Many people focus on relatively unimportant activities in creating 2,000 percent solutions (ways of accomplishing 20 times as much with the same time, effort, and resources). Why not gain as much benefit from your efforts as possible?
Now, let’s look at questions to help you achieve great results. I suggest that you jot down your answers. These notes will be helpful to you when you repeat the eight step process in the future by reminding you of what you did and did not consider.
1. What activities in your organization have the most positive impact on total profits now?
For a mining company, the answer may be reducing the cost of raw materials by extracting the lowest cost ore first. For a manufacturing company, the answer may lie in avoiding costly errors in its products so that rework and warranty costs are avoided. For a wholesaler, the answer may lie in purchasing the lowest cost items and being able to keep those goods in stock with low inventory levels. For a brokerage firm, it may be interesting clients in trading more frequently in profitable ways for the clients and the firm.
2. What activities in your organization will have the most impact on total profits five years from now?
For the mining company, the answer may be locating new sources of lower cost ore. For the manufacturing company, the answer may lie in redesigning products and developing new products that are less expensive to make and cause fewer errors in producing. For the wholesaler, the answer may lie in creating new computer systems that allow for more efficient purchasing and management of inventory. For a brokerage firm, the opportunity may be adding new services and increasing the value of existing services to attract more profitable clients and retain them longer.
3. In which of these activities do you suspect that some of your organization’s efforts are much more productive than the least effective efforts?
Although you cannot know until you measure, you have probably observed differences in performance or heard stories that lead you to believe that there are differences in some areas. These differences may occur from individual to individual (such as how rapidly and correctly transactions are processed), office to office among people doing the same function (such as regional sales and administrative operations), or from plant to plant producing the same item.
4. What measurements already exist that could help you identify the size and value of these differences in performance?
Convenient measurements may not be readily available for this purpose, but could be assembled to help you understand differences. For example, you may have individual productivity by employee in some performance areas. Those individual data could be combined to determine if office by office productivity differs. That measurement would be helpful because it could help identify superior management practices in some locations that are not performed in other locations. Many people assume that such measurements only exist in accounting, information technology and manufacturing functions. Be sure to also ask people who work in the activities that interest you. You may be pleasantly surprised to find out that there are other measurements in place that you have never seen.
5. What measurements could you inexpensively add for other high value opportunities where you have no information about relative performance now?
Talk with those who would have to be involved in making the new measurements to learn their ideas about what can be done easily and inexpensively. Then, take a little time to make these measurements on a one-time basis. Later you can decide if it is worth continuing these new measurements.
6. What do the measurements you have already suggest the greatest differences in the value of performance are?
In looking at this question, you should be sure to consider the economic impact of differences in performance as well as the percentage size of the differences in performance. For example, your most productive salesperson may be selling 50 times as much as the least productive. But if everyone operated at that level, you might only save one percent of revenues. If everyone matched your most productive design engineer in finding less costly and more valuable ways to redesign existing products and design new ones, you might save as much as five percent of revenues. Obviously, the latter alternative would be the one to work on first assuming that all else is equal.
7. Where do you suspect that the greatest value differences in performance are among areas where you have no measurements available?
8. How hard will it be to make improvements in performance in the most valuable opportunity activities identified in questions 6 and 7?
When answering this question, you need to consider difficulty, risk of not succeeding, cost of working on the problem compared to what you can afford and how long you can expect it to take in the worst case. Many such changes are difficult. The most challenging are those performance areas where people have to change their long-held habits and beliefs. Don’t rely solely on your own judgment in answering this question. Speak with those who work in those areas as well as outside experts who have helped organizations improve performance in these areas.
9. What area of performance improvement should be your top priority?
My suggestion is that you pick an area with a high payoff which can probably be improved rapidly with fewer resources and risk than other activities you are considering. Be sure to consider the potential enthusiasm with which those who will need to change will probably view the necessary adjustments. If in doubt, pick the activity where enthusiasm is highest for the needed changes.
Copyright 2007 Donald W. Mitchell, All Rights Reserved