Little Things Can Mean A Lot (Improving Operational Effectiveness)

Doud Hausner and Associates

We often speak of our “Five Transitions” view of succession planning for family businesses. These transitions involve:the Business, the Founder (or current leader), Management, Ownership, and your Estate Plan. Experience proves that effective planning and implementation of these five transitions are the keys to finding the “success” in succession planning.

The business transition has two basic components–operational effectiveness and strategic positioning. We are going to begin at the beginning and take a closer look at operational effectiveness. Whether or not it is your family’s vision to perpetuate family ownership into the next generation, your interests are best served if you take every opportunity to optimize operations effectiveness and profitability. Not sure where to start? Here are some simple keys to getting it done.

Take Nothing For Granted

For starters, adopt a questioning mind that drives you to challenge operating assumptions. There should be no “sacred cows.” Take nothing for granted about the efficacy of established operating procedures, systems, and policies.

Ask the Right Questions

As you look around your business, ask yourself (and others) two key questions: (1) “Why are we doing it this way?,” and (2) “Could it be improved?”

Ask the Right People

Get the front line people involved–the people who are actually doing the work. They invariably have a wealth of good ideas. However, in far too many businesses they are rarely consulted.

Be Willing To Act

Solicit input only if you are committed to taking good advice. If you are going to solicit ideas for change, commit yourself to acting on the best ones.

Provide Feedback

You won’t use all the ideas you receive. Let your people know which you’ve accepted, which you’ve rejected, and why.

Recognize and Reward Contributions

When your employees provide ideas that put money in your pocket, find ways to put some of it into theirs.

Keep Your Customers In Mind

When considering changes, govern your decisions by a commitment to exceeding customer expectations and optimizing resource utilization. Your criteria for change should not include tradition or expediency. Making things internally convenient is not every satisfactory if the result is inconvenience for your customer.

Don’t Swing for the Fences

Look for “singles” and “doubles,” rather than “home runs.” Little things can, indeed, lead to important payoffs.

Here are examples of what some of our clients have achieved through operating reviews:

  • A manufacturing business had added equipment over the years wherever space was available. By asking the right people the right questions, they learned that excessive product handling and narrow aisles were contributing to the damage of materials in transit between processes. Redesigning plant layout reduced product handling by 40% and virtually eliminated damage to work in process. First year savings exceeded the remodeling cost.
  • Another client asked, “Do employees need to start and end their individual shifts at the same time?” By staggering shift schedules within and between departments the company reduced its order processing time and manufacturing turnaround time, and virtually eliminated late shipments to customers.
  • The City of Los Angeles is not a family business. however, a recent news item caught our eye. By advancing the start time in its asphalt plant to one hour earlier than the paving crews, the city eliminated a daily product shortage problem and saved $35 million earmarked for building a second plant.

Conducting regular operations reviews should be part of your ongoing management process. It can put “found” dollars on your bottom line.