Productivity Improvement: Three Key Factors
This piece was written by Kate Hobbs, Senior Consultant and Mark Franklin, Principal & Owner, First Principles Consulting and is republished here with permission.
Every business in the world, from the most modest single-person operation to the largest multinational, is based on the same foundation of taking an input, adding value and producing an output. That, right there, is the fundamental business process at the highest level.
Every business is based on the same foundation of taking an input, adding value and producing an output. I have to yet see a business that does not operate on this foundation. Even the latest crops of disruptive businesses like Uber, AirBnB, eBay, LinkedIn or Facebook work on the same principle. It may not be as obvious, but they do. They take one group of people, introduce them to another by using a technology platform and in the process add value to both groups.
When you break this high level process up, you see many more detailed processes exist to power each business. These are individual to each business depending upon its size, industry, product, location and a number of other variables. However, every business still takes an input, adds value and produces an output. This process does not make a business alone, however. People are required to execute the process and technology enables it.
With such a simple concept sitting behind every business and how it operates, ‘fixing’ problems or ‘doing business better’ should be a case of review the processes, people and technology, identify where they’re not working, and improve them. To most people, this makes sense. It feels like a ‘bread and butter’ way of thinking. Logical. You could even go so far as to say it appears easy. This must be why so many organisations undertake so many improvement projects, because it’s easy!
A study conducted every few years by KPMG’s New Zealand operation reviews the success rates of improvement projects across a large number of organisations across multiple industries. In 2010, they found that only 59% of projects achieved the intended results consistently, with about half coming in on budget and a third on schedule. In their most recent round of the study completed in 2013, they found that only 35% of projects achieved the intended results consistently, with a third on budget and just over a quarter on schedule. But that’s only in New Zealand, right? Wrong.
A large IBM study in 2008 of over 1500 change management executives indicated that only 40% of change projects reach schedule, budget, and quality goals. In the same year, Logica Management Consulting spoke to almost 400 senior executives in Western Europe and found that 35% of organisations had abandoned a project in the last 3 years with 37% of projects completed failing to deliver benefits. The trend of poor results is being seen across the globe. So where are businesses going wrong in their implementation of something that appears to be such a simple concept?
Let me explain.
Working with many businesses in multiple industries, we see the success of efforts hampered by the same things time and time again within the three areas of people, processes and technology. I’ll now outline some of the key things that cause organisations to trip themselves up when implementing a change within their business.
People execute business processes, which in turn must be enabled by appropriate technology. If the trilogy is not in sync, inefficiencies are inevitable.
- Strong, visible and consistent leadership is required to drive any new ways of operating and to cement benefits. If this is not in place or utilised when and where it needs to be, the result is generally poor. People look to their superiors for guidance (either for a carrot or a stick, but sheer rallying for a cause works even better) and without it, change is never sustainable. Unfortunately, leaders need their own guidance and support – most internal efforts do not take this into account.
- Organisational culture plays a significant role in the sustainability of change efforts. The existing culture and potential to effect any changes to business processes are often not considered sufficiently to support the new way of operating. If they are, the fact that it can take many months – or even years for large scale transformations – and significant resources to change an organisation’s culture is often overlooked. Culture change is hard and usually labour intensive. Period.
- Improving a process or implementing new technology is not just about coming up with a solution, drawing a line in the sand and shifting to a different way of doing things. It takes a lot of planning and preparation to get the problem nutted out, the solution developed and the new way of doing things implemented. Adequate resources for these tasks are regularly not provided or assigned appropriately.
- Do you realise how much time, money and effort is wasted by not correctly understanding the problem you are trying to solve? It often amazes us how businesses haven’t taken the time to understand the issue(s) they are are having or the end goal they are trying to reach. In order to do this properly and in a meaningful way, it is essential to establish the status quo of processes within the organisation. Unfortunately, again this takes time and energy, usually resulting in an assumption being made that the current understanding of how processes work within the business is an accurate one. Ask a few different people about how one of your processes works and you’ll see what we mean. Make this assumption at your own risk as you’d be surprised just how wrong it can be.
- It’s easy to look at a problem and quickly come up with something you think will make it go away. In most change efforts however, the new processes haven’t been mapped properly or verified prior to implementation. It’s hard enough trying to predict the outcome of a change when you do this in significant detail – you’re still making a ‘guesstimate’ about what’s going to happen – but if you do not take the time to map out where you’re headed and to check this is aligned with your business, you’re headed for disaster.
- As important as it is to get the new process design right when implementing a change, the review of supporting sub-processes such as those that form links to existing systems is critical. All too often, a great solution fails due to its misalignment with the rest of the business. Other elements that often get left behind during change efforts that can result in a negative outcome include detailed and communicated process documentation, as well as regular and thorough process auditing.
- It is amazing how often the technology options on the market are promoted as the solution instead of being the enabler for businesses. The silver bullet that’s going to solve all of your problems! Funnily enough, this is very rarely the case. We liken a business trying to improve productivity to someone trying to get fit. You can buy the most expensive, fandangled new exercise machine with hundreds of features but if it’s not targeting the body part you wish to improve or if you don’t use it often or in the way it was intended, it’s not going to make much of a difference. It still takes a serious amount of effort from the individual to get a result. The same goes for organisations implementing technology solutions.
- We’ve seen teams within an organisation on a number of occasions build a business case around a technological product instead of understanding the problem they’re trying to fix first. This usually stems from someone seeing a product implemented successfully elsewhere and then wishing to replicate it, even when the organisational environments are significantly different. Admittedly, sometimes replicating solutions across different businesses may produce the expected results. However, you must first determine the appropriateness of this by understanding if the problem and the environments are similar and then reviewing the product (and others!) to see if it’s suitable.
- The importance of mapping out existing processes prior to making changes is rarely seen more clearly than when there’s a significant misunderstanding about how new technology will fit into the existing organisation. Do you have the people with the right skills to use it? Do people see the benefit of the new system and want to use it? Do people have time to use it? Does the business have the inputs it requires? How is the output going to be used and is it in the right format for downstream processes? Does it link in with existing equipment and/or technological platforms – i.e. do they ‘talk’ to one another? These are just some of the questions that need to be asked well before deciding to make the change but are often only asked once the change to new technology has been made and a problem is discovered.
Most organisations have a less-than-desired success rate when it comes to improvement projects, whether related to cost minimisation, safety measures or productivity improvement initiatives. Even with many businesses implementing extensive project management training and software platforms, this usually relates to oversights within one or more of the areas of people, processes or technology. In most cases, success rates can be improved by following a strict (but simple) process like the one we use with our clients. A high level version of this is shown below to give you an idea of what we’ve found to work.
- Establish the status quo
- Clearly define the problem and outcomes required
- Develop a process inventory – what do you actually do already (not think you do!)
- Build the desired state
- Define and map the “To Be” processes based upon the problem
- Verify the “To Be” processes (are they aligned with your organisation and what needs to be altered to make sure they’ll work?)
- Analyse the “People” requirements
- Analyse the “Technology” requirements
- Develop the implementation plan
- Proactively monitor not only progress but how fit-for-purpose the new solutions are while deploying them. Flexibility is extremely important as it is impossible to be 100% accurate when predicting the outcomes of change. Anticipating future outcomes is never a complete science.
Just remember, the above will not work if the right type and number of people aren’t used to undertake the process, if the process isn’t followed in the right order or with enough detail applied to each step, or if the technology used isn’t appropriate for the organisation!
This piece was written by Mark Franklin, Principal & Owner, First Principles Consulting. If you're interested in learning more about what First Principles Consulting can do for your organisation, check out their website!