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!
A number of years ago I ran a strategic offsite meeting for a large engineering company I was leading. 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 our staff completed timesheets and these timesheets were turned into invoices and used to bill our 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, our 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!”
So, what can an organization do to plug the gaps and stop bleeding money?
8 Ways to Stop Bleeding Profit!
There are probably an unlimited number of ways to stop the flow of profit from your business. However, I have selected eight relatively easy, yet powerful ways which are briefly outlined below:
- Build Discipline and a Strategic Mindset: Create a calendar block once a quarter to systematically look at your business for areas of waste or inefficiency. Do not allow anything to interrupt the cadence of this review.
- Remove Organization Scar Tissue: Run a process like Kill a Stupid Rule with your leadership team and with randomly selected staff. You will be amazed at the waste your staff finds that your leadership is unaware of (or worse yet, trying to cover up!)
- Automation: Have your team list out every process in the business that contains a lot of manual steps. Evaluate if these processes are really necessary. Can you simply eliminate the process? If the process is critical, can you automate it?
- Reclaim Resources: List out all the processes that consume a lot of resources. Are these processes necessary? Can you eliminate them? Can you optimize the process so it uses fewer resources?
- Time and Money Ranking: Rank the processes or activities within your business by the time they are using or the money they are burning. Then rate their effectiveness in terms of the value they provide or the revenue (sales) they produce. Are there mismatches between the time or money and the return or value? What can be done to optimize these areas?
- Internal Issue Identification: Have your team list all the issues that the business is dealing with that impact the following areas. What plans need to be put in place to deal with these issues?
- Delivery of your core product or service
- Your brand value
- The community
- Create a Wish List: Create a wish list of products, processes, tools, data, systems, structures, etc., that would take your business to the “next level” if you were to purchase and implement them. Rank these in a grid to determine the highest impact versus easiest to implement. Select one of the largest impact and easiest to implement items and put a plan in place to implement it.
- Tell the Truth: I was working with a PR company recently and they were dealing with a very tough issue for a client that had the potential to severely damage the client’s reputation. They were advising the client to “choose a truth” and they would spin a story around this and release it to the press before the real news hit the market. This is absolutely the wrong approach! When there is a problem brewing an organization must always hit the issue head on and not “choose a truth” but tell “the truth.” Anything other than “the truth” will always cost an organization so much more when the “real” truth emerges . . . and the real truth will always emerge!
Go ahead and book your quarterly strategic review meetings into your calendar. Pick one or two of the ideas above and dig into your business to identify and stop bleeding profit!
Finally, review these related posts for more ideas:
- 5 Simple Steps to Kill a Stupid Rule
- Why You Need to Kill Your Company
- Are Rules, Processes or Tools Killing Your Business
- How to Reduce Your Workload and Get More Done
- 10 Questions that Turn an Insurmountable Problem into an Inconsequential Event
- 11 Commandments of Business Success
“It’s the innovations aimed at the bottom line that yield the profits to fund investment on new products and services.” Matthew E. May
What experience do you have in finding and eliminating “profit leaks” that may provide value to other readers? Leave your comments below!
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