|
OPERATIONAL IMPROVEMENT
"You can either take action, or you can hang back and hope for a miracle. Miracles are great, but they are so unpredictable." (Peter Drucker)
As we work together, awareness of a need for improvement may come from any source:
- From the Monthly Financial Review we may identify opportunities and problems.
- From the Business Strategy there may be an intention to move the company in a particular direction and develop new capabilities.
- From Benchmarking we may identify a performance gap between the business and its competition which needs to be closed.
But whatever the source, the results is the same - it is necessary to make changes to the way that work is done within the company.
PROCESS IMPROVEMENT
If you think about what happens in your company you will see that people perform activities that link together in a process. Whether it's in the factory or office, one person's output becomes somebody else's input until the business achieves the work objective.
A typical process.
Just consider how one transaction may pass through a typical stock purchasing process:
- The stock controller identifies that stock is low and that more needs to be purchased.
- The stock controller completes a purchase requisition specifying what and how many needs to be purchased and passes it to the buyer.
- The buyer contacts a few suppliers and finds various combinations of price and delivery and selects one to place the order with.
- The order is keyed into the computer (by someone else?), printed, checked, signed (by the buyer or director?) and sent to the supplier.
- The supplier sends in an order acknowledgement which is checked to the original order and filed.
- The existing stock sells faster than expected causing a stock-out so the stock controller asks the buyer to chase delivery.
- The buyer rings up the supplier and is assured that delivery will be on time.
- The buyer reports this back to the stock controller.
- The stock controller tells Sales that the new supplies are expected in on schedule and Sales make promises to customers.
- The stock controller contacts the buyer when the delivery isn't received on the due date.
- The buyer contacts the supplier and complains. The buyer is told that the supplies haven't been delivered because the company has been put on stop because it is late paying invoices from three months ago.
- The buyer contacts Accounts and complains. He needs a cheque to be sent off tonight in the first class post.
- Accounts check and find that the big invoice isn't on the system.
- Accounts call the supplier and ask for a copy of the invoice to be faxed across.
- Accounts get the invoice and check it against the purchase order and goods received note. The invoice is passed to the buyer to be authorised.
- The buyer authorises the invoice but because of its size it needs to be counter-signed by a director.
- The invoice is passed to your secretary who is waiting for you to return from visiting a customer. But you are late back because of the traffic and your secretary has gone home before you return.
- A few days later Sales contact the stock controller because customers are complaining about not getting the deliveries promised.
- The stock controller contacts the buyer to find out what is happening.
- The buyer contacts the supplier and is told that the cheque still hasn't been received.
- The buyer contacts Accounts and is told that the invoice hasn't been authorised.
- Accounts contact your secretary who discovers that she forgot to ask you to sign the invoice.
- Your secretary gets you to approve the invoice and takes it back to Accounts.
- Accounts enter the invoice onto the computer system and raise a cheque which is taken back to your secretary to ask you to sign it.
- You sign the cheque and your secretary takes it back to Accounts who send it to the supplier.
- Accounts tell the buyer that the cheque has been posted.
- The buyer calls the supplier and tells them that the cheque is in the post and asks for a delivery to be arranged for tomorrow on trust. The supplier refuses and tells the buyer that the delivery will be made the day after the cheque is received.
- The buyer tells the stock controller that the goods should be received in three days time.
- The stock controller tells the sales staff.
- The sales staff apologise to the customers and promise that they will get their deliveries in four days time.
- The goods are delivered as promised and counted.
- QC checks the goods and notice a problem with some of them.
- ...............................
Is this a parody that is way off the mark or do you recognise that this type of thing really happens in your company? No wonder business can be such hard work. The worrying thing is that it could have been worse because in a number of places I assumed that things went right. But this example shows how high costs, delays and poor quality can be incurred by having badly designed processes.
The problem is that all the individual activities are performed by people who work in different departments and have different bosses but the performance of one activity has a direct effect on the results of another. Information has to pass between the different people involved and each has different responsibilities and time pressures.
Unfortunately in many companies, processes evolve over time bit by bit. It's not uncommon that no one understands the way that all the bits fit together. The entire process isn't the responsibility of any one person except the MD/business owner who bears ultimate responsibility for the whole company.
There were four people working in a company called Everybody, Somebody, Anybody and Nobody.
There was an important job to be and Everybody was asked to do it.
Everybody was sure that Somebody would do it.
Anybody could have done it but Nobody did it.
Somebody got angry because it was Everybody's job.
Everybody thought Anybody could do it but Nobody realised that Everybody wouldn't do it.
It ended up that Everybody blamed Somebody when Nobody did what Anybody could have done.
The simple fact is that the results of the business depend on how well people design, perform and improve their processes.
WHAT ARE THE MAIN PROCESSES?
Each business is different but the diagram below shows a generic model of processes for a typical business. Some will be more important than others in delivering your chosen strategy and improving your financial results but all must be effective and efficient.
Sorry about the poor quality of this diagram. The original is fine but something strange happens when it is posted onto the website.
OUR ROLE
We can help you improve your processes by providing an objective, independent review and by facilitating the improvement initiative.
The main stages in process improvement are:
- Define the process - what are the key measures and goals and how does the process fit with the other business processes?
- Establish ownership and form an improvement team of people who work in and are affected by the process.
- Investigate the current process in terms of who does what, when, where, how and why?
- Assess the current performance of the process to establish a benchmark and identify the gap from the goal.
- Identify and test the improvement ideas.
- Implement the chosen improvements and document the new procedures.
- Measure performance and re-assess the goals of this process and the other connected processes.
The bigger the company, then the more formal the improvement initiative has to be because more people are involved and fewer people know about the complete process from one end to the other.
In a smaller business it can be less formal but the key criteria are the same - buy-in from senior managers and the people working in the process for a) the need to change and b) the particular changes planned. This buy-in can only be achieved through involvement in the improvement and having a chance to contribute their ideas or air their concerns.
I.T. SYSTEMS - REQUIREMENTS, SELECTION AND IMPLEMENTATION
One of the biggest opportunities for changing the way that work is done within the company is when a new computer system is being introduced.
There are three basic reasons why new systems are installed:
1. You have to - the hardware and/or software is obsolete or unreliable and is no longer supported.
2. You want to - "keeping up with the Jones" is a significant motivator but does not lead to success. Just because a competitor or a friend at the golf club has bought a new system does not mean that another company has to follow.
3. It makes business sense - the benefits of the new system are greater than the costs of deciding what you need and want, the costs of selecting the system, the costs of implementing it and then operating it in the future.
There are different ways of approaching an I.T. systems purchase:
1. Buying a well established system and fitting your business processes around the system. This is the cheapest in terms of payments to IT suppliers but may be expensive in hidden costs for the company because of the compromises that the system forces you to make. On the plus side, technical and supplier risks are low.
2. Buy a system targeted at your specific industry. Some industries have special needs that are not catered for by the well known systems. Again you fit your processes to the software. This option may be forced on you but the technical and supplier risks are often high. Software is expensive for a small software house to develop and maintain and it may be based on old technology.
3. Tailor a system to your particular needs. This involves buying a system that offers many of the benefits that you want but the system needs to be modified in particular places to make the system fit. This is expensive because it means that you have to decide what you want and need, go through an extensive selection process and pay to modify and test the system. But the key advantage is that you are fitting the I.T. system to your business. Disadvantages are that it takes much longer and the modifications are a high risk because they may be wrongly specified or wrongly programmed so that they fail pre-implementation tests. Even when the system is working the modifications may be difficult to support and modify in the future.
4. Buy selectively. This would involve buying particular modules and applications from different software houses depending on which fits best. The problem is making all the different pieces fit together now and in the future.
We are experienced in software selection, specification and implementation and we can help you introduce a new computer system by providing project management services.
|
