Three Operational Oversights That Will Cost You Dearly

Winston Churchill famously said: Success is going from failure to failure with no loss of enthusiasm. The quote applies marvelously to business, with every phase, every quarter, and every strategy bringing a new, sometimes unexpected, challenge. At every turning point on your growth curve, there will be the need to revisit previous business decisions, and re-evaluate to see if they still apply. Miss them out, and you’ll be stunting your own growth and success.

One such major obstacle on the path to business growth - one that has brought down many good companies - is in the area of operations and execution: how do you continue to deliver great work while growing, and simultaneously maintaining profitability (net, not just gross!)? An added complication is that operations are often the hardest area to change in a business - it’s the ‘what we’ve been doing’ mindset that can make introducing any initiative an uphill battle.

In that light, here are three operational oversights which will have a disproportionate cost on the business, along with some suggestions for resolving them.

1- Time Cost

Whether your business sells products, services, or both, there is one key cost element that needs to be considered: time. While ‘obvious’, experience has shown that time is often not well-priced, largely underestimated, and poorly tracked. Here are some examples of missed time-related costs:

• Selling time (often involving multiple, senior people)
• Time to get paid (and associated financing cost, if applicable)
• Project overrun (the time cost [aka opportunity cost] can exceed penalties)

In most businesses, time is the unchangeable limiting factor. If you work on one project, you have limited time to work on another. If you’re preparing one order, the second will have to wait. What makes this even worse is the lack of data on time utilisation and efficiency. I can tell you minutes of server downtime, but I have no way of tracking time lost due to miscommunication, mistakes or laziness.

Ideas:

• Make time-tracking (or some version of it) a part of every departments’ KPIs.
• Quantify time spent on each phase of work, and notice trends and deviances.
• Find connections between efficiency and results; if you’re 60% efficient, then a 3% increase in efficiency will translate in to 5% extra profits. It’s not about the hours in the office or activity, it’s about performance and output.

2- Scalability

Almost every business I’ve asked both wants to grow 10x, and admits that 10x growth will likely break them. Short reason for this? Inability to scale. 10x growth is a lot, even doubling of demand will be difficult for most businesses.

So how do you prepare for massive scale - particularly while staying lean? Tripling the staff or doubling the machinery is not feasible - but also isn’t the real reason. The usual, main obstacle to growth: the execution.

Allow me to explain with a simplified and common example: have you ever had a favourite restaurant that became too popular? One where the owner and staff knew you by name and remembered your order, where the food was great, and - whether dinner date or business lunch - you knew it would be a good experience. And then, once it started getting famous, new staff came who weren’t as warm, new cooks came who weren’t as careful, and the larger crowd came and made the ambience and experience go down.

That’s similar to what happens in every growing business, unless its managed early-on. Your business will grow, and will need more people, and will get more customers. How are you going to maintain the standard you built your reputation on? There’s a reason so few SMEs manage to scale effectively over geographies - the people, who are the real asset - aren’t scalable.

Ideas:

• Plan for succession - actively. Everyone should have a ‘second in command’, who is able to pick up slack as and when needed. This will also allow people to move up and across with less inefficiencies.
• To whatever extent you can manage, create and implement processes and workflows. It will help keep quality levels up.
• Define and articulate your culture, and actively train people on it. Don’t assume they’ll learn, they might end up teaching something completely different! The real culture will only be revealed when you aren’t around to monitor it, so train your ‘employees’ to be your ‘team members’.

3- Internal feedback

If I had to pick only one area to focus this article on, it would likely be this. In so many situations, an ‘impossible’ problem got resolved through an off-the-cuff remark from one of the front-line team members. The only thing more surprising is that nobody thought to ask them earlier.

Your front-line team are your eyes and ears on the ground. They know your customers, your systems and - in some cases - your business better than you. They often aren’t the most influential within the team, and their voice doesn’t always get heard at the top. Yet, if asked, they could probably come up with insights, challenges and solutions that weren’t considered in any management meeting.

Ideas:

• Ask for ideas and suggestions proactively. Make it an important part of the managements’ work, not a ‘tick the box’ exercise. Celebrate good ideas, recognise participants, reward victories.
• Create a culture where people are empowered and encouraged to speak up.
• Get managers and team members to work in other departments or with other teams for short periods (or on specific projects). It’s always helpful to have a fresh pair of eyes.

This list isn’t exhaustive. Running a business successfully is about both capitalising early on opportunities and proactively preventing mistakes. There will always be more to do and more to learn. But start with these.