Does your company have resource leaks?  Are there areas in the company where money could be saved, or profit be improved?  Is poor productivity causing issues with client or customer delivery, or increasing expenses?

How do you identify and resolve those issues?

If you are like many business owners, you started your company from the ground up and expanded your team to meet the needs of the company or the market.  At the end of the day, the goal is to sell more stuff to more people or companies.    While this is great, how it is being done could make the difference between being highly successful and struggling.

Only about 25% of businesses reach revenues north of $250k (you can check some other interesting stats here).  You would think that a service-based company with that revenue would be doing pretty well.  But inefficiencies and leaks in the company along with an ineffective pricing strategy caused the company and its leadership to struggle for many years.

Here are some of the things that we found during discovery:

Inefficient Systems:

Inefficient systems are those wherein the costs or steps to produce a result are higher than they need to be. Most importantly, there needs to be a way to track productivity to determine how efficient the systems are.  In this company, we found:

• Team members were entering the same information into different systems.
• The wrong tools or resources were being used to complete a task.
• “Dead zones” in data capture (meaning that there were steps that should have been tracked in order to track productivity that weren’t being tracked).

Nonexistent, ineffective or unfollowed processes:

Processes ensure that people do the same things the same way and also act as training and resources which employees will use to do their jobs.  This company suffered from

• Not having all of the processes documented, which meant that people basically did what they saw fit in order to complete a task.
• Processes that should have been updated due to changes in software or standards that weren’t updated, essentially due to not having a process to update the processes.
• Processes that simply weren’t being followed either because team members were too lazy, didn’t understand the process, or felt that their way was better.

This resulted in disorganization and inconsistency across the organization, sub-par client delivery, overtime requirements to get the work done, and lower morale.

Nonexistent, ineffective or unfollowed metrics:

Luis Almanza, Ingrid Ahumada and I discussed how “You can’t track what you don’t measure,” wherein businesses cannot improve performance if they don’t measure it.  Business owners will make assumptions, but it is data that will provide the ultimate truth.

This company was not effectively tracking anything.

• Everything was based on “gut feelings” and the thought of the moment.
• Leadership decision-making simply wasn’t reliable because there was not data.
• There were decisions that would probably have been made differently or at least more confidently had the data been in place.

The company was hanging onto existence by a thread.  It was so desperate that it held on to clients that were unprofitable, did not charge enough for their work, allowed team members to charge too much on projects, missed deadlines without accountability, and allowed business expenses to get out of control. Further, there was no definitive measure of progress.

Ineffective hierarchy:

When we think about hierarchy, we don’t always think about it in terms of efficiency from a bottom-up approach. But that view is extremely important.  Because of this company’s ineffective hierarchy:

• Team members were not being trained properly. Instead, they got an overview of their work and then were on their own to do the best that they could.
• There were no resources to go to for guidance and assistance when they had questions about a particular assignment, so they didn’t have the confidence that the work that was being done was the level of work that was expected.
• There was inconsistency in direction from different managers, so one month they would ask one manager what was expected of them. Then later, asking another manager the same question, they got a different response.
• They were failing to optimize team members based on their skills and interests, so people just did their job as a job. They weren’t committed to the company, and thus had lower productivity in their role.

Here is an article called 7 Types of Organizational Charts that may be helpful in designing your company’s structure.

General disorganization: The disorganized organization is by far the most prevalent issue that I see with growing companies, especially as they experience rapid growth.

While there was a plethora of issues, those below stand out as ones that impaired the company:

• Job overlap – multiple roles assigned to the same task or team members performing other team members’ work.
• Job gaps – the opposite – where no one specific role is responsible for a particular step. “Someone” usually steps in and does the work, but if no one realizes that it isn’t done, then it simply doesn’t get done.
• Inconsistent Procedures – procedures are what makes for effective business operations. If people are doing things the way that they see fit, there is a good chance that they are going to do things differently. Then when someone new joins, they will likely follow the same non-procedures.
• Final product – the expectation of the final delivery is not the same as what the actual delivered product is, which means that there will be some rework or a less-than-optimal customer experience.
• Data management – each team member has their own method and procedure for managing data: Some download the data to their company and only upload it to a shared location when they feel it is complete, or the filing system in general is not consistent, making it more difficult for other team members to find data.
• Poor / inconsistent communication – many issues can be resolved simply by having regular, effective communications with other team members. When communication is lacking, assumptions are made which may lead to sub-optimal results.

While no company sets out to be inefficient nor wants to have resource links, if a company does not plan for it, there are going to be resource leaks which will cost the company time, money, and productivity. It can also result in a poorer company culture, lower profits, and poor customer experiences.

Establishing systems, processes and procedures, and measuring performance should be done very early in the business evolution and simply be part of the company culture.  It should certainly be planned for as the company looks at opportunities to grow.  (Take a look at our article “Designing BizOps to Support Rapid Growth”.) Otherwise, companies will be even less likely to reach operating income levels north of $250k.

Aepiphanni is a Business Consultancy that provides Advisory, Management Consulting and Managed Services to business leaders and entrepreneurs seeking to improve or expand operations. We are the trusted advisor to those seeking forward-thinking operational and strategic solutions to help them plan for and navigate through the challenges of business growth. Learn more about us at https://aepiphanni.com or register for a complimentary discovery session at http://coffeeandaconsult.com.