The Systems Thinker Blog

Employee Productivity: 7 Tips to Harness the Power of Urgency!

Posted byRon Carroll

With some people (like owners and managers), everything seems to be urgent, pressing, dire, critical, serious, or top-priority. With others—employees who are laid-back, casual, carefree, lackadaisical, or even unconcerned—nothing is urgent.

In business, a general sense of urgency is a good thing, but it usually doesn’t happen automatically.

My mother recently fell and broke her pelvic bone. She recovered in a rehab facility. Never-ending patient demands at the care center kept staff on-the-run all day long. Urgency, and the resulting productivity, is built into the culture. The business owner just smiles as he watches people scurry around getting their work done.

The Power of Urgency to Increase Productivity

You may not be so lucky. Most owners and managers have to be more creative to infuse their company culture with a sense of urgency. If done successfully, however, the payoff includes motivated employees, happy customers, lower costs, and increased profit.

An Example of Urgency

When I was a young man going to college, I worked for a company that had a “hot product.” We were three weeks behind in production and shipping. Customers were constantly calling to have us trace their order, thinking it must be lost. A picture hung on the wall with a chimpanzee dressed as a shipping clerk. To a customer over the telephone, the chimp declared, “Trace it! We haven’t even shipped it yet.” That was our story.

Every shipment was urgent to prevent orders from being canceled. One day, I decided to pack an extra twenty cases of product and process a few more orders after my regular shift was over. It took me another twenty minutes. Continuing each day, I packed an additional hundred cases in the week and about 450 cases in the month. My shipping buddy decided to join in, and we completed nearly a thousand extra cases during the month for our employer. It was urgency that drove us to it. (And truthfully, we wanted to avoid being yelled at by angry customers or a grumpy-pants boss.)

Bad Urgency vs. Good Urgency

Urgency that comes from “putting out fires” is not good. It is the result of poor planning and execution of business operations. This kind of urgency is very stressful and a real downer for everyone.

However, when the energy is properly harnessed, urgency can elevate business performance and produce amazing results (motivated employees, happy customers, lower costs, and increased profit).

Simply put, urgency will increase productivity and accelerate the sale of goods and services. Employees are motivated by a sense of accomplishment (and sometimes incentive pay). Customers love to receive products fast. Higher sales-throughput enables a company to reach its break-even point earlier in the month, and that sends profits soaring. Everyone wins!

Dos and Don’ts

Before you try to introduce urgency into your business operation, keep in mind there is a RIGHT WAY and a WRONG WAY to go about it.

Here are three things you don’t want to do to add the element of urgency:

  1. Don’t set goals to motivate people that are unrealistic. Goals that are too hard to reach kill motivation and cause resentment (especially when there is a financial incentive involved).

  2. Don’t skip steps in a proven business process. Skipping steps such as a preparation step or a quality-control step for the sake of urgency will create problems that nullify any gains.

  3. Don’t turn up the speed on the conveyor belt. People can only work so fast and still maintain quality. Efficiency is better achieved by eliminating speed bumps and system busters than by pushing people beyond a reasonable work pace.


Now, here are four legitimate things you can do to create a sense of urgency:

  1. Let customer expectations drive the urgency. Tell customers you have next-day shipping or one-week lead time, or a specified completion date. Employees will do what it takes to fulfill the company promise.

  2. Set daily, weekly and/or monthly goals. Speed and urgency naturally increase as people get closer to a deadline. For example, employee productivity accelerates to meet a shipping goal by the end of the week (e.g., number of boxes, orders, or dollars). It is a good idea to post results and hold people accountable for achieving the stated goal.

  3. Create financial or other incentives. Self-interest is highly motivating for most people. A good incentive system—financial or otherwise—will lift employees, speed processes, and drive down unit costs.

  4. Declare an emergency. This infusion of urgency can only be used once in a while and should be substantially true (e.g., you may lose an order). Proclaiming an “emergency” too often is an indication of weak management. Declaring emergencies that are not real is like the boy who cried, “Wolf.” The plea for help will eventually be ignored.

Keep in mind: a high-level of urgency cannot be sustained. People have peaks and valleys of energy and productivity. They can’t stay in top-form all day, every day. You have to accept that. However, you can have higher and longer-lasting peaks and shorter-shallower valleys by adding one or more of the urgency triggers described above.

Where Do You Start?

Infuse the power of urgency into the weakest of your core processes for selling and delivering products and/or services. Watch as surrounding workers and processes catch the fever. Keep an eye out for the physical bottlenecks that may be holding people back, and elevate those constraints.

Oh, and one more thing: kick your business into high gear with Box Theory™ products.

 

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Tags: Laws/Principles, Efficiency/Speed, Cost Cutting

Business Improvement: Shut Down Your Fix-it Factory!

Posted byRon Carroll

At the root of most business problems is some form of waste, either defects in products or services, or time-wasting delay. This is what causes customers to go to competitors. This is what raises cost and erodes profit. This is what ultimately drives owners out of business.

Every product, service, or transaction-based business has two “factories” running simultaneously according to Jay Arthur, author of Small Business Guide to Six Sigma. The "Main Factory"—where you focus most of your energy—produces goods and services for your customers just as planned.

The second factory is less noticeable. It is the "Fix-it Factory," which cleans up all the mistakes, rework, breakage, returns, scrap and other problems of the Main Factory. This dark underbelly of the business primarily deals with defects and delay. Every business has a Fix-it Factory that consumes human and financial resources. You might be surprised by the cost of running your Fix-it Factory!

Shut down your fix-it factory

Waste is Expensive

Most small-business owners do not face the brutal reality of waste in their business. However, experts estimate that the average small business has at least 3% waste (Jay Arthur). Many have more. Some have much more!

For a company with one-million dollars in sales, 3% waste amounts to $30,000 in cost. This expense, however, is not paid out of revenue dollars, but is paid out of profit dollars! If the company’s net profit before taxes is expected to be 8%, or $80,000 dollars, 3% waste would reduce the profit to $50,000.

Stated another way, the company has to sell nearly $400,000 more to replace this $30,000 loss in order to achieve the desired profit level. (I don’t want to depress you, but it actually gets worse because there are additional costs to handle the waste.)

Do you realize what I just said? Every waste of time or material comes directly off your bottom line. In this example, waste of 3% of sales translates to nearly 40% in lost profit!

Mistakes are Prevalent

How often have you purchased a product or service and had something in the transaction go wrong? For the last ten years, I have been telling my wife that it seems like half of our purchases have one problem or another.

For example, several years ago our financial services company was teaching workshops to educate our customers on the development of effective business systems and rocesses. In putting together our little workshop facility, I had to buy a variety of equipment, furniture and accessories. Here's what happened:

I purchased eight high-back chairs for the lobby that arrived with the wrong fabric. I had a wall-to-wall counter built that was one-eighth of an inch too long and had to be returned for trimming. Paint came off ceramic candy dishes when removing the price labels. I ordered new blinds for five windows. Four of the blinds arrived together, but the installer had to make a trip back to install the fifth blind. I bought special narrow conference room tables that came with the wrong style legs. The company graciously remade the tables, but this was particularly annoying because it delayed our kick-off date. In the second batch, one table had a large dent in the top. In addition, the skirting on the tables didn’t stay attached so we removed them altogether. The audio-visual person put the ceiling speakers in a different place than I requested. I didn't make him move them, but it always bugged me.

These common mistakes cost the vendors most or all the profit from my business. However, this is only part of the story. The Fix-it Factory erodes profit in another way. You see, I may never do business with some of these vendors again; they caused me too much aggravation. Worse yet, I may tell other people of my bad experience. It is apparent that the overall cost of 3%-mistakes can be quite enormous!

Walmart Gets It

Walmart is relentless at cutting waste from their business. For example, they have distribution centers as large as twenty-four football fields, with up to nineteen miles of conveyor belts. Many trucks are simultaneously loaded at the docks and dispatched to regional stores. Now get this! Walmart measures the efficiency of their loading operation by how much space there is between boxes traveling down the conveyor belts. If the boxes are touching each other, the maximum number of boxes can be loaded. The space between the moving boxes is actually “waste” or inefficiency, and it increases the cost of every unit of product on the conveyor. This kind of attention to detail is what makes Walmart so successful.

Mistakes and waste are a common occurrence in every company. The typical customer-purchase has many choices, options and variables, amidst a complex array of promises, processes, and paperwork. Consumer demand for new and improved products and services—never-ending change—puts pressure on maintaining quality. The turnover of people in the workforce reduces overall competence. Holy cow, no wonder so many mistakes are made! It’s not surprising that we go around frustrated with employees we think have messed up, or mumble when customers take their business elsewhere.

Cut Waste to Survive and Prosper

The truth is that times have changed. To survive, small-business owners of today must accomplish the seemingly impossible. They must squeeze out every possible defect and delay from their business operations. They must execute with consistency and exactness. Every part of their business must be systemized to reduce costs and eliminate customer dissatisfaction.

Here’s the deal. You—the business owner—are in control. It is up to you to create a “culture of discipline” (Jim Collins, Good-to-Great) and drive the waste out of your business. If it's not important to you, it won't be important to others. Make it a top priority!

I invite you to begin turning your business into a “house of order.” Develop effective business systems and processes that will shut down the Fix-it Factory. Start working on the business and not just in the business (Michael Gerber, E-Myth Revisited). You can do it, and I will show you how!

 

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Tags: Improvement, Quality, Efficiency/Speed, Cost Cutting

Fast Business Processes Increase Profit—7 Strategies to Boost Speed!

Posted byRon Carroll

A Frenchman, count Gaston de Chasseloup-Laubat set the first land speed record December 18, 1898 at a dizzying 39 miles per hour. Recently, an Austrian daredevil, Felix Baumgartner, jumped from twenty-four miles above Earth, breaking the speed of sound, and free-falling at 833.9 miles (1,342 kilometers) an hour before releasing his parachute.

 

Throughout history, people have been fascinated with speed—and so should YOU!

Increase System Throughput

Speed of business operations translates to dollars—increased sales capacity, higher productivity and worker satisfaction, lower unit costs, quicker turnover of inventory, faster billing and collection cycles, accelerated cash flow, and happy, loyal customers. What’s not to like?

In Old English, “sped” meant success or thriving. In business, it means much the same thing. The speed at which a company churns out products and services—its throughput—has much to do with its success.
   
So maybe we should get our employees track shoes and start cracking the whip…

Not so fast!

Creating a speedy business—high throughput—has much more to do with removing time-waste and delays in business processes than it does with how fast people work.

Focus on Cycle Speed

The true speed of a business system or process is the total elapsed time it takes to go through one system cycle—the first step to the last step—including idle time. For every 25% reduction in elapsed process time, productivity doubles and costs drop by 20% (George Stalk, “Competing Against Time”).

Whether applied in the factory, the workshop, the store, or the office, here are seven strategies that will accelerate the throughput of your business operations, and lower overall costs.

  1. Create Smooth-running Business Systems – Get rid of steps in your business processes that do not add value to customers, such as inspection, rework, and unnecessary movement. Avoid overproduction and inventory buildup. Eliminate the idle time that work sits around on pallets or in-baskets. Pace your business systems with sales orders. The steady tortoise, not the hare, wins the race.

  2. Improve Quality Don’t waste time on redo's, repairs and reprocessing. Create business systems with high yield and low defects (less than 1% errors). Stop and fix systems that produce frequent mistakes. This prevents accumulation of problems for later handling. Use a 5-Whys Analysis to get to the root cause of errors quickly. (They may not be coming from where you think.)

  3. Elevate Bottlenecks – Look around your operation and notice where things are getting bogged down—the bottlenecks. Find ways to elevate the constraints to non-constraints. Your individual processes and your entire business are only as fast as the slowest point. Bottlenecks and weak links in a chain of tasks kill throughput!

  4. Reduce Process Downtime – Plan better. Downtime is very expensive. Avoid stop-start work-flows. When people switch back and forth between tasks, there is a great loss of concentration and momentum. Worker errors rise. Performance is hard to measure. Throughput drops significantly (see System Busters).

  5. Keep It Clean and Simple – Reduce the physical path, clutter, barriers and distractions. Minimize complexity, customization, and exceptions in making and delivering your products and services. Eliminate uncertainty and excessive employee discretion caused by inadequate policies or procedures.

  6. Lift Your People – Improve employee performance with training, accountability, performance standards, reporting, recognition and incentives. Inject the fun-factor. Provide a safe and pleasant work environment with good communication systems.

  7. Focus on Speed – At your weekly Business Improvement Workshops, discuss specific ways to create fast business systems and processes. Start with systems that touch customers. At future meetings, report results and celebrate improvements.

Customers Love Speed

Customers—both internal and external—want things fast, or at least on time, as scheduled, or as promised. Strive to provide a quality product faster than your competition (lead-time) in order to differentiate yourself and become the best in your target market.

Remember: shorter lead-times also increase sales capacity, billing cycles, customer loyalty, and profit.

You don’t need a lot of analysis to make significant improvements. Simple observation and reasoning can help you quickly reduce delay, boost speed, and cut costs. 

For a more in-depth analysis that will get your systems in high gear, you need Box Theory™ Gold software. It will help you diagnose problems and prescribe remedies to dramatically increase speed and throughput. I predict that a little improvement to just one of your business systems will offset the cost of this powerful software tool. So, what do you say, let’s get going today!

 

The Next Step...

Tags: Business Systems, Efficiency/Speed, Cost Cutting

Discover the Hidden Gold in Your Business Systems and Processes!

Posted byRon Carroll

What your customers and employees think of your company, and how much profit your company generates, are the result of small and simple things—mostly unnoticed—that go on every day in your business operation.

A Valuable Lesson

In 1849, a young merchant from Massachusetts was caught up in the excitement of the California gold rush. He sold everything he had to move west and seek his fortune. He was told the gold nuggets were so big that a person could hardly carry them.

Largest Gold NuggetThe world’s largest Gold Nugget ever found.
Discovered in 1872 and called the Holtermann Nugget.
It was 630 lbs in weight.

Day after day, the young man dipped his pan into the river and came up empty. All he had was a growing pile of rocks to show for his efforts. Discouraged and broke, he was ready to quit. Then, late one afternoon, an old experienced prospector happened by and said to him, “That’s quite a pile of rocks you’ve got there, my boy.”

The young man responded, “There’s no gold in this river. I’m going back home.”

Walking to the pile of rocks, the old prospector said, “Oh, there is plenty of gold in this river. You just have to know where to find it.” He picked up two rocks and smashed them together. One of the rocks cracked open, revealing several flecks of gold that sparkled in the sunlight.

The young man noticed a bulging leather pouch tied around the prospector’s waist. He said, “I’m looking for gold nuggets like the ones in your bag, not just tiny flecks.”

The prospector opened his pouch and extended it toward the young man. He looked inside, expecting to see a handful of large nuggets, but was shocked to see that the pouch was filled with thousands of tiny flecks of gold.

The old prospector said, “Son, it seems to me, you are so busy looking for large nuggets that you’ve missed filling your pouch with these precious gold flecks. The gradual accumulation of these little flecks has brought me great wealth.”

Discover the Gold Flecks in Your Business Processes

The tiny flecks of profit in your business are found at the detail level of your business operations. Like the rock, you may have to crack open and examine your business processes to find them. Small changes to eliminate waste—deviation, defects, and delay—will fill your pouch with the gold you seek.  Daily innovation and improvement will gradually make you wealthy.

Remember: “By small and simple things are great things brought to pass."

 

The Next Step...

Tags: Business Systems, Improvement, Laws/Principles, Cost Cutting

Ten Tips to Increase Productivity of Your Business Processes!

Posted byRon Carroll

How efficiently people get work done has as much to do with business processes as it does with the productivity of employees. In fact, the design and quality of a business system largely determines the productivity of the people working in that system.

People who are part of a good system or process will not only produce more, but can work above their pay grade. For example, a $10.00 per hour college student working with the Box Theory™ Software system can create value worth ten times what he or she is getting paid (shameless plug).

Business System ProductivityHow to Create Highly-Productive Business Systems and Processes

  1. Create and document business systems, including the system components and procedures—like the ingredients and steps of a recipe. Each of your core systems should have a single purpose and productivity goal. Involve team members in the system design to get buy-in and support.

  2. Make one person the owner of the system or process and accountable for its results. However, when performance is unsatisfactory, avoid blaming people for the problems; first look for flaws within the system. This may include evaluating your hiring or training systems.

  3. Standardize business tasks so workers do the same thing every time. Repetition improves worker skills, productivity, and is the secret to consistent results and predictable profits. Stick with the system until an innovation makes it even better.

  4. Track the performance of systems in real-time and compare actual results with expected results. Use the data to make adjustments and improvements as you go. Numbers drive all process improvements. Pay special attention to your key performance indicators (KPIs).

  5. Continually strive to elevate the constraint on a system or process. In other words, improve the weakest step or eliminate a bottleneck that is dragging down performance. This will increase the productivity of the entire system and the sales throughput of the whole company.

  6. Reduce duplication of effort and lost time that come from excessive mistakes and rework. Improve the system to reduce process errors to less than 1%. Six Sigma methods can expose the hard-to-find causes of your quality problems.

  7. Prevent system downtime, start-stop work-flow, delays, half-finished projects, and the work-in-process that is sitting around just waiting to be worked on. These system-busters ruin concentration, continuity, and momentum that kill productivity. They also increase the risk of operator error, and make it difficult to measure performance.

  8. Reduce the loss of time, energy, and efficiency due to poor layout, clutter, general disorganization, unsafe conditions, distractions, and unnecessary walking or movement. Multiple employees over the course of a year will burn up a lot of dollars dealing with these system speed bumps.

  9. Keep the process as simple as possible to accomplish the stated objective. If feasible, reduce customer options and choices, special handling, exceptions to routine (e.g., customization, back-orders), employee discretion, and complexity, all of which hinder system flow. Let customers and vendors do as much of your work as possible (e.g., vendors can pre-price goods or drop ship; customers can pump gas, buy tickets online, or serve themselves at buffet-style restaurants).

  10. Like the tortoise and the hare, a sustained and steady pace, rather than occasional brilliant bursts of speed, wins the race. The same holds true in business processes. The most optimized processes are paced and synchronized with sales demand and with on-hand inventory. The three work together in harmony so that you have just enough inventory to process today’s sales orders. Don't get behind and lose customers. Don't over-produce and build excess inventory. While this is easier said than done, all improvements in this direction will increase throughput and decrease costs. Work-in-process and excess inventories are enemies to productivity and quality.

Double Productivity and Cut Costs

Effective business systems shape the patterns and habits found in every high-octane business culture. By implementing good systems, you will have happier customers and employees, and maximum profits for stakeholders.

George Stalk, “Competing Against Time,” states that every 25% reduction in elapsed process time will double productivity and reduce costs by 20%. That sounds like something worth shooting for. Wouldn’t you agree?

Now, pick an item on the list above and go make one change today that will improve productivity and cut your operating costs!

Related Article:
Ten Tips to Increase Employee Productivity

 

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Tags: Business Systems, Culture, Efficiency/Speed, Cost Cutting

Cost Reduction: Make Products and Services Better, Faster, Cheaper!

Posted byRon Carroll

Years ago, I went into a local printing shop to do business. The proprietor had a sign on the back wall that read:

Good-Fast-Cheap

I got a chuckle out of the sign, but at the time, it made some sense to me.  I could understand that:

    • If I want the best quality and the lowest price, I may have to wait.
    • If I want the best quality and the job rushed, I should expect to pay a higher price.
    • If I want the job fast and cheap, I probably won’t get the highest quality.

Of course, like every customer, I really wanted my print job with the highest quality, as fast as possible, and at the lowest price. I wanted GOOD, FAST AND CHEAP!

Breakthrough Principle

Upon becoming a Systems Thinker, I learned that it is quality and speed that create the lowest possible price. You and your customers can and should expect all three!

QUALITY + SPEED = LOW COST


By creating business systems that have minimal mistakes, defects, and rework (good), you will reduce waste and increase process speed. By eliminating delay, downtime, and other speed bumps, you will boost sales throughput (fast). This powerful combination will give you the lowest possible cost and your customers the greatest value (cheap). Remember: Quality plus speed equals low cost.

Side Note: To increase speed without losing quality, don’t push workers beyond reasonable performance standards. Instead, focus your efforts on reducing the idle time in a business process—the time things are sitting around waiting to be worked on. Keep work-in-process to a minimum. Eliminate over-flowing in-baskets and items stacked up in cues or on pallets. Create an even and steady workflow.

Happy Customers and More Profit

In short, low quality and slow speed are what make business processes—and the resulting products and services—more expensive.

Whatever your business—in the office, the store, on the production line, or delivering a service—use well-designed business systems to get work done efficiently and effectively. Increasing quality and throughput (rate of speed) will guarantee happy and loyal customers. And you can take that to the bank!

 

The Next Step...

Tags: Business Systems, Quality, Efficiency/Speed, Cost Cutting

Two Counter-Intuitive Principles for Business Improvement

Posted byRon Carroll

Things are not always what they seem. In the picture below, do you first see the old woman or the young woman? Can you see both? (Hint: the ear of the young woman is the eye of the old woman.)

Illusion

In business, sometimes the best solutions—the simplest and least-expensive—are not so obvious. We are often counseled to work “smarter instead of harder.” The Systems Thinker does that by seeing through operational illusions to understand things as they really are—to solve business problems in the smartest possible way.

Consider two principles that may seem counter-intuitive, but are important to squeezing the most value out of your business operations.

Improvement Principle #1

“If you need a new process and don't install it, you pay for it without getting it” (Ken Stork).

If you have a business system or process that is sputtering along, you can be sure there are excessive errors and inefficiencies. Perhaps you also have customer dissatisfaction or even defection. To let the faulty system continue is to suffer an unnecessary loss of profit. If you don’t improve the system now, you’ll eventually lose the money you might have used to install a better one. You will pay the cost of the new and improved system without actually getting it! Every day you wait is taking money out of your pocket.

Improvement Principle #2

You always pay for the "A" employee. The lesser cost of a "C" employee, plus the hidden cost of inferior performance, poor decisions, and costly mistakes, is equal to or greater than the higher cost of the "A" employee. Within the same job description or grade, replace "C" employees with "A" employees to improve system performance and reduce costs.

So, what is an "A" employee? These people have a history of getting results. They aren’t afraid of accountability or score-keeping. They are self-confident and able to apply past successes to new assignments, but they are also teachable and eager to learn. "A" employees will make good things happen in your business, especially when their personal goals are aligned with your company goals. As Jim Collins advises, “Get the right people on the bus and the wrong people off the bus” (“Good to Great”).

Keep these two principles in mind, and remember: Systems Thinkers find ways to save and earn money that many business owners never discover! At what stage of Systems Thinking are you?

 

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Tags: Systems Thinker, Business Systems, Improvement, Laws/Principles, Cost Cutting

Sales Equivalency—The Surprising Power of Cutting Costs!

Posted byRon Carroll

Every dollar you save through cost reduction—one of the primary purposes of your business systems—is far more valuable than the dollars that come from sales. In tough times, cost cutting can preserve your bottom-line profit when your top-line sales are struggling. Let me explain.

A sales dollar is reduced by commissions and other sales costs, the actual expense of the product or service you are selling, and even administrative or overhead costs. In fact, a net profit is all that remains. For example, if you sell a $100 product, and you have an 8% net profit margin, that $100 sale will eventually put eight dollars in your pocket.  

On the other hand, if you save $100, THE ENTIRE AMOUNT GOES STRAIGHT TO YOUR BOTTOM LINE. YOU GET TO KEEP IT ALL!

Cut Costs 

Sales Equivalency 

Another way to look at this is to calculate the “sales equivalency” of your dollars saved. If your company has an 8% net profit, and you save $100, it has the same effect on earnings as $1250 in sales. The formula for calculating sales equivalency is as follows:

 

Amount of Savings ÷ Profit Margin = Sales Equivalent
($100 ÷ .08 = $1250)

 

The smaller your net profit margin, the greater the impact your cost reduction becomes. In the example above, if your profit margin is 5%, the $100 of savings has a sales equivalent of $2000; with a 3% margin, the sales equivalent is $3,333.

What is the sales equivalent of a $100 saved in your company?

Here are a few examples of eye-opening sales equivalents from our company with an 8% profit margin.

  • A tweak to a telephone system saving $50 per month is equal to $7500 in annual sales.

  • Preventing $1000 of lost, damaged, or obsolete inventory in a year produces the same financial result as $12,500 in new sales.

  • An annual saving of $5000 by finding a better supplier of materials or product, reducing freight cost, taking advantage of purchase discounts, and so forth, is worth $62,500 in sales.

  • An improved business system or process that can perform a task with one less employee earning $25,000 per year and no benefits is equal to $312,500 in sales. YES, THREE-HUNDRED AND TWELVE THOUSAND, FIVE- HUNDRED DOLLARS!

Impact on Profit 

Here’s another fact: The average small business has at least 3% waste or excess cost within its operations and often times much more. In our example of the business with 8% profit margin, 3% of waste equals 37.5% of lost profit (.03 ÷ .08). Remember: All waste comes straight off the bottom line!

Improving the quality and efficiency of your business operation—its systems and processes—is the gift that keeps on giving. The payoff continues year after year. In good times and bad, it’s always the right time to be cost conscious!

What's one way you could reduce costs today? Now, go do it!

 

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Tags: Business Systems, Business Measurement, Quality, Efficiency/Speed, Cost Cutting

A Cool Business System that Attracts Customers and Cuts Cost!

Posted byRon Carroll

Last week, my wife and I went to dinner at one of our favorite eating spots, Tucanos Brazilian Grill, a local chain of restaurants. They have a cool food-service system that is part of their brand, but also saves them thousands of dollars every year.

The restaurant offers an all-you-can-eat buffet of tasty salads and side dishes, while entrée servers walk around from table to table with skews of beef cuts, barbecued chicken wings, bacon-wrapped turkey, pork, sausage, shrimp, grilled pineapple or vegetables, and so forth. They cut off slices or push pieces down the skewer for customers to grab with tongs and put them on their meat plate.

The Tucanos Cue System

Once patrons are ready for servers to visit their table with these delicious morsels, they turn the wooden “Tucanos Cue” with the green side up (go). If they need to pause, or are full to bursting, they turn the Tucanos Cue over, with the red side up (stop). The servers immediately discontinue bringing selections to the table. Laying the cue on its side signals that customers are ready to pay their check.

Tucanos Cue - A Cool Business System

This distinctive method of serving the entrée makes Tucanos Brazilian Grill an unforgettable experience for customers. However, it is also a significant cost-saving strategy. Here’s how.

Fun and Profit Producing

A Tucanos Restaurant feeds an average of 1200 people per day with about fourteen entrée servers per shift. The servers visit the tables approximately fifteen times throughout the customer's thirty-minute eating frenzy. They spend roughly ten seconds per person each time they visit. Were it not for the Tucanos Cue in the red position, my observation is that they would spend at least an extra sixty seconds per person during the meal with needless visits and chatting.

The average savings of one minute per customer is equal to 1200 minutes per day or twenty person-hours. The entrée server is paid $2.50 per hour by the company (tips are added). This amounts to a savings of $50 per day or $15,600 per year (Tucanos is not open on Sundays). The Tucanos Cue System enables the restaurant to provide a quality service with one or two fewer entrée servers than might otherwise be required.

In your business, using minimum wage employees for a five-day workweek, similar time savings would add up to a whopping $37,700 per year. A nice bit of change resulting from a little creative thinking, don’t you think? With minimum wage going up, or higher-paid employees, the savings is even more impressive.

Where’s the Magic in Your Business Systems?

Remember, an effective business system is not just a flowchart or a checklist. The best systems include a mixture of left-brain and right-brain thinking that make your company a fun and motivating place to work and shop. The effort will translate into lower costs, repeat customers, and a thriving enterprise.

Become a Systems Thinker and you will discover the magic in your business!

 

The Next Step...

Tags: Systems Thinker, Business Systems, Customer Retention, Cost Cutting, System Example

Business Systems vs. the Misunderstood Operations Manual

Posted byRon Carroll

Do you have an operations manual? I doubt it. Most small-business owners don’t, unless they’ve purchased a franchise. Operation manuals require a lot of work to create, have to be frequently updated, and tend to gather dust from lack of use. Fortunately, there is a better way!

Recently, I did some work for a senior retirement center. I asked the manager to tell me about some of his business systems. He proudly opened an office cabinet and pointed to seven three-inch binders, the operations manual prepared by the corporate office. He said, “We don’t really read it, but we use it as a reference.” I looked over several chapters and found them to be well-written and quite thorough—A GOOD START!

But is a procedure in an operations manual really a system? DEFINITELY NOT!
 
For example, making a chocolate cake is more than just a recipe. An automobile is more than just an owner’s manual. A physical workout is more than just an exercise video.

The difference is this: A written procedure in an operations manual is just one component of the business system or process. The actual results you get depend on other factors that give life to the procedure during its implementation. Read on.

A Typical Business Problem

Three times a day in the retirement community, the staff serves meals in a large dining room for approximately one hundred people. They do a pretty good job following the procedure outlined in the company's operations manual.

Senior Center Dining RoomAt dinner time, for example, four servers begin working at 5:15 p.m. They first serve a round of drinks and salads, then soup, the entrée, and finally the dessert. After serving, they bus the dirty dishes back to the kitchen, wipe off tables and chairs, and completely reset tables for the next day’s breakfast. Servers are expected to complete this seven-step task no later than 7:30 p.m. to stay within budget. They are typically about fifteen minutes late.

A manager might look at the operation and wonder why the servers can’t seem to get done on time. He or she may even get frustrated and tell people to work faster, or they’ll lose their job. Pressure is often applied to solve this type of business problem.  

However, the serving system, as with other business systems, is more than just a written procedure. Most workers want to succeed, and you can help them.

The System Thinker’s Solution

In this situation, the Systems Thinker looks at the following:

  1. Are the servers a good fit for the job? Are they well-trained and do they work as a team? Is there a system owner/team-leader who is accountable for results, sets the example, gives guidance, and responds to problems that may arise?

  2. Do all the servers understand that the goal of being finished by 7:30 p.m. is a corporate, management, and budget requirement? “Failure is not an option.”

  3. Beginning at 5:15 p.m., how long should it take for each of the seven steps in the process. Do the servers start on time? Can they see a clock and know how they are progressing with each step? (self-administered feedback).

  4. Is the dining room laid out for fast and efficient service? Do the servers understand the best positioning of food carts to get the work done with a minimum number of steps? Are the carts loaded so there are no extra trips back to the kitchen?

  5. Does the company measure results? How many meals in the week are completed on time? Is there a little competition between breakfast, lunch and dinner servers? Can you make it a game and keep score?

  6. Does the serving team celebrate victories when they get th job done on time? Do they know their best time from beginning to end? Does the company provide any recognition or incentive for fast completions?

The Payoff

Four servers, completing the procedure on-time—fifteen minutes earlier than usual—is a one-person-hour improvement. There are three meals in a day, 365 days per year. This adds up to well over 1000 hours at about $10.00 per hour, or $10,000 dollars annual savings. However, this company has 360 retirement communities in the U.S. and Canada. The improvement could add—CHA-CHING—$3,600,000 to the company’s bottom line each year. Wow!

This is the power of Systems Thinking. It is more than just following a procedure in an operations manual. It takes into account people and personalities, system ownership, training, work environment, score-keeping, feedback, recognition, celebration, and so forth.  

The difference between an operations manual and a business system might be compared to the difference between a movie script and the movie itself. Actors, camera techniques, background music, special effects, and even the theater the movie is shown in, all influence the end-result.

Turning a written procedure into a blockbuster money-making business system is the Master Skill of the entrepreneur. It is your primary responsibility to make this happen. You or others can do it by applying the Box Theory™ Way!

Related Articles:
The WOW Factor: Six Ways to Supercharge Your Business Systems! (Part 1)
The WOW Factor: Six More Ways to Supercharge Your Business Systems! (Part 2)
Turn Dust-Gathering Procedures into Business Systems that Wow!
Boost Your Business Profit by Adding the Fun Factor!

 

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Tags: Systems Thinker, Business Systems, Improvement, Efficiency/Speed, Cost Cutting, System Example