In good times, executives can make small changes to enhance their business model. Most don’t feel the need to do an overhaul, a major restructuring programme or a complete revamp of the business model. In good times, executives focus more on capturing and servicing new business, than they do on their business model.
Robert Kaplan talks about how in growth times, people become very exuberant – recruiting customers, launching products and spending widely. Sustained growth hides negative economic fundamentals such as unprofitable relationships, and products. It’s only when the tide goes out, when recession hits, that the true cost of doing business becomes exposed. “You find yourself with a bunch of unprofitable customer relationships, products and delivery channels.”
Then companies slash and cut costs. To Kaplan, this cost-cutting frenzy is like taking a meat cleaver to yourself to remove some fat. This action removes valuable muscle and leaves the business so badly damaged that in some cases it may not recover.
In recent times, operational efficiency for some companies has meant the difference between survival and failure. Companies can no longer afford to carry inefficiencies in terms of how a product or service production, customer service delivery or distribution effectiveness. That means that instead of incremental changes; major changes to operations have to be made. This time the question is: How do you make sweeping changes to operations without damaging the fabric of the business?
Fiona Flynn, Sales Director, Staff Balance says that there are 7 core questions that you need to ask about operations, before you take an axe to operating costs. “Efficiency is measured in terms of time, cost and effort”, says Fiona. “The measure of an efficient automated system for example is the level of time it takes to produce the goods, the operating cost of the system and the level of human input required.
These 7 questions are drawn from StaffBalance work with corporate companies, helping them to identify and implement operational efficiencies while preserving the integrity of the business.
1. Are our people skilled up and delivering to maximum productivity levels? It is important to forensically understand who in the various operating areas is performing and working to full capacity and who is not. There was one particular team that we looked at, where a guy was earmarked for promotion and a girl of equivalent rank on the team was considered to be a non-performer. We conducted a review of the team’s productivity and even though she worked shorter hours than the rest of the team, the girl came out as the most productive person. Management were surprised to discover that the personable young man was the least productive person on the team. The reality was that the girl applied herself to her tasks efficiently, within a certain timeframe and that the guy applied himself more to profile building and affable interaction with management and colleagues.
2. What parts of our business could we outsource to deliver cost-efficiencies? Outsourcing non-core operational activities can result in significant savings for a company. Choose a reputable supplier and get feedback from their customers directly. Once well-defined service level agreements are adhered to and performance measurements are put in place, then this could be a way to save on management time, costs and effort.
3. What aspects of our operations can we automate? While it might seem perfectly obvious to automate routine transactions and customer interactions – there is still an enormous amount of paperwork and manual activity in most corporate organisations. Automation can be as simple and cost-effective as encouraging bill paying customers to use direct debit rather than sending costly, time-consuming cheques. Some organisations are even looking at closing retail branches and servicing low value customers over the phone or by internet. Relatively few people buy flights from an airline’s retail outlet these days – customers adapted well to the convenience of buying flights online.
4. What are the alternatives to meetings, meetings, meetings? Working with all sorts of corporate companies, we observe that physical meetings are the most time-consuming and least productive daily activity. They can be even more costly, when employees have to travel long distance to meet, invariably using up a day’s travel for meetings that last an hour or two. Where feasible, we encourage companies to introduce teleconferencing, web-conferencing, and video conferencing for meetings. Simply cutting down on the number of meetings works too.
5. Is centralised procurement an efficient option for us? Centralised purchasing from a range of preferred suppliers using online purchasing systems has been shown to reduce costs significantly. Third party suppliers are selected as a result of a competitive process and so costs are contained. Centralised purchasing helps to eliminate costly ad-hoc buying across the organisation. Installing an online purchasing system can lead to tighter management of purchasing, better cost analysis and it helps to simplify the supplier payment process.
6. Can we use staff capacity planning more effectively? Invariably some departments are busier than others. However, as work expands to meet the time allocated, it can be difficult to know which teams are under capacity. Staff capacity analysis and planning can provide tremendous insight into where there is capacity to take on more work, particularly at peak activity times.
7. Starting from scratch, how would we approach this market differently? If you believe that operations is costing too much relative to your business, then it may be time to rethink the way your business is structured and how it addresses customer needs. In the late-1990s, First Active became one of the first banks to operate without cash. This strategy freed up staff time to focus on customers that needed advice on mortgages and investments. Cash transactions were now catered for online. Cost of security and cash transport was wiped out. The bank saw profitability rise significantly.
Each of these 7 questions to consider about your operational efficiency can be identified, explored and addressed using software from StaffBalance. This inexpensive, online software has the tools to help you forensically analyse the operational aspects of your business, enabling you to make changes supported by factual data.
StaffBalance software is particularly useful when you want to make cost savings – by cutting the fat and not the muscle of the business. The results could surprise you. Investment in the software is recouped within three months of implementation.
