Innovations, improvement workgroups, continuous improvement, SCRUM and process optimizations. We spend a lot of time trying to save time and effort in our processes and infrastructure to improve operational efficiency and profit. In this time of continuing automation and increasing demands on our precision and flexibility, we are seduced into launching improvement project and improvement project to keep ahead of the competition long enough to come on top.
But when you want to build for the future, and safeguard continuity, you cannot sacrifice flesh for bone. You may decide to cut costs, demand more from your people and starve your business processes, but after some time you are going to deal irreparable damage to your business’ vitality and growth. You have sacrificed your long-term growth and prospertity for your ability to stay ahead of the market in short term.
If you want to avoid the potentially devastating effects of this, you need to determine some basic truths about your company and its structure.
What are the concrete goals for your organization?
The first step is to make an honest and lean definition of when you consider your team or company to be successful. Be honest in what are the requirements for the company or team’s survival in the long term, and consider everything beyond that your “stretch goals”. Even if you put up higher targets to reach further growth and expanding your market share, the first target starts with you.
You may find that your team’s survival depends on far less work and achievement than you might consider, allowing you to dedicate more time and attention on the actual improvements, rather than trying to cut costs to improve the bottom line alone.
If your goals are particularly complex, it serves to cut them into smaller pieces and set specific goals per department/team or separate process. For example, if you are a printing company who makes both booklets and full-size posters, you might have two separate sets of targets. Each then also comes with its own skills, market insights and processes to consider.
Knowledge of business is a key requirement here. Know what revenue, margin, profit and profit after taxes means, even if you don’t deal with the money side of things yourself. Know that a cost can be withdrawn from revenue before the taxes look at it, so for companies a cost is not necessarily a bad thing – it gives them means to work with, and part of it is effectively refunded by the taxes. In fact a large investment, often in capital, can be deducted from revenue over several years, providing benefits there over a longer time. Knowing what this does for a company can help you set better financial goals.
I will make a post in the future about how a business operates and how cost, revenue and profit work together, and show that entrepreneurship does start with having your own company, but realizing that costs are not bad, and profits are not always good.
How do you interpret the required skills to meet these goals?
In order to be able to meet those goals you have to find a suitable language to describe those goals in. As always, it becomes important to make them SMART: Specific, Measurable, Actionable, Realistic and Time-related.
In this context, the time should probably be annual, based on your book year. This will allow you to measure the results at a time when you already have your financial teams working on closing the books and getting the results. They need to be specific, so make sure that you set goals that affect only your team or company, and are based on things they can do, not external factors. Make sure they are realistic, so stick to those minimum “viable results” we spoke of before, and consider everything else a stretch goal. If the goals are set in a way that finance can measure, this is great. Then comes the “actionable” part, which is where the next paragraph comes in.
An example of this can then be: “The next year our company needs to break even between costs and profit after tax as measured by the annual report. To do so, we need to cut our costs by 10% over the year, by performing improvements to our processes and people that do not impact our productivity negatively. In this process, no staff may be dismissed and redundancies must be covered by restaffing.” which is a key definition of minimum survival for most companies.
Can you make these goals with your current team and skill set?
Once your goals are clear it’s time to see if you are capable of reaching these goals with your current team and available skill set. At the most basic level this comes down to comparing people’s performance with the job requirements that are set. Do your team members meet this level, or might they need training or refresher courses in order to bring their skill levels up to the required minima?
So if in the aforementioned example costs are an issue, and you’ve been thinking about cutting costs, consider instead how you could use your funding more efficiently. Are you spending a lot of money on externals, hired on to do rush-jobs to cover for skills that your team doesn’t have. And when the pressure goes down, do you release those people, but don’t make good on adding those skills to your existing team members? Then that is a classic example of a circular money-spending exercise that is resolvable.
A skill is needed, but only at crunch time. So people have a tendency to forget it in day-to-day operations until the crunch hits. Then, that skill becomes critical, and hiring someone to do it is often twice or more as expensive as someone in your team being trained for that. Not only that, but you could add more value and appreciation to your current team, so it’s win-win to invest here instead.
Even if this expenditure might seem small, they happen a lot and they add up. Especially in small companies, this can mean several percentage points worth of profit being lost annually.
One aspect of staff capability is whether or not they meet the minimum demands of their job descriptions, but do keep in mind that their productivity may increase dramatically with additional training and experience. So when you consider their training, be prepared to set goals for their continuous improvement after your minimum acceptable standards have been met. To meet your stretch goals, additional coaching, education or upskilling might be required.
Are my processes supporting or improving my ability to make my goals?
If you don’t already have descriptions of the processes at work within your team or company, at least understand the actions that are taken, who does what, and at what points approvals or quality checks come into play. Set these out on a timeline, so you have a rough overview of the tasks at work at any stage during the process cycle.
Then you can talk to people about their roles in this process, check that this cycle indeed works the way you have visualized it, and ask them openly about any problems or blockers that may hinder this process, and things that they are doing for which there is no reason.
You may be surprised how often things move in circular fashion or have dead ends. Approvals that require other approvals are one example, or critical actions that can only be performed by a staff member who’s working part-time. Or a digital process running through the servers of another company, only to return back into your systems at a later point, requiring data conversion along the way. In such cases, the original purpose of those process steps were forgotten or lost, but kept because it was simply part of the process. Those are the kinds of inefficiencies that are easy (and thankful!) to spot and take action on.
In a real-life example I once worked at a warehouse years ago, where the team goal was to finish off orders within a set time of receiving them. The pressure was high, and people often had to skip breaks to make them, which led to a lot of turnover in the staff. The reason for this high pressure was to make sure orders were delivered on time, but the goal had not been changed by a decade, and meanwhile delivery companies had been modernized and upscaled. There was no longer a need for the goal to be this strict for the company to meet its delivery standards. People were being worn out to perform consistently ahead of schedule. If we had reduced the goal to an acceptable, modern standard, turnover rates would have dropped and team happiness increased.
Am I forgetting myself?
One key staff member is often forgotten by management: themselves.
You too are in need of development, and even if your performance seems on the level, you have to remain watchful for complacency or running behind on your skill levels due to focusing too much on others, or the “daily business”. As leader and manager you are a critical component in the machine that is your team, and failing to increase your own skill does a disservice not only to you, but your team as well!
Don’t be led only by your performance reviews, if you have them. Talk regularly with your team members during informal check-ins, and spend the effort to create a safe atmosphere where people are able and willing to share information that they might keep to themselves normally, perhaps for fear of reprisal, feeling disempowered or “it not being their place to say”. This information can include hints to your own performance, and you should take such feedback to heart and work on your own advancement.
Being a leader means that you are always at the head of the movement, that you have to be knowledgeable and prepared to meet the demands of your team or company. This is part art and part science, and you need to pay equal attention to each. Education, coaching, feedback, the stories and anecdotes of peers, but also recharing yourself with rest and vacation all serve to keep you in good health and mental shape. Don’t neglect yourself in the process of improving your team!