You’ve heard it said often… Management can be broken down like this; eliminate, automate, delegate. You must always eliminate anything (and everything) that is not working, is wasteful, too costly, has no return on investment (ROI), and is not making the right kind of progress for your business.
Automate everything you can. This includes client reminders, billing, marketing, promotions, follow-ups, etc.
Delegation is REALLY important, and most often not done. It’s not done enough because we (you, me and most everyone) has a hard time “letting go.” Basically, we’re control freaks. You must determine your value per hour and NEVER do work that is below that pay level. Begin by delegating (outsourcing) all the things you loath.
It will instantly free your time for doing “HUBU” – your Highest Use and Best Use of your time to attract the next big client.
No one talks about how to eliminate unproductive routines, corporate bureaucracy and ‘administration trivia’ that kills ambition and sap energy for far too many employees. That’s demoralizing for employees and a waste for companies, which badly need the full energy and commitment of all their workers to keep or make the business profitable.
No one talks about how to evaluate the true causes of organizational drag — all the practices, procedures and structures that waste time and limit output — not just the symptoms. The symptoms may seem minor annoyances and inconveniences that could be wiped out without much effort – too much process steps to get orders out, too many meetings, meaningless goals, and time wasted on work that no one will even care about.
But those symptoms stem from fundamental problems. Companies wind up in trouble and squander the time, talent and energy of their workforce when they lose focus, spend money on things that don’t make a difference to employees or the future of the business, and use operating models that are out of whack.
Below are some areas that waste can be eliminated from an organization or restructured to help it to become more profitable.
• Board of Directors — being complacent and procrastinating on leadership, governance and compliance issues. Also, delaying or distorting strategic decisions that overlook waste and high costs, hastily conceived and harmful cost reductions, missed new product and business development opportunities and poor long-term investments that destroys shareholder value(profits).
• President – wasted authority, responsibility, ability, talent, technology and knowledge by spending to little time on ‘strategic issues/vision’ and ‘operational improvements strategy’ by accepting positions work on multiple boards that are not relevant to the company but provide networking and resume building opportunities for them. Not executing plans that improve shareholder value(profits).
• Administration (wasted efforts) — outdated technology, lack of current policies and procedures, poor tracking of costs, expenses, lost files, inadequate reports, inefficient ordering methods, no competitive bidding, facilities inefficient for operations and employees mindset of ‘we know what we are doing’. Senior executives having too many meetings that have little or no direct impact on company value (profits).
• Human Resources – Poor Employee Handbook, Ambiguous Employee Responsibilities/ Inadequate Job Descriptions, Irregular Employee Evaluations, Outdated Employee Benefits, Poor job training, high employee turnover and improper employee tracking, record keeping systems and the ‘don’t rock the boat’ mentality.
• Finance/Accounting (wasted profits) — credit losses, poor refund/returns tracking system, poor budgeting (profit planning system), Excessive Expenses, Slow Collections from current/former customers, delayed invoicing, inefficient record keeping (inventory/order management) and idle money
• Sales (wasted business opportunity) — neglected customers, uncalled prospects, lack of sales, calls on unqualified prospects, unsatisfied customers, high pressure sales tactics, rash promises and out-moded compensation structures
• Marketing Communications (wasted actions) — executing old marketing plan (targeting wrong customer audience), ineffective advertising, no publicity, lacks ROI measurement, poor coordination with other internal departments, outdated marketing material, outdated marketing message, no coordinated social media marketing presence, uninformed about company plans, internal employee communications lacks credibility and the ‘they can’t handle the truth’ mentality by senior management
• Operations (wasted products/services) – unused capacity, wasted labor, poor training, absenteeism, slow work pace, idle employees, spoiled work, out-dated methods and equipment.
• Ownership (wasted investment) – no profit on investment and the it’s a ‘write off’ mentality.
No one shows you how to attack the root causes of organizational drag listed above, which allows companies to eliminate unnecessary work, re-energize the workforce and at the same time, put the business on a better course. Making improvements allows you to ‘raise the bar’ in the organization by following the three R’s.
• Refocus on strategic priorities
• Resets the budgets
• Redesign the operating model
Refocus on strategic priorities
Refocus the organization on the most important business units, customer segments and geographies in which the company has a repeatable formula for growth and a ‘right to win’.
A. Within business units, eliminate any sources of profitless volume.
1. Look closely, company may have stretched their brands and used product portfolios to customers and market in which they are undifferentiated and profits are weak. This contributes to drag as well as costs that rob resources from better and potentially, more profitable ideas.
Reset the Budgets
How companies allocate money can contribute to organizational drag by keeping nonessential work going on. But it is not easy to make the tough decisions to refund.
I recommend profit planning based on zero-based budgeting and planning to make the choices clearer.
A zero-based budgeting and planning process using stretch targets challenges conventional thinking and brings forth bolder ideas.
Redesign the Operating Model
After streamlined portfolio and reset budgets, it is important to redesign the operating model —- that is, the way the company is organized to deliver on its strategy. Thinking ‘customer-back’ or ‘frontline-back’ provides lens to eliminate work. Just ask: How does this activity help to serve the customer better? Or How does this activity or information serve the internal stakeholders better? —- Companies need to look at inefficiencies cross-functional, cross-geographical or cross-business unit activities, where no executive or team has any account activity.
Assess your current state operating model. You then need to identify the waste in your operations top to bottom. By identifying the seven wastes of lean which provide a lens and a language to identify waste in your own work. Ask yourself these questions:
Transportation: How many hand offs do I have in my work? Inventory: How big is my queue of work tasks? Motion: How much time do I spend searching for information? Waiting: Does my work sit idle waiting for other tasks or information? Overproduction: Do I perform some tasks long before they are needed, while other tasks are late? Over-processing: Do I do more than is necessary, such as three-paragraph emails where one sentence will suffice? Defects: Do I have tasks I must rework?
Keep a list of what you are looking for, and make notes when you observe those specific instances. Identify the cause of that waste. You aren’t going to eliminate everything, and certainly not all at once. But if you have multiple observations, you can make choices about the best opportunity to improve.
Note, understanding and taking deliberate steps to mitigate identified wasteful process areas in all business units will drastically reduce all kinds of cost and increase profitability regardless of what industry your organization plays in.
The idea of categorizing seven wastes is credited to Engineer Taiichi Ohno, the father of the Toyota Production System (TPS). Although the classifications were intended to improve manufacturing, they can be adapted for most types of workplaces.
The following are the seven wastes, as categorized by Taiichi Ohno:
• Overproduction — Manufacture of products in advance or in excess of demand wastes money, time and space.
• Waiting — Processes are ineffective and time is wasted when one process waits to begin while another finishes. Instead, the flow of operations should be smooth and continuous. According to some estimates, as much as 99 percent of a product’s time in manufacture is actually spent waiting.
• Transportation — Moving a product between manufacturing processes adds no value, is expensive and can cause damage or product deterioration.
• Inappropriate processing — Overly elaborate and expensive equipment is wasteful if simpler machinery would work as well.
• Excessive inventory – This wastes resources through costs of storage and maintenance.
• Unnecessary motion — Resources are wasted when workers have to bend, reach or walk distances to do their jobs. Workplace ergonomics assessment should be conducted to design a more efficient environment.
• Defects — Quarantining defective inventory takes time and costs money.
Since the categories of waste were established, others have been proposed for addition, including:
• Under-utilization of employee skills — Although employees are typically hired for a specific skill set, they always bring other skills and insights to the workplace that should be acknowledged and utilized.
• Unsafe workplaces and environments — Employee accidents and health issues as a result of unsafe working conditions waste resources.
• Lack of information or sharing of information — Research and communication are essential to keep operations working to capacity.
• Equipment breakdown — Poorly maintained equipment can result in damage and cost resources of both time and money.
After you have identified and categorized ‘mission critical’ wasteful business practices/process areas in business units that need and can be to be resolved. Develop specific solutions for specific waste instances. Don’t try to eliminate waste in broad themes.
By identifying, improving and eliminating wasteful areas throughout the organization that decrease profitability. A business owner can increase their ‘profits’ on the bottom line in a good or bad economy.