More than ever, great companies know building discipline and efficiency into their organization is not some fleeting “program of the month” designed to capture short term cost savings during times of recession. Most business leaders acknowledge the fundamentals of productivity and efficiency as no longer just nice to have, but imperative for remaining competitive in their market space. Customers with a choice of service providers are less likely to tolerate long response times or poor service simply because of historical loyalty. Surviving manufacturing companies understand this dynamic as they continue to work hard implementing “Lean” business transformations on their shop floors. Loss of market share to global competitors forced many to learn their lessons fast! As these lean initiatives continue to mature and return significant benefits to their companies, attention has shifted upstream from the shop floor to “leaning” the entire enterprise.

These companies have learned achieving organizational efficiency has a lot more to do with business processes and the work tasks completed in each of those process than quoting platitudes or moving boxes around on an organizational chart. Client services are a collection of proprietary intellectual inputs converted by a series of processes to create a value proposition for the customer. This intellectual input is your company’s capital. All conversion processes consists of activities that add time and cost to the final output. Some activities in a process provide a value to the customer for which they are willing to pay. Other activities, like waiting in queue, moving between departments, repetitive tasks, and quality errors simply add time and cost while providing no value to the customer. Customers are willing to pay for those processes that provide intellectual value to them. Efficiency of a process is expressed as the ratio of value added activity compared to the total time required for the process. Maximum process efficiency is achieved when the process ratio is one (1). What is your process efficiency?

Traditionally, companies organize into departments based on function: Accounting, Engineering, Purchasing, Budgeting, Human Resources, etc. These departments are staffed with persons having knowledge or skills in that discipline. Staff members of each department are the custodians of the intellectual capital necessary for a single business process to convert an input into a deliverable service. These departments frequently operate as independent “silo” organizations where entry and departure is controlled by resource availability. Deliverable services must pass through a series of these silo departments to complete the conversion process into a value added product. For a variety of reasons, departments are seldom created equally in the distribution of resources. Some departments have excess resources while others have too few!

A successful organizational efficiency review suggests deliverable services be treated as a series of functional processes required to convert intellectual inputs into a value added product. For each process, the tasks performed to complete the conversion must be documented. Each task must then be designated as value added or non-value added. Non-value added tasks are candidates for elimination from the process. Elimination of non-value added tasks reduce customer response time and cost increasing the desired value added quotient. Finally, the traditional silo approach to departmental organization must be challenged. Improved revenue goals and market share is better accomplished by concentration on processes across the organization rather than the traditional vertical entry and exit requirements of a silo style organization.

 

There is much to be learned about organizational efficiency from lean methodologies already in practice today. In the end, the goal is not to simply “reduce headcount” for the sake of headcount reduction. Those efforts will almost always be unsuccessful. Eliminate non-value added tasks from each process, balance resources (personnel) to match the customer demand, and organize for process flow rather than follow functional organization dogma.