Business Process Optimization
How the average US business operates only at 51% of their true potential
Have you ever felt that your business could do better? That it could operate on a higher level and increase profits while minimizing headaches? That you lack business process optimization? It may not be your imagination.
According to statistics collected by the US Bureau Of Economic Analysis the average business in the US operates at about 51% productivity. That’s an astonishing 49% lack of productivity.
The formulas for calculating productivity can be quite complex. However, in order to simplify our discussion we can think about productivity not as the amount of hours worked or time invested in business activities, but as results. To clarify this point let’s look at a hypothetical example:
| Total Jobs Completed | Total Hours Worked | Total Net Income | |
| Company A | 8 | 50 | $100,000 |
| Company B | 10 | 90 | $100,000 |
Assuming these businesses operate in the same industry, under the same conditions, we can see that Business B has put in more hours than Business A. However, productivity-wise, Business A is far superior, having achieved the same income, for a lower number of jobs in close to half the time. In other words, when we talk about productivity we are analyzing the time and effort invested versus the profits gained.
This is somewhat of a simplification, but it helps us get started.
Low productivity can be due to many factors, some which are brought on by the economy or market. However, as we’ll explore in this paper, this lack of productivity can generally be attributed to a lack of efficiency. It closely resembles “death by a thousands cuts” in the business arena.
Changing optics and looking at this issue from a different perspective makes us realize that any increase in efficiency could have a huge impact on an organization and increase the bottom line. Not only that, but it would lighten workloads, improve office morale and create a much more positive company outlook. But first…
Why Is This Happening?
There are a variety of challenges across many industries that must be solved in order for the business run as optimized as possible. Having said that, many efficiency issues are common across almost all industries. Even though these are serious issues they’re usually overlooked. This can cause major damage, or loss in productivity, if not identified and dealt with. The problem is that most of these issues seem simple on the surface and therefore businesses often neglect them. This willful ignorance is paid for with loss of profits and tremendous turmoil in the organization.
In this paper we will attempt to give you a clear understanding of the basics so you can start dealing with these issues, mitigate the damage and increase your efficiency. As you read through, you may find yourself thinking “Well, this makes sense and it’s very basic. It’s almost like breathing. So how is it possible to that most businesses forget to breathe?” Keep reading until the end where we tackle the main reasons why businesses miss the boat on these crucial issues.
Client Communications
The one thing that all businesses have in common is CLIENTS. Doesn’t matter if those clients are other businesses or off the street customers. Doesn’t matter if you’re providing services or a product. If you run a business you have clients.
Right in the middle, between the business and the client, you have the transaction. This is the whole point of the relationship between the customer and you.
Whether you are selling the client a pair of shoes or representing them as an attorney, you are essentially entering a business deal with them. As such, this deal must be accomplished with communication. Online, through a phone call, email or maybe even a live visit, communication is the pipeline that facilitates the transaction. Essentially this is a “We will perform this service in return for this compensation”, or “we will sell you this item for a payment of x dollars”.
Unfortunately business deals are never that simple. For example: you can sell a client service “A” but the client thought they were getting “A + B”. This can lead to increased workload as the business struggles to fix the issue or decreased customer satisfaction because the client feels they didn’t get what they were promised. This simple example illustrates the importance of communications. It is paramount to running a business efficiently.
Here are a few top complaints that customers have. See if you can spot the communication thread that runs through all of them.
Customers view the business in a negative light when:
1) They get contradicting information from different members of the organization.
For example: they call Tom from your team who tells them everything will be done in two weeks. A few days later they call in to get an update, speak to Mike who tells them that it will take at least month.
2) They are told one price and then presented a different price, usually higher, later on.
Example: A customer calls and asks you for a quote. You give the quote as $7,500. Client calls back a few minutes later furious because they came across an email you sent a few days ago where the quote was only $5,000.
3) They have to repeat their problem when they call in and speak to a different person, or sometimes even the same person.
For example: A client has a complicated issue that affects his business with you. He calls in and speaks to David. After a very long and complicated discussion that requires much research, David and the customer come up with a solution that will work. A few days later the client calls back but he speaks to Jessica who is completely unaware of the situation. In order to clarify things the client must waste time rehashing everything and bring Jessica up to speed. In a rather ironic twist, instead of the client getting updates, the client is actually the one updating Jessica on what is going on within her own organization.
Studies show there is a direct correlation between customer frustration and return business. As frustration increases the chances for return or continued business decrease.
The examples above can be extrapolated onto any organization. Almost all businesses have experienced something similar. Maybe the customer did not get his item on time, or maybe it was not as agreed upon. Maybe the service you provided was not done as they expected or when they expected.
This is not to say that the customer, or you, is correct. Rather the issue is the lack of proper communication.
Data shows that new customers are especially inclined to stop doing business with a company that has communication problems.
But it doesn’t take a study to tell you what you already know. If you were to do business with a brand new company and they would give you conflicting answers and always seem unprepared, you’d probably pull out of that deal quickly before more damage is done.
This loss, especially with new customers, sometimes old ones too, takes the form of refunds or loss of potential business. The client goes somewhere else in search of a company that seems more able to perform the service or deliver the product.
Team Communications
While client communications occupy an important role in the communications hierarchy, team communications can sometimes be just as important. In fact team communications can create more problems than client communications.
Let’s look at the unique challenges team communications present in the context of a business process optimization.
The purpose of internal team communications is mainly to help complete a task for the client or the business itself. From making sure the job gets done on time and on budget, to creating a new product or dealing with fulfillment issues, it’s all about communications within your organization.
One of the biggest symptoms of bad communication is tasks left in limbo. As tasks pass through the “conveyor belt” that processes things in your organization they might change hands many times. Once “step A” has been completed by Mike, Jane needs to take over for “step B”. But what happens when Jane has to kick back the task because she has an issue? What if Mike says that everything is good and then gives it back to Jane? You can easily see, in such scenarios, how tasks fall between the cracks as Mike thinks Jane is on top of it while Jane thinks Mike is the one handling it.
Another symptom of communication issues is time wasted. In the example we’ve just mentioned, the issue seems to affect only Mike and Jane. But what if there is a “step C” needed in order to complete the job and Kenny is the one that takes care of it. Now Kenny is waiting around for the task to arrive on his desks, completely unaware that the task is actually lost in limbo. In this case we have a third person that is affected by poor communications.
These examples are only the tip of the iceberg. Just about every organization has examples where lack of communication results in lack of productivity.
The Pipeline
Another potential productivity quagmire happens when work must be delegated to a second party or managed by a third party. Let’s take a look at the problems brought on by the pipeline.
So what’s the “Pipeline”?
A “pipeline” can be best thought of as the procedure or methods by which you accomplish your tasks. Changes to the pipeline can have quantum effects on results, for better or worse. One of the most famous examples of a brilliant pipeline that yielded mega-success and changed the world is Henry Ford’s assembly line. The assembly line was a carefully tailored and orchestrated pipeline that took automotive production to new heights. Due to its efficiency it allowed for lower production costs and higher turnout.
Looking back it’s easy to see what Ford did right. He took the methodical but discombobulated process of assembling a car, which everyone was doing at that time, and made it more linear.
Finding the right pipeline for a business is crucial. Time and effort is wasted by a poorly conceived pipeline.
Here is an example of a flawed pipeline. Mike takes care of “part A” of a process. He talks in great detail to the client and then completes “part A” based on this discussion. He then passes his work to Jane to complete “part B” of the process. The issue arises when Jane is unable to complete “part B” of the process because she needs granular information from what the client said. She contacts Mike and asks for more details on what he discussed with the customer. Right here, we have our fist pipeline “leak”. Instead of being able to continue her work, she needs Mike’s input. Not only that but now Mike is also stopping his work in order to talk to Jane. Jane finishes “part B” and hands it off back to Mike for “part C”. The only problem is that the work Jane did, while it satisfies the criteria for “part B”, it takes the project in a different direction than the one Mike discussed with the client. Now Mike must either ask Jane to change her work or go back to the client and ask if this new direction is satisfactory and meets their needs.
We can adapt the example above to fit almost any organization. As such, it becomes easy to see how a poor pipeline can create problems, waste time and in the end affect the bottom line.
Overseeing
Overseeing is the act of managing tasks. While the term may imply plurality, such as a manager overseeing many team members, it can also apply in the singular. For example: an employee overseeing their own tasks.
Inefficiency in overseeing can usually be reduced to a few factors:
1) Lack of guidance. This means that the person overseeing the tasks is not clear on what exactly they are supposed to look for, how to deal with issues that arise or the best way to setup tasks so as to pro-actively avoid problems down the line.
2) Lack of tools. This means the person overseeing the tasks doesn’t have the tools necessary at his disposal to perform their duties well.
3) Bottlenecks in responsibility. This means that the person overseeing does not posses the necessary privileges in dealing with issues. Alternatively this can mean that they are handling too broad a responsibility which precludes them from getting more granular and dealing with problems.
There can be other factors but the ones illustrated above are usually the most common.
Delegation
Any time a tasks changes hands there is sure to be some inefficiency. This is especially true in tasks where the baton must be handed to the next in line. If you’ve ever looked at baton races, where one runner hands off the baton to the next, you may have noticed something a bit strange. The next person starts running even before he gets the baton. They get up to speed, match the baton holder, and only then the baton exchange takes place. There’s a few reasons for this:
1) It doesn’t slow down the original holder so no speed is lost in the transfer.
2) The transfer is more smooth and secure. After all it’s harder to hand off a baton to someone standing still. It’s much easier to hand off the baton to someone that is running along with you.
Unfortunately in business, most of the time, the baton receiver gets a cold start. This results in time lost and issues with the task that happen in the transfer or delegation (think of a dropped baton).
Another problem is unclear and imprecise delegation protocols. If there is no clear and comprehensive threshold for the delegation to take place, then the whole process can be jeopardized. Without defined goals for part A of a process, Mike can hand off the task to Jane but she may have to put it on hold or come back to Mike for further clarifications. Here’s a simple task delegation example that anyone can understand: you have to move your car but because you’re busy, you delegate the job to your friend. However, you forget to give your friend the car keys. The baton was dropped when delegating.
Time Management
No business process optimization analysis can be complete without taking time into account. Many businesses are quite deficient when it comes to time management. Even big companies whose name is familiar to almost everyone, can suffer from lack of time management. This is evident, for example, when customer service says they’ll call you back tomorrow and yet the day passes and you get no callback. People constantly miss appointments, deadlines and other time sensitive actions.
This is usually the result of two things:
1) Unrealistic planning. This happens when the business sets goals that cannot be met. For example telling a customer they will have a response within 24 hours when in reality it takes at least 72 hours.
2) Failure to set appointments. This is a lack keeping meticulous track of appointments and putting them in tool or system that not only shows them but correlates them to the business or tasks required.
Intersectionality
It should be noted that none of the subjects mentioned above exist in a vacuum. Productivity can be affected by one or more issues and in many cases a combination of them. Therefore these issues in business process optimization often overlap which can increase the negative effects exponentially. Take for example the case of a task bouncing back and forth. It may have started because of a flawed pipeline which makes things harder to process and more prone to error, but it’s amplified by communication issues which create even more inefficiency.
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Why Business Process Optimization Is Usually Not Addressed
It has become pretty clear by now that all the problems we’ve discussed have a major impact on productivity and therefore the wellbeing of your business. So how it is possible that they are so neglected? What makes organizations ignore them while their productivity nose-dives? Here are some major reasons:
Familiarity Breeds Contempt
Almost all of the issues discussed in this white paper are familiar to any organization. However this is also their downfall. Because these issues are so ubiquitous they are taken for granted. They are minimized and given less importance. This is partially the result of the “inside the bubble” effect. If you are exposed to certain issues day in and day out you might become “numb” to them. It’s sometimes hard to notice a problem from the same perspective. You may need to develop a special skillset or frame of mind in order to track and resolve the issue. This is because while the subject itself is simple, the application of it can be quite complex… and this brings us to our next point:
The Simple Yet Complex Dilemma
On the surface these issues are simple to understand. However, when trying to identify and mitigate the problems as they apply to an actual organization things start to get complex real fast. This “simple yet complex” paradox makes tackling issues uncomfortable for most decision-makers. Nobody wants to be the first to open “Pandora’s box” because once opened, it takes time and work to fix things. This addresses our next point:
The Vicious Time circle
Poor business practices create more work than needed. They create more problems. This in turn takes away from the very time that could be spent trying to address the issues we’ve discussed. In other words it takes time to fix productivity issues, time which most businesses don’t have because of the lack of productivity. If a productive business finishes a task in 10 hours, then an unproductive business might take 17 hours on the same task. The productive business has an extra 7 hours which they can use for more business, or to analyze and solve even more productivity issues. The unproductive business on the other hand is already at a deficit and is usually playing catch-up. And so the vicious circle continues. The business that needs to address productivity issues the most is the one that finds the least amount of time to do it.
