The business has been around for years. It has been successful. There is a team in place that has worked together for a long time. They understand each other. They each understand their particular jobs.
But the business just seems to be a little sluggish. Its not because management has gotten “fat”. The last few downturns have ensured there isn’t a lot of redundancy in headcount. It isn’t because anyone in a leadership role has gotten complacent. Each leader pulls his/her weight and is respected as a leader in whatever function they serve. Maybe there have been some exercises to review the efficiency of each function. Maybe even cross functional teams have been used to ensure there is no waste in any function.
The answer is usually in the interplay of functions and the cumulative effect of multiple functions that are optimized within themselves. It happens when the leadership team is pulling in slightly different directions. This happens unknowingly. And this happens a lot. Ask each of the senior team members to define the goal of the company, or a similar question, and see how different the answers are. Although they are similar, they are usually not the same. Not unless the communication of the company’s stump speech is regular and consistent.
Using a holistic approach to review the company can yield some dramatic findings. One example was a client who had worked very hard at reducing the cost of accounts payables transactions. A new process had been designed around level-loading the work, following a process to ensure all payments were cut on Fridays, etc. A major problem was that some smaller vendors who made specialty or custom parts required payment up front. By not getting the payment processed by their cutoff, these parts were taking an extra week to release, adding a minimum of one week to the manufacturing lead time. Sales were lost due to the AP process. AP, purchasing, manufacturing and customer service all accepted that as the lead time. Each was very efficient at its work. But the system was not efficient at converting sales into revenue.
It can be difficult for incumbents to see the cumulative effect of optimizing functions without reviewing the entire system. In most businesses, there is little overhead dedicated to reviewing the entire system. That overhead could be wasteful for many companies to keep on board.
A better approach would be to get help from outside the company. PE firms often send in specialists to do this sort of work. Others use contractors who have backgrounds that support this kind of review.
The results can be dramatic. We have experienced fifty percent increases in capacity on main manufacturing lines with headcount reductions, all because of changes to scheduling and material presentation. One additional person in materials resulted in five fewer required people on an assembly line. We have seen businesses that were capacity constrained double their sales without adding resources, all because the resources already there were freed up to do better work. We have seen seasonal businesses running 90%+ late shipments improve to under .1% in a season.
Title 2 Business Services has accomplished this work in multiple industries with great success. Our varied backgrounds, depth of exposure, breadth of company types and industries, and “fresh set of eyes” give us a unique perspective.
If you think your business is doing well, but suspect you are leaking opportunity, contact us. We would be happy to discuss what to look for or arrange a discovery trip to help you out. A couple of days can be transformative in the life of your business.