ARE YOU SURE 'IT AIN'T BROKE'?
I often hear executives take the “If it ain't broke, don't fix it” stance, figuring, they have resources and technology – why meddle in operations that are already operating? Great advice – if your operations are functioning properly, or if they require merely time, as opposed to intervention. But that’s a big ‘if ’. More often, the hands-off approach becomes a crutch for organizations to avoid issues, or to justify wishful thinking. It’s not just having resources and technology that breeds success, it’s how you wield your resources and technology to address your goals and dysfunctions.
Countless executives and managers cite this excuse when asked why they don’t address issues that are troubling, but haven’t ‘exploded’ – yet. I’ve seen companies ignore profitability dips because they were ‘still making money’. I’ve seen managers refusing to document employee negligence in hopes that ’cutting them some slack’ would incentivize behavior modification.
Whether it’s delaying a visit to our dentist, or proactively troubleshooting our business, human nature pushes us to postpone anything that causes pain, discomfort, anguish, or expenditure. But the longer we procrastinate, the more severe our consequences. Like a cavity that degenerates into a root canal, a seemingly minor tech glitch can develop into an expensive systems crash.
The sooner you address these issues, the healthier your business will be:
Systems integration & optimization
“In God we trust; all others bring data.” So many companies overlook W. Edwards Deming’s clever quote. They fail to check whether they have all the data necessary to make effective business decisions. Most don’t.
· What systems does my company have?
· Are they integrated?
· How old is my ERP system?
Your answers to these questions will determine your next step. ERP systems should be replaced every 5-10 years. They should also be as integrated as possible, and revamped regularly with the help of a skilled support team.
Many small and midsize companies I work with don’t have a good handle on their costs and can’t measure their profitability. Not evaluating your costs hinders your ability to provide quotes, or to determine when it’s time to let a client go.
Examine whatever data is available. Sales per customer, for example. Calculate the costs attributable to each customer: materials are easy to identify; labor may be more challenging to peg; and overhead requires consulting your team. Determine which customer requires a lot of handholding, custom packaging, or extra resources, and adjust accordingly.
· Have you identified the drivers of your business?
· Are you tracking Key Performance Indicators (KPIs)?
· Do you know why your clients do business with you?
· Do you analyze why you lost a client or prospect?
Often, if they are still making money, businesses fail to identify drivers and execute a post mortem or root cause analysis.
Again, look into the data and dig. Compare a more profitable month with a less profitable month. What do you see? Is it the scrap level? Is there an issue with a particular machine, department, shift? Is it the number of customer returns? Is it your product mix?
Proactive companies are successful companies. They realize that in the end, the path of least resistance is always more time-consuming, more strenuous, and more expensive.