Operational inefficiencies manifest in different ways in organizations. Some are easy to spot while others are obscure and difficult to detect. Nonetheless, they consume resources and increase cost.
The following is a list of reasons why inefficiencies persist:
- Lack of commitment to review how work is performed and look for ways to be more effective and efficient.
- Quick to conclude that adding more staff would clear the bottleneck.
- Common misbelieve that technology is a panacea.
- Continue to pave the cow path.
- Failure to review adhoc fixes for adequacy as long-term solutions.
- Lack of incentives to innovate and improve.
- Focus on urgency rather than importance.
- Desire to protect jobs and turf.
- Lack of collaboration across departmental boundaries and external business partners.
- Unwillingness to make unpopular and tough decisions.
- Confusion on action appropriate for treating cause and effect.
- Use of performance metrics that drive the wrong behaviour.
- Lack of expertise.
- Lack of accountability to eliminate inefficiencies.
When business is good, inefficiencies are dealt with by adding staff to clear the backlog. During an economic slowdown, companies reduce staff and focus on doing the work necessary to serve the customers. The question then, when is a good time to deal with inefficiencies?
The impact of operational inefficiencies proliferates throughout the organization. Companies need to uncover and eliminate inefficiencies regularly and relentlessly. The root sources of the problem could be grouped into two categories: leadership and knowledge.
It takes commitment and leadership to place high priority on continual operational excellence. Elimination of operational inefficiencies introduces change. We love our comfort zone and tend to keep to our routines as they make things easier.
The majority of the reasons listed above are related to whether an organization sets a mandate to constantly review and consistently work on improving the way they perform work and serve their customers. In order to build a culture for operational excellence, there needs to be formal goals on performance objectives and, communication on operational strategy and tact so that every employee is clear on how he could contribute. This requires resource commitment through economic highs and lows.
In addition, you need to foster a receptiveness to change. This minimizes the tendency to associate a negative connotation with change and removes the fear of uncertainty. When employees don’t see change as a threat but betterment for their work, self-esteem and employee engagement raise the bar for performance.
A good place to start with operational improvement is employee feedback. Those who do the work every day has intimate knowledge on what works and what doesn’t. Tap into their expertise for ideas. Then, the ideas need to be vetted, cost and benefit assessed, and recommendations made to proceed. An important element to consider while going through the process is to consult and collaborate with colleagues involved in the upstream and downstream work. Look for innovative ways to build coherence and consistency. Any changes you make in one department are likely to affect associated work in other departments. Look beyond the obvious.
It takes objectivity to identify inefficiencies and impartiality to generate creative solutions that effect impactful results. Therefore, consult others in the industry, and bring in expertise you need to leverage best practices in other industries to develop an approach that works best for your company.
One of the critical success factors is to challenge the status quo. Complacency is your worst enemy. Keep the big picture in mind and communicate often.
In summary, financial success for a company comes from growth and well managed costs. Focusing on growth alone is not enough.