Most organizations are bleeding away profit through holes they don’t even know they have!
That’s right! If you are not periodically and systematically looking for inefficiencies, gaps, old processes, or broken systems, chances are, your business is bleeding profitability.
These holes that are bleeding profits from your organization are generally not a result of a deliberate or malicious act. They just form slowly as the marketplace shifts and as technology changes. These shifts and changes create holes that must be “fixed” in the same way a pothole in a road must be fixed!
For Example: The $156,000 Timesheet!
A number of years ago I ran a strategic offsite meeting for a large engineering company. I facilitated an exercise called “Kill a Stupid Rule.” This purpose of this exercise is to identify any silly rules or processes that are costing the business money.
One of the “stupid” rules that was uncovered very quickly by the team was the need for salaried staff (overhead staff not billable to the customer) to complete a timesheet every week. As an engineering company, the majority of the staff completed timesheets and these timesheets were turned into invoices and used to bill the customers. However, for staff that are not being billed on an hourly basis, there is no real need for a weekly timesheet. The only timesheet requirement is for sick time or vacation time – essentially a timesheet by exception.
At the time, their business systems demanded that the salaried staff complete a timesheet and that the timesheet be run through a series of approval gates before being accepted. This process took a lot of time from the people completing the timesheets and the managers needing to approve the timesheets. The estimate was that there were 30 hours being burned doing timesheets and timesheet approvals every week.
30 hours at an average cost of $100/hr is $3000 a week! This is $156,000 per year! This was money that was simply “disappearing” or bleeding from the business with no benefit! Worse yet, the process was frustrating staff and the time was being wasted rather than being spent on activities that added value!
This met the definition of a “stupid rule!”
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