Business improvement is vital to every business, and it is great to see a growing awareness of this. However, I am regularly amazed by the number of companies developing effective solutions to their problems, but failing to implement them. They just sit on the solution for weeks, or months!
The cost of the delay of implementing a solution can, of course, be calculated. However, I don’t think enough businesses are calculating this figure – otherwise it would kick-start them into action a lot sooner. By working out the cost of one month’s delay then you can use it to ensure decisions are made quickly and ultimately ensure that essential improvements are implemented.
Delays, of course, come at different times in business improvement. I come across companies that delay the start of deploying business improvement while they cogitate over implications. Or companies that prefer to spend additional time going out to tender to ensure they have the best deal. Others who put off a decision until the next board meeting, while there are some that just find it hard to make a decision. Any decision.
The results are quite staggering. If you have conducted a business improvement project correctly you’ll be aware of how much a process is currently costing you or the impact of the issue on your business in other terms. You will have collected the correct data to prove these numbers and then analysed the data to identify root causes and generated solutions to eliminate them. It is typically at this point that a Lean Six Sigma Black Belt or Green Belt will go to their Sponsor, company board or manager for approval to proceed.
After presenting their case, arguments are accepted and solutions agreed, every single day that is lost is losing the business money. If a new system will be £100,000 a year less costly to run, every month that this new system isn’t used costs the business £8,300. It’s pertinent to consider it in this way – the cost of one month’s delay – as it is incredibly common for businesses to decide on something “at next month’s board meeting”. If it is clear that between now and the next board meeting the business will lose over £8,000, decisions will be made a lot more quickly.
Let me give you some examples of how the cost of one month’s delay can affect your business.
I was working with a firm where they had run a Lean Six Sigma project to review the costs, quality and retention of their recruitment process. The result was that they would be better off moving to an outsourced solution. The benefits were calculated at £23,000 per month.
When presented to the board they wanted to go out to tender even though one had already been conducted. The result was an eight month delay in choosing the same supplier, and a cost of £184,000 to the business in lost time.
Similarly, I am currently working with a company that delayed four projects from implementation because the board meeting overran and the business improvement slot was lost. Assuming approval is given this month, the month wasted cost the company £53,000.
The cost of one month’s delay is a powerful number:
- Use it to get senior managers to understand the impact of not making a decision.
- Use it to influence so you can get resources.
- Use it to get your training signed off.
- Use it to communicate the importance of the change you are trying to implement.
How have you used the cost of one month’s delay? We’d love to hear your experiences.
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