How much is inefficiency costing you?

/How much is inefficiency costing you?

It’s easy to discount small inefficiencies as a minor niggle, a problem to be tackled another day. Sometimes, however, seemingly small issues can build up to become large problems.

A recent McKinsey report found that the average employee is spending just 39% of their time on role-specific tasks. The remaining time is spent reading and replying to emails (28%), communicating and collaborating internally (19%) and searching for and gathering information (14%). These findings support what we have identified working with our clients – that this inefficiency, often called the hidden factory, is costing businesses time and money.

Inefficiency: Case in point

With a turnover of more than £25 million per annum and over 200 staff, a previous client in the medical industry acknowledged that they were spending too much time dealing with emails. While this sounds like a minor issue, inefficiencies in the email system were putting time pressure on a cross section of senior employees. The arduous process also raised some concerns about data protection as some staff had created their own quick fix to avoid wasting so much time.

Making one change to how a small number of employees used their emails saved the company the £250,000 they were losing each year in lost productivity.frozen budget money locked in

Scratching the surface

And we’ve seen countless examples of how small changes can save significant amounts of money, and how lots of small changes can totally transform the fortunes of a company.

Recently we worked with a financial services company that had an invoice black hole, with conflicts in responsibility as to who should send them to the client. As a result, each month hundreds of invoices were not collected on time, creating an average dent in cash flow of £875,000. Every month.

With another business, the 110 members of staff had to wait six minutes every day for their computer systems to boot up. In one day that’s 11 hours of wasted time, in a year it adds up to 2,420. Or, to put it another way, the equivalent of 1.3 full time employees.

Don’t just treat the symptoms

Inefficient processes that cost your business lost time and opportunities are not unique. Although the problems appear small, the scale is significant. But because these problems seem commonplace, the fix is often superficial. Businesses tend to deal with the symptoms of their hidden business but fail to address the root cause, putting off action until things reach crisis point.

By avoiding the underlying issues, organisations may not be aware they have a problem until it manifests itself in customer complaints or a drop in sales. Only then does action become urgent but by this stage it is often too late, and this mistake is repeated again and again across the business world at multinationals and SMEs.

In the early 1990s, IBM, the company that first introduced PCs to homes and businesses, was nearly brought to its knees by the slow, cumulative impact of its hidden factory. The company had become stuck in its ways and was floundering under the existing CEO, with many assuming the declining computer giant would fold. And it took a significant shift in gear to save it, with new CEO Lou Gerstner – a man with no experience running a technology company – immediately laying off 100,000 employees and any senior staff who were unhappy to break from the past.

IBM indicates the problems that a company can face when it becomes too comfortable, when the drive for innovation and change is removed. Much of Gerstner’s success was down to his focus on getting every employee working towards a culture of continuous improvement by introducing personal business commitments and measuring people’s success in achieving them.

“People do what you inspect, not what you expect,” he is famously quoted as saying.

Sweat the small stuff

So how do you avoid taking a superficial approach to you hidden business? You need to define and track the little things, before they become big things. This is where business improvement and Lean Six Sigma comes in.

One of the core teachings of Lean Six Sigma is the Five Whys. This tool is so useful because it illustrates to businesses that what they thought was a root cause, was actually a symptom of a deeper problem. It helps to peel away the layers, and strip out all the complicated steps to get to the breakdown in process that is causing inefficiencies.

Furthermore, Lean Six Sigma is known for its reliance on a data-driven climate, providing change agents the information they need to identify where improvements are necessary and how to implement meaningful, permanent change. With decades of experience helping large and small companies across all industries address their hidden factory and introduce business improvement, we’re well placed to help you take the first step towards improvement.

Call us now on 0800 066 3749.

By | 2017-02-22T16:40:42+00:00 December 10th, 2013|Business Improvement, Lean Six Sigma|0 Comments

About the Author:

As Managing Director of 100% Effective, John is an authority on how effective Lean Six Sigma is. He draws on his 20 years experience as a consultant and Master Black Belt to give you practical insights into how Lean Six Sigma can help you and your business.

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