Business Systems and Processes.

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Beware of Employee Discretion!

“Employee discretion is the enemy of order, standardization and quality” (Theodore Levitt, Marketing for Business Growth, 56). So what is employee discretion and why should you care?

No More, No Less

My accounting business was located near two Subway Sandwich restaurants where I occasionally had lunch. I always ordered my favorite 6-fat-gram Sweet Onion Chicken Teriyaki sandwich. I preferred one restaurant over the other, and here’s why:

Subway Sandwich
In restaurant A, after placing my order, the food preparer would scoop the chicken teriyaki out of a pan onto the wheat bread. Influenced by a little pleasant chit-chat, the person would give me a generous portion of the marinated chicken. After all, we like to make customers happy, right?

In restaurant B, the food preparer would empty a pre-measured paper tray of marinated chicken onto my wheat bread. No “discretion” was required; the person just followed the system put in place by the franchise owner. I always got exactly 2.5 oz of meat—no more, no less.

It was always nice to get a little extra chicken in store A. However, the owner of store B was the smarter of the two. Employee discretion—such as deciding how much chicken to put on the sandwich—can be very costly to the business over the course of a year.

In a national meeting of Walmart employees, managers were trained to eliminate employee discretion in the fabric department. At checkout, clerks would cut the bolt of fabric a few extra inches beyond what the customer ordered to make sure they weren’t shorted. Managers were told that the extra fabric was costing stores an average of $2500 per year (per store). Employee discretion was replaced by a policy that clerks cut exactly the length purchased. (Most customers have already estimated a little extra anyway.)

Avoid Vague Policies

Employee discretion is when individuals are allowed to make responsible choices, judgments, or decisions within their job description. However, in many business systems, the employee is forced to make decisions without clear policies or procedures, particularly in dealing with exceptions (e.g. solving customer complaints). When a course of action is uncertain or ambiguous, workers make mistakes and waste time—both of which cost YOU money!

Too much discretion exists where rudimentary business systems are invented by workers, training is by word of mouth, and procedures change as workers come and go.

Empower People to Build Systems

There’s a lot of talk these days about empowering employees by delegating authority to them to get the job done. Results, however, are very dependent on the employee’s commitment to the company and their individual skill level. Higher-skilled people make better use of discretion than lower or under-skilled people.

To a Systems Thinker, only results determine how much employee discretion is appropriate within a job description or business system.

I like this statement by Jim Collins, “A culture of discipline involves a duality. On the one hand, it requires people who adhere to a consistent system; yet, on the other hand, it gives people the freedom and responsibility within the framework of that system” (“Good to Great”).

Appreciate your people and their unique contribution. However, keep the uncertainty of discretion to a minimum. Instead, encourage people to use their talents, experience, and insights to improve your policies and business systems.

“When you build on a foundation of systems, people will come and go, but the systems remain constant” (Michael Gerber).

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Michael Gerber

"Organize around business functions, not people. Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant."

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W. Edwards Deming

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