each of these key elements below.
- Product: Arguably, the most important element of any operations strategy is the product. The strategy should include how to allocate resources to iterate on the product based on its lifecycle and market trends.
- Production system: A company’s operations strategy also depends on its production system. A production system determines how resources are turned into products and services using clear workflows, quality control benchmarks, and supply chain management strategies.
- Production facilities: A company’s production facilities may have different specializations, production goals, and inventory management systems, which will affect its operational capabilities. The size and number of a company’s production facilities will also be a factor.
- Technology: Technology can affect how the product is produced. An operations strategy should help analyze and select tools and software that help improve the quality or production of products. Machine learning, production line automation, real-time metrics, and market forecasting tools are just a few examples.
- Resource Allocation: Finally, an operations strategy must take into account the total resources available for operations, including locational, mechanical, and human resources, and decide how to allocate them.
Types of Operations Strategy
There are five major types of operations strategies that can help optimize the use of processes, people, technology, and facilities. Let’s define them below.
Corporate strategies are operational strategies that support the company mission and help cross-functional teams work together. These high-level operation plans should enable all business units to successfully implement the overall business strategy.
2. Customer Driven
Customer-driven operations strategies are designed to meet the needs and expectations of a specific customer segment. To create this type of operational strategy, ask how you can better serve your customers.
3. Core Competencies
Core competencies strategies are operational strategies that focus on developing and leveraging the company’s key strengths and resources. For example, if a company has technical superiority over its competitors, then this type of operational strategy might focus on educating the sales and customer support team to explain that to customers.
4. Competitive Priorities
Competitive priorities strategies aim to differentiate the company in the market so they can better provide a product or service. These strategies might focus on the company’s production process, for example, so they can deliver products faster or cheaper than their competitors.
5. Product Development
This type refers to operations strategies in product development and design. These strategies might be focused on bringing new products to a market or modifying existing ones to perform more competitively in an existing market or launch in new markets. Note that products are not just tangible items — they can also be services.
Operations Strategy Examples
Below are some different examples of operations strategies that vary by type and what the business’s core objectives are.
1. Automating Inventory Management
Inventory management is a crucial business operation that ensures you can fulfill customers’ orders while reducing backorders and overstocks. A franchise restaurant may decide to use technology, like a stock control database system, to know what inventory they have at any given time so they can keep stores stocked and avoid unnecessary ordering.
2. Creating a Hiring Plan
To ensure they’re hiring people with the right skill set, a technology company may create a hiring plan. This plan should define each step of the hiring process — from posting a job to screening candidates, scheduling and conducting interviews, extending an offer, and all the steps in between. This ensures that the talent acquisition team can most effectively identify, acquire, assess, and hire candidates and that every candidate has the same positive experience in the recruitment funnel.
3. Outsourcing Production
To improve its competitive position, a retailer may decide to outsource production to an automated facility in order to manage its supply chain better and speed up its production system. They may also hire an internal employee or an external supply chain management firm to oversee the production and distribution of their products to ensure they meet quality standards. This outsourcing strategy can help the organization cut costs and solve customers’ needs at a better price point.
4. Standardizing Communication
To improve alignment and reduce ad hoc requests from cross-functional teams for custom content, training, and other resources from the product team, a SaaS company may implement strategies to standardize communications. For example, they may assign a specific individual or team the task of maintaining and updating documentation on processes, guidelines, and other critical materials for new and existing products. They may also set up monthly meetings between product marketers and support and sales team leaders.
Optimizing Your Business Operations
Business operations are the core activities that keep your company running and able to compete and scale. Having a business operations management team and strategy can ensure that your operations are running as efficiently as possible so you can reduce costs, provide superior customer experiences, and boost employee productivity and satisfaction.