Of all the business owners and entrepreneurs we have met, every single one has a need to know about all things occurring in the business at all times. This is an understandable need, since the business is the product of the entrepreneur’s own blood, sweat, and tears. However, let’s re-frame the situation to where being involved in every decision means the entrepreneur’s focus and attention are being taken away from other things that may be more important or critical to the business. Or the owner’s involvement in every facet of the business is hurting the business as a whole because she’s the only one person (the bottleneck) empowered to make decisions, and is unable to keep pace with the growth and challenges facing the company.
How does such a business owner keep up with ever-evolving competitors, or be receptive to customer needs, and continue growing the organization if there is barely enough time in the decision-maker’s day to single-handedly digest every issue?
If you think you have time to figure out how to best take advantage of your competitive advantages, improve customer service levels, and reduce the costs of your supply chain inventories, you’re wrong. One-off projects like these can have a huge impact, but they also cause a large disruption to day-to-day activities. Can you afford the time to teach yourself how to take action on any of these opportunities effectively while not negatively impacting the rest of the business?
The cost to a business of self-medication (time, money, foregone opportunity) is much greater than the cost of an objective expert’s time. Similarly, the risks of self-medication of a haphazard implementation with a high probability of failure are greater than the risks of bringing in an objective expert who has the training and experience to implement a solution with a high rate of success. The progress of your business depends on your judgement, but it shouldn’t have to be captive to it.
A cliche, but apropos, anecdote involves a primary care physician (experts in personal health) prescribing treatments to help you improve the quality of your life based on their judgement in seeing similar cases; similarly, a consultant (experts in specific areas of business) have much more experience and exposure to similar business cases and are able to prescribe action plans to improve the health of your business.
I recently visited with a Director of Marketing at a charitable startup, and he shared that his title sounds impressive, but his roles can vary from web developer, customer service representative, contract manager, warehouse fulfillment person, to janitor, depending on the day and need. Essentially, one person is fulfilling many different roles, and any issues across multiple functions are most likely going to be handled by the exact same person. In this scenario there is no cross-talk, no second-guessing, no conflicting information.
By contrast, in larger organizations, one hat can be worn by many people. Five different data-entry associates will tell you five different ways to process paperwork. When someone downstream needs to act on the information that was entered and has a question, who does she turn to for help? The person who produced the discrepancy may not necessarily be the person doing the troubleshooting. Time is wasted in tracking down the person who made the error, understanding what went wrong, fixing the error, notifying the person downstream that the issue has been rectified, so work can resume.
In both scenarios – effort and work is suboptimal from an efficiency perspective:
- One person doing multiple things cannot be the expert at everything. There are “switching costs” when a person has to put down one thing in order to work on something entirely different.
- Multiple people doing the same thing, but with slight variations, can lead to confusion when someone downstream receives something unexpected.
Resolving situation 1 may be a matter of time management and prioritization. Resolving situation 2 can be much more involved because more people are involved. Consider the following questions when when evaluating a process:
- How did the error get introduced in the first place? Systemic error or human error.
- How does the output from this function impact downstream functions?
- What are best practices to completing the task so everyone can benefit from a common approach?
Standardizing a process so it can be repeated and measured is one way to reduce the variance that occurs naturally when more than one person is tasked to perform the same function. The benefits of standardization are a reduced variety of errors, which speeds up resolution and less confusion downstream. Being able to measure a process also brings more visibility in managing a process – which leads to greater efficiencies and reduced costs.
To tie everything back to the Director of Marketing – variation in completing tasks is not as much of an issue since one person is generally doing everything from beginning to end. The practice of one person doing everything may be a necessity, however, it is not sustainable, and when new people come on board they will sure ask: “What is the best way to complete this task?”
Firebrick Advisory was recently interviewed for a sound bite and featured in the new North Dallas Chamber of Commerce video. It’s at the 25 seconds into the clip.
Summer is in full swing and many people will go on holiday or vacation during this time of year. However, for many business owners and executives, there will be no relief of a vacation or any time off. Any span of time where the executive is even partially detached from work could be very dangerous. He or she is so involved in the organization that nothing can function without his or her constant physical presence.
The logic of this argument is ridiculous. I would challenge the leadership of such an organization that would allow one person to hold it hostage, and I would challenge such an executive to reflect on how much value he is truly contributing to the organization by allowing himself to be a bottleneck. In a more extreme scenario to illustrate the issues, if an executive were to be kidnapped by gypsies and be unable to resume work, would the organization be able to survive?
Well-run, sustainable, organizations should be able to accommodate an executive’s vacation or surprise exit. If it is too dangerous to allow the executive to go on vacation, it is even more dangerous to NOT allow the executive to go on vacation. The executive will continue to hold the organization hostage, or the executive burns out and leaves the organization in chaos with no backup plan. In either case, the organization will sustain significant damage.
One solution to mitigate this risk of complete dependence on an executive is to abstract the organization’s knowledge and capture it into a system that naturally does not need to take vacations. Such a system could be a checklist of tasks, simple documentation on how to do a certain job, a library of work products, a collaboration wiki site on a company intranet, or a number of other implementations that specifically suit your organization’s needs. The system will outlive any employee, and, with some care and attention, can be a wealth of information and source of competitive advantage.
With such a system in place, everyone can appreciate vacation time to relax and recharge.
Silos, a cultural phenomenon when organizations become burdened by bureaucracy. The phrase “That’s not my job” is a very strong indicator of silo mentality. Important stuff doesn’t get done because everyone is busy pointing fingers or trying to protect their own necks. It’s great source material for a popular comic series (dilbert.com), but – joking aside – silos stifle innovation, drive away high-performers, obfuscate decision-making, and contradict operational efficiency.
NASA was awesome in the 1960’s because their only mission for the entire organization was to be the first group to put a man on the moon. Janitors, engineers, astronauts, and management were all moving in the same direction and making decisions to support that singular outcome. Realistically, silos are embedded into the culture of an organization and rallying to be the first to put a man on the moon has already been done. Breaking down silos today is difficult work.
The first step is to recognize and acknowledge silo mentality.
- How are people being held accountable?
- Is information being freely shared between groups?
- Are there disparate systems that are hindering effective communication?
- How quickly does the organization respond to disaster?
The next step is to understand how much it is costing the organization.
- Is product/service quality suffering, are deadlines being pushed
- Are loyal customers leaving?
- Are new customers being turned away?
- Are inventories piling up?
- Are actual numbers falling short of forecasts?
The third step is to re-build trust among opposing groups.
- Cross functional teams can shed light on the benefits of working together
- Strong senior leadership that embodies the mission, vision, and values and effects will trickle down
- Incentives that reward collaborative behavior
A culture that embraces silo thinking will resist change, never be able to achieve optimal operational performance, not be resilient enough to adapt to external forces, and will ultimately fail. If you’re experiencing evidence of silo mentality in your organization, we would be happy to work with you to evaluate your specific situation. Contact us at email@example.com.
All organizations exist to make an impact. Whether it is to build wealth for shareholders, make a social difference, or some combination of the two – chances are that the benefits of the organization’s existence could be amplified if all the moving pieces worked in harmony. More lives could be saved, more resources could be preserved, and more profit could be earned … if we didn’t have to worry about pesky internal conflicts such as:
- departments blaming one another for missing deadlines,
- inefficient controls that drag on productivity,
- team members who do not pull their own weight,
- bottlenecks in decision-making,
- multi-tasking and juggling too many things,
- poor management and prioritization of goals, etc
Realistically, there will always be conflicts. However, it is possible to minimize the impact of conflicts through Business Process Optimization. By taking a holistic view of an organization and understanding the dependencies of its inner workings – we can improve communication, eliminate effort that is not adding value, and ensure alignment in decisions. The result is a “sweet spot” of business performance where – accounting for known and unknown conflicts – an organization can achieve high productivity.
Business Process Optimization is a tool which can expose areas in an organization that are not functioning as well as they should or that may be broken from an operational sense. We have identified in previous posts how these operational problems can manifest themselves, and such symptoms are more common than many are willing to admit. Business Process Optimization will systematically uncover the root causes that drive these painful symptoms and provide insight into where to focus efforts on fixing the problem. The follow-on work of transforming an organization to actually achieve and sustain performance at an optimal state will be left for another entry.
Time and time again, we have heard business owners and executives make this statement. Coaches will recommend a disciplined approach to prioritizing each and every task, motivational speakers will recommend a “just say no” approach, but our philosophy is to build systems around decision-making.
Business owners are reluctant to delegate decisions and tasks because of a strong need to know about everything that happens inside the company – and perhaps the owner or executive never learned how to delegate. Over time, as the organization grows in size and complexity, the key decision-maker becomes more of a bottleneck, and the heuristics (rules of thumb, experience, requirements, dependencies) necessary to inform a smart decision are all trapped in the decision-maker’s head. Thus, the cycle of not delegating and becoming the bottleneck perpetuates.
With careful analysis, it is possible to extract this wealth of knowledge from the decision-maker’s head and build a system that is capable of replicating many of the same smart choices or – at the very least – serve as a filter that brings attention to crucial decisions only when necessary. From a large corporate perspective, this system may look like an executive management team. For the small to medium-sized business, this system could be a standard set of processes that inform role players on what to do in certain instances.
One of our clients was undergoing a transformation, and customer service response times began to exceed acceptable levels. After deeper analysis, it became evident that one person had become the bottleneck who was impacting the team’s ability to react quickly to customer inquiries. We worked with this individual to map her decision-making criteria and captured that process into a set of protocols for the rest of the team to follow. In one week, we measured a drastic improvement in customer response times and the organization was able to benefit from the dissemination of knowledge that had once been in one person’s head.
Though modern science cannot actually clone a person, it is possible to build a system that can serve as a pretty effective substitute.
This sobering accusation about the NSA being overwhelmed with data should be a wake up call to businesses who are collecting data for the sake of collecting data. It is becoming increasingly easy for organizations to collect data on almost every aspect of their existence: customers, sales, inventories, markets, costs, operations, etc. but without a process for collecting troves of unstructured data, synthesizing the data into information, and translating information into action – you’re not effectively wielding the power of data.
- Improve Revenue
- Identify corellations and opportunities to cross sell products or services
- Identify and prioritize investments in specific customer / market segments
- Inform the supply chain to make smarter decisions as a whole and be more responsive to changing customer demand
- Lower Costs
- Reduce the amount of overstocked inventories
- Improve production efficiency and performance
- Flag customer behavior that may indicate a drastic change is on the horizon
- Predict when an asset may be expiring so action can be taken to prevent downtime
- Benchmark utilization and identify the superstars
We worked with a client in the telecommunications space who was collecting data on all of its customers. The client was interested to know if there was a way to improve customer retention, so we built a database around those customers with the goal of creating profiles based on certain characteristics and attributes. After careful analysis and many iterations of challenging and confirming assumptions, the result was a set of heuristics that enabled our client to have better conversations with their customers by anticipating customer needs, improve customer satisfaction, and increase average revenues per customer by offering more appropriate solutions.
The customer data sets contained all the pieces of the puzzle, but it took a team of people who possessed domain knowledge, an understanding of mathematics and statistics, a certain level of curiosity, and patience to assemble everything into a cohesive picture. This is the power of data, to information, to action.
NSA Mission Statement
The National Security Agency/Central Security Service (NSA/CSS) leads the U.S. Government in cryptology that encompasses both Signals Intelligence (SIGINT) and Information Assurance (IA) products and services, and enables Computer Network Operations (CNO) in order to gain a decision advantage for the Nation and our allies under all circumstances.
In other words, the NSA uses data to protect the Nation. Is your organization using data to protect its territory and gain a decision advantage over competitors?
Have you ever found yourself thinking:
- “This could be so much easier if… ?”, or
- “Why was I trained to do this task this way, it doesn’t make any sense?”, or
- “Who decided it would be a good idea to do things this way?”
Processes are designed and defined to accomplish a task, but, over time, as systems, technologies, and people change, the processes are not updated to reflect new norms. Thus, workarounds AKA “Band-Aids” are created as a way for people to bridge the old with the new. Eventually, people get so caught up with workarounds that no real work gets done. In other words, “Band-Aids” are highly inefficient and can even be detrimental to the operations of an organization. They are only meant to be a temporary solution that address an acute pain, but never really solve an underlying root cause. Unfortunately, “Band-Aids” often become part of the process.
As an example, we worked with a client to map and understand tier one supplier spend in an effort to improve the cost cost structure of their supply chain. Sounds like a simple enough exercise, except for the competing definition of Cost in the engineering, purchasing, and accounting functions. Over time, each group had figured out different tricks to adjust for other groups’ cost calculations in order reflect each other group’s numbers. The tricks had become so ingrained that analysts were taught to make the adjustments based on who was asking for the report.
Additionally, the patchwork of “Band-Aids” created huge inefficiencies and confusion in communication. There was additional paperwork, irrelevant quality controls to validate the numbers, and individuals dedicated to ensure the workaround performed smoothly. Agreeing on one number required weeks of effort, when it could have just been a simple calculation done in a matter of minutes.
Ideally, one standard definition of Cost could have saved this client time and money, but peeling away the “Band-Aids” was much too painful. Does your organization tolerate practicing old and costly habits rather than peeling away the workarounds to streamline critical business processes?
First of all, congratulations. Growing pains are natural and these issues mean the organization is most likely over capacity. Now would be a good time to take a moment to celebrate the accomplishments achieved thus far, because the next phase is going to present an entirely new set of challenges.
From recent history, American Giant’s “catastrophic success” comes to mind. This clothing manufacturer’s hooded sweatshirt went from obscure to must-have overnight and, as a result, many customers were left waiting for months to have their orders filled. Their explosive success tested customer patience and left the online retailer scrambling to ramp up production in order to satisfy the surge in demand. To American Giant’s credit, there were plans in place to steadily scale up production and growth, but nobody expected for their hoodies to catch on as quickly as we all now know.
Do you personally have an appetite for growth?
- A business that used to be fun when it was just a small team may not be so fun after new people are added. What was once a great work place with a fun culture could become a dreary place to field complaints.
- More oversight will be required since there will be more stakeholders involved. Do you have the patience for working through business problems in addition to technical problems?
Things to look out for when deciding to grow:
- Are there standards in place to ensure consistency of products and services?
- How dependent is the growth on a few key individuals? These people are potential bottlenecks and must be willing to learn to delegate.
- What capital requirements are needed to fund acquisition of additional equipment, hire and train additional people, lease more office space, maintain stable cash flow?
- Vendor agreements must to be reviewed if your product/service depends on their ability to support your growth.
Looping back to this article’s title, it is important to define what “quality” means to you and your customer – then identify reasonable metrics that can monitor the product or service on a continual basis. The metrics don’t have to be fancy, but the more relevant they are to a specific product or service, the easier it will be to respond when things go awry. Here are a few examples of metrics that we have used:
- Reactive product quality metric: Has there been a statistically significant increase in customer returns reporting a defect?
- Proactive product quality metric: Are suppliers providing materials that meet our customer’s requirements?
- Reactive service quality metric: Has there been an increase in the instances of having to expedite orders?
- Proactive service quality metric: Has there been sufficient training for our people?
Notice how these measurements come in two flavors: reactive and proactive. Reactive metrics report issues after-the-fact. Meaning, the damage has already been done and steps will need to be taken to fix a problem for the customer. Proactive metrics can alert you when things may cause downstream troubles and corrective action can be taken before the customer is ever involved. Though proactive metrics are much more difficult to identify and control, the shift from reactive to proactive metrics is important to sustaining steady growth.