Many small business owners are accustomed to the idea of a restricted budget, a small staff and not a lot of wiggle room. Nonetheless, streamlining the organizational structure can help companies save on resources without sacrificing efficiencies or service. The business owners’ perception is that it’s always been done in a certain way (format), making the change unnecessary. Hence, business owners today burden their business by checklists for every task, difficult-to-use business formats that complicate processes and hamper operations.
For achieving a streamlined business process, business owners create formats the way in which work or task is arranged or set out. Also, supporting checklists are created as a list of items required, things to be done, or points to be considered to perform certain tasks in a defined format.
According to market research firm IDC, companies lose 20 to 30 percent in revenue every year due to inefficiencies. And yet, many companies continue to “make do” with their current process even though those may not be the right solutions. Unfortunately, companies will often repurpose or redesignate one of these systems for a task which has probably low usage for the project, ‘imagine using a knife to cut a tree’, but is still not the right tool for the job. Sooner or later, that misapplication is likely to cause a problem. The consequences for using out-dated business format solutions can be multi-faceted and ultimately damaging to a company’s bottom line.
Here are few common problems that are expected to erode companies in nearly every industry due to inefficient or out-dated business processes having formats and checklists according to those out-dated processes.
1. Cross department functionality
Regardless of what industry you are in, or the type of customers you serve, the challenge of managing process flow and operations across departments and systems is universal. Combining tedious manual tasks along with pre-defined formats with the dependency that company departments have on a smooth daily workflow makes it virtually impossible to maintain any kind of competitive advantage. Yet, this is how most companies operate.
There have been studies done on the effect departments have on efficiency within certain industries. And the general conclusion has been that departments eat up a huge amount of resources, particularly in terms of interdepartmental collaboration. One noteworthy example referenced by author Gillian Tett in her book, “The Effect was Sony”, whose successful PlayStation department jealously guarded its independence, even as the company’s then-new CEO, Howard Stringer, tried to break down cross department non visibility effect.
One of the ways companies can successfully break down work cross department functionality is to provide mechanisms to achieve transparency and openness. Companies may want to consider a single system of record to achieve transparency, streamline communications and manage performance.
Companies can build highly successful systems of record that keeps everyone and everything connected, an organization is vulnerable to the common issues that impact distributed teams even if formats and processes are defined for departments.
2. Poor systems integration
The growth of automation has led to more systems and solutions being in place than ever before, each requiring a set of processes to enable its successful use. Without a standardized solution that streamlines processes, employees are forced to continuously shift between different sources of information, resulting in productivity issues which in turns leads to hiring more employees which eventually adds to the company cost.
According to an IDC survey, “The Document Disconnect”, over 80 percent of business leaders surveyed from sales, HR, procurement and other departments agreed that problems “arise because they have different internal systems/applications that don’t ‘talk’ to each other,” while 43 percent of workers surveyed said they often have to copy/paste or re-enter information.
Automation saves time and money by replacing manually initiated processes with software that reduces errors, enhances your work and process flow, while lowering expenses and improving efficiency across the board. Rather than continuing to rely on disparate, legacy, and outdated systems, modernizing your IT environment allows you to streamline communications, while gaining more automation, control, and visibility, which strengthen those partner relationships. A centralized platform comes pre-loaded with application, SaaS, and B2B/EDI integration connectors to power an enterprise, whether it’s on premise or in the cloud. The right solution allows you to customize and integrate applications to suit your business needs without any additional scripting.
Just because a process has been executed one way for a long time doesn’t necessarily make it the best option. Often, companies will overlook sources of process slowdowns because of their lack of visibility and inability to understand the impact of a bottleneck.
These bottlenecks are sometimes the result of not adapting to new processes, formats, systems and technologies. Regardless of the reason, process hurdles can cause major slowdowns, with far-reaching financial impacts.
General Electric reported that just a 1 percent improvement in oil recovery was worth 80 billion additional barrels per year, the equivalent of billions of dollars in additional revenue. Another GE finding, Avoiding just one day of down-time on an offshore platform can prevent $7 million per day in lost production.
Adapting to new processes with accordingly prepared formats for reporting and work visibility, being open to new systems is the best way to improve processes. Be aware of a process that seems to be slowing down your business and actively pursue a way to improve it.
Another common problem for companies of all sizes is process duplication. Repeating steps dilutes the quality of a process and confuses those who execute the steps. This is commonly seen when there is a lack of departmental collaboration, or processes have been adapted in a less-than-systematic way. It occurs when employers reduce their workforce because a position is no longer required. It is only redundancy if that particular position disappears. If somebody is dismissed and his or her post is filled by another person, that is not redundancy. Most small or medium businesses are hyper sensitive to the swings of the economy. When the revenue line falls, most businesses naturally turn to the cost line. But in most small or medium businesses the biggest cost is staff; and as an owner operator you have spent long periods building up the skills and rapport with staff who know your business. If you let them go, it will be hard to get them back when growth returns.
The redundancy process is different depending on the size of the business and the number of employees that are being made redundant. Making staff redundant in small and micro businesses (e.g. businesses between 1 and 50 employees with a turnover below ₹ 100 crores) is not an easy task, but might be necessary for the survival of the business.
Improving departmental collaboration can bring major benefits. Company will be able to manage and improve its process flow by eliminating non-value-added activities. These included wasted time, wasted movement, wasted inventory due to overproduction, customer delays, waits for approvals, delays due to batching of work, unnecessary steps, duplication of effort and errors and rework.
5. Lack of insights
Even when companies have the right business intelligence information available, the right formats and checklists for movement of tasks, it may be inaccessible or reported with errors due to a lack of real-time data. Leaders who don’t have the most relevant insights at their fingertips are less likely to make smart choices.
If a leader doesn’t know exactly how you’re progressing (for example, where in the given initiative tasks are stalled, how cycle times are being impacted, whether the time line is being adhered to or whether a task is in the red or the black), it’s difficult to competently prioritize activities.
Oil and gas companies are an example of what can be gained by using real-time data analysis. They generate massive volumes of data from wells and sensors on their equipment and other assets they have already deployed. Concurrently, drillers and maintenance staff add to this volume by documenting their observations and the issues that concern them.
Real time data analysis for massive volume of data being generated and document the observations and the issues that are of concern. However, this potentially valuable data is often inaccessible or difficult to analyse because it’s in a text format or locked away in data of different departments.
6. Loss of operational performance
Without a complete understanding of all components of the business, executives lose the ability to identify critical weaknesses and plan for predictable growth. Simply put, they cannot remain reactive to operational vulnerabilities or mitigate the complexities of running a business in a global economy. Ultimately, a lack of process visibility leads to the assumption of greater risk, a loss of stakeholder trust and less growth.
“The crux of inefficiencies of work come down to lack of clarity,” says Justin Rosenstein, co-founder of San Francisco-based collaborative software company Asana. When 70 to 80 percent of your day is spent doing work about work (multiple meetings, endless e-mails) instead of doing actual work, that’s a problem, he says.
Processes that connect suppliers, customers and assets are creating unique efficiencies and customer value. From connecting machines on the shop floor to connecting data from different asset vendors, operations in the new digital economy using information to inspire new processes. Those processes, in turn, help close the gaps between companies and their customers. And that leads to a more positive bottom line. For this to happen, there must be clarity of purpose, clarity of plan, and clarity of responsibility among the stakeholders and departments of the organization.
The combination of rapid changes taking place in SME sector and major differences calls for a system with centralized coordination and decentralized, distributed management and control. To remain responsive to customers, SMEs must have the ability to implement change and deliver services in the most effective, efficient way for the demands of their local customers.