Most organizations hope to grow every year in terms of revenue and profits. Often the perception of top leadership is to dogmatically pursue maximum revenue today, without considering how to optimally scale their company to handle that growth profitably.
In fact, as companies grow and take on more business, operational efficiency becomes increasingly important.
The time to prepare for growth is not after you have the orders and are already behind. Planning for operational success better ensures a long-term, sustainable business. What does it mean to plan for operational success? At the most basic level, an operational plan normally consists of the following:
- Assessing the current workflow
- Setting reasonable goals
- Developing a plan to achieve those goals
- Communicating the plan to all involved
- Executing the plan efficiently
- Making consistent, step-by-step progress
On paper, it appears easy, but there are 4 common challenges that prevent many organizations from achieving optimal operational efficiency.
Challenge #1: How to determine the factors to assess in your operational plan?
Although modern technology makes data collection and analysis more accessible to business owners, many top executives struggle to identify the key metrics for operational efficiency. There are hundreds of different elements that make up operations. How do you determine which elements are the most important?
The challenge is that if you have too many operational elements you are “focused” upon, the process quickly becomes overwhelming. If you focus on too few elements, you will be missing key functional areas of your operations.
After working with hundreds of companies over the last 25 years, we have determined that there are really 12 key business functions that business owners or managers should use to assess the health of their operations. This list has been refined over many years and includes key business activities like Income Generation, Procurement, and Distribution.
While you can come up with your own list of key business activities for your company, the key is to make sure that each major area of your operation is covered and there is a clear definition of each key business activity.
Challenge #2: How do you assess each key business activity? What criteria do you use? What scale do you use?
Assessing your current state is a critical step in developing an operational improvement plan. It is difficult because most owners or managers do not know what the best practices are for a company their size, and therefore don’t know how their company’s workflow measures up to the competition’s or how to simply “hit” their own goals.
It is important to have uniform and objective criteria that you can use to rate your organization for each performance category. In the same way that you cannot measure length consistently if you define an inch differently each time you measure, you cannot assess your organization unless you have objective criteria for each functional area.
It does not matter if you do the assessment yourself or use an outside company; the important part is to make sure you have uniform and objective criteria for each key business activity.
Challenge #3: How should you determine the goal for each key business activity?
Once you understand the current state of your company’s operations, the next step is to determine how you want each element to operate. In other words, what is the future state you want for each of your key business functions?
Embarking on any scaling process without having a defined goal is like embarking on a trip without a map or end location in mind. You will end up somewhere – but it probably will not be where you want to go.
For each business function, it is important to be specific regarding the future state. Having fuzzy or imprecise goals normally leads to suboptimal outcomes. In addition to being specific, It is important that your future state is appropriate for a business your size and you have the resources to achieve your goals.
Challenge #4: How do you get from your current situation to your ideal future state?
Change is hard. Changing operations is especially hard. Companies often struggle to make widespread operational changes because they need to maintain their existing business activities while developing new systems and processes.
In business jargon, the process of moving from your current state to a future state is referred to as organizational change management. The widely-quoted statistic is that 70% of organizational change initiatives fail (McKinsey & Bain). An overwhelming number of companies do not plan adequately to ensure success.
At Bellewether, we have led dozens of organizational change initiatives from small to mid-sized to large organizations. We can say with confidence that every one of our organizational change management engagements over the last 25 years has resulted in significant forward progress for our clients.
If you want to improve your operational performance, it is critical to determine HOW you will overcome each of these 4 challenges. The process of operational change is not easy, but the rewards are fantastic and often more profitable.
Bellewether, Ltd., is a specialized consulting firm with decades of experience helping businesses of all sizes. We make business better as an independent resource to our clients, providing fresh eyes, ears, and perspectives on your challenges and opportunities. We approach each project at a granular level, but always with an eye on the overall needs of the organization.
At the heart of the actual “work” we take our 4P structure and couple it with our knowledge of organizations and our years of success in helping organizations stabilize, change, and grow. To learn more, go to bellewether.com or give us a call at 816.554.9400.