Optimization is the act of making a system as effective as possible by adjusting the controllable variables.
In a nutshell, optimization means figuring out where to set all the controls to make the company, system, process, or other aspect of your life do what you want it to do.
“Effective” in this definition is defined by whoever is developing the system. Optimization can be maximization (profit), minimization (costs), or targeting some specific number (component mixture for the fastest drying time of an epoxy).
Optimization will always have some constraints associated with it. Profit growth might be limited by the amount of working capital or available credit. Optimizing to minimize costs might mean using a certain quality level as a constraint.
In your personal life, you do optimization as well. You are trying to maximize your happiness. You need to adjust all the levers—how much time you spend at work, at play, by yourself, with your family—in order to get the balance just right.
There is some ‘best’ mix that will optimize your well-being, from your perspective. Too much work and you don’t get enough time (not to mention what it does to your job satisfaction). Too little work and you can’t pay the bills. In this case, your constraint is the total time you have, and the obligations you have made.