The Systems Thinker Blog

10 SIMPLE ACTS to Increase Customer Loyalty, Profitability and Growth

Posted byRon Carroll

The average business owner is always on the run, trying to do everything in his or her power to keep up, solve problems, please people, pay the bills and make a little profit—to survive, grow and prosper. 

In our fast-paced and complex world, many voices are calling out for our attention, advising us where to go and what to do to achieve success. We hope for a breakthrough idea that will propel us to the “next level,” but we’re not always sure what investment of our time, effort, and money will provide the biggest payoff.

However, many of the best ways to improve a company are found in doing small, simple, and inexpensive things that can have a significant positive impact on employees, customers and our business results.

Small but Simple Things

How to Improve a Business

Here are t SIMPLE ACTS that will elevate your business and put more money in your pocket.

  1. The SIMPLE ACT of smiling, showing kindness, or expressing gratitude will lift everyone you come in contact with, engender loyalty, and elevate employee performance.
     
  2. The SIMPLE ACT of creating checklists—to ensure procedures are precisely followed—will reduce the number of mistakes people make, and the unnecessary waste of time and materials.
     
  3. The SIMPLE ACT of measuring a business process and providing your workers frequent feedback will increase motivation and productivity.
     
  4. The SIMPLE ACT of applying a 5-Whys Analysis will help you quickly uncover the root cause of many business problems.
     
  5. The SIMPLE ACT of getting your operation cleaned up and organized will impress customers, increase efficiency, and boost profit. Make your business shine!

  6. The SIMPLE ACT of assigning ownership to business systems, processes, or activities—and making team leaders accountable for their results—will dramatically elevate your business performance.
     
  7. The SIMPLE ACT of identifying and monitoring key performance indicators (KPIs) will cause you to focus attention on the areas of your business that matter most.
     
  8. The SIMPLE ACT of asking your employees about persistent problems, bottlenecks, and ways to improve—tapping into their ideas and insights—can reveal many opportunities for innovation and cost reduction.
     
  9. The SIMPLE ACT of implementing the WOW Factor in your business operation will help you attract and keep good customers and valuable employees.
     
  10. The SIMPLE ACT of holding a weekly business improvement workshop will eventually give you a world-class organization.


One More Simple Act

Finally, the SIMPLE ACT of reading “Box Theory™: Double Your Profit with High-Performance Systems and Processes” and becoming a Systems Thinker will raise your business I.Q. by 80 points—overnight!

Forgive me for this little sales pitch; I don’t do it often. However, I truly believe that applying the Box Theory™ Way (eCourse, all-in-one software, and Business Systems Academy) is the most important thing you can do to have a smooth-running business that attracts customers, retains the best employees, and generates a healthy profit.

Remember: by small and SIMPLE ACTS are great things brought to pass!

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Tags: Improvement, Efficiency/Speed

Theory of Constraints: 6 Limiting Factors to Your Business Success!

Posted byRon Carroll

Every businessperson with a vision of where they are going, and specific strategies and goals to get there, will face obstacles or barriers that hinder them from achieving success. Frequently, when confronted with solving problems or making improvements, business owners or managers feel overwhelmed. They lack the time, money, or resources to correct the problems they are experiencing. They often feel like their hands are tied, and they don't know where to begin.

Hands tied when solving problems

You can start by confronting the brutal facts about your business operations—the problems that are staring you in the face. For example: from customer or employee complaints, discouraging financial or performance reports, or just plain gut-level frustration, you have a general idea of your weaknesses and challenges. As discussed earlier, these symptoms are the result of unhealthy and under-performing business systems and processes.

In 1984, Dr. Eliyahu M. Goldratt, in his book The Goal, introduced the Theory of Constraints (TOC), a management philosophy based upon the application of logic and scientific principles, to help organizations achieve their goals. The principles of TOC will provide you the shortest distance between two points—where you currently are, and where you want to go.

What Is the Theory of Constraints?

The Theory of Constraints is based upon the assertion that: “Every real system, such as a business, must have within it at least one constraint (limiting factor). If this were not the case then the system could produce unlimited amounts of whatever it was striving for, profit in the case of a business. . ." (Dr. Eli Goldratt).

In other words, every business operation has something inhibiting it from reaching its full potential.  Some condition exists that limits sales or production output. This limit or constraint determines the maximum capacity of the system. By removing or improving the single constraint, the system is elevated to a higher level of performance.

Below are six types of constraints that can hold back an organization. The solution to your problems can be found in any or all of them; some may overlap.

  1. A Logical Constraint - Faulty thinking or assumptions can block success (e.g., believing people are the problem when ineffective systems—hiring, training, and so forth—are the real problem).

  2. A Process Constraint – The output of work processes is reduced by a weak-link or bottleneck in the process (e.g., work piled up in an in-basket; inventory waiting to be processed).

  3. A Physical Constraint – Physical components of a process often have limitations (e.g., capacity of a machine; available space or time; capability of a person; physical obstacles such as clutter or travel distance, and so forth).

  4. A Self-inflicted Constraint – A company's culture, rules, or policies can have a detrimental effect on results (e.g., lack of accountability, not hiring older people; sticking with the "sacred cows" of work practices).

  5. A Personal Constraint – Personal traits of an owner or manager can hinder performance (e.g., disorganization, procrastination, perfectionism, indecision, fear, incompetence, lack of time, or failure to face problems). Do you have any beliefs or behaviors that are holding back your business?

  6. An External/Market Constraint – Obstacles can exist that you have no control over (e.g., market size; customer attitudes; competition; the economy). You can often adapt to these external constraints over time by adjusting your business strategy.

As with a medical diagnosis, the symptoms of a business problem don't always point directly to the cause of the problem. In fact, most of the time, the problem you experience is not the real constraint. Just as a cough is only a symptom of an unhealthy system within the body, the pain or frustration you feel about your business is likely the effect of a deeper problem. Some constraints (e.g., physical) are more apparent than other constraints (e.g., logical).

Consider this: While there can be a variety of problems within a business system, only one step of the process at a time is the constraint on the entire system—the weak link and true cause of restricted output.

You can only improve the results or output of that system by eliminating the weak link or elevating its performance. Time, effort and money spent to strengthen the other links in the chain—the other steps in the process—will not improve the system output. The weak link governs the performance of the whole system!

Bottleneck of a Process

 (Answers: Step 4; 14 per hour)


Once you have strengthened or elevated the weak link, another link or step in the process becomes the weakest and may deserve your attention. Thus, by always focusing efforts on the weakest part of the system, you get the maximum benefit from your business improvement efforts.

Because only a few core systems or processes drive your business results—and each has just one constraint at a time—you can now focus your energy on the few problems that really matter the most. Make the necessary improvements and then tackle a new constraint. Watch your business take off!

Theory of Constraints: Performance = Full Potential – Constraints

Throughput

The Theory of Constraints assumes that a system has a single productivity goal. The challenge is to increase the output, or "throughput" of the system by managing the constraint that blocks your ability to reach that goal.

For example, the throughput of a marketing and sales process is measured by the dollar-value of orders written. The throughput of a production system is the dollar-value of products shipped. For a business as a whole, the measurement of throughput is the final cash collected from the sale of its products or services.

Many company owners mistakenly think they need to optimize all of their business systems and processes (logic constraint). They often measure individual processes and reward performance independent of overall business results.

Surprisingly, the improvements of quality or efficiency, as important as they are, do not always lead to a corresponding improvement in total throughput. In fact, an optimized system or process can create a negative effect on the next system in a line by overwhelming it with too many inputs.

Improving any but the weakest step within a process creates excess output that piles up in front of the weak step, often called a bottleneck. Bad things happen when work piles up, when you overfeed a process. Don't create any more inventory or work-in-process than is necessary to maximize throughput!

Remember: The key is not just to eliminate the bottleneck-step of a particular system, but to elevate any complete system or business activity that constrains the throughput of the entire business. All of your core business systems and processes must work in synchronization to achieve the optimum result. While efficiency and cost cutting are important, the best measurement of real improvement is increased throughput—revenue and profit.

In my experience with small businesses, insufficient sales are usually the major constraint on the throughput of the business. No matter how efficient the operation, without a steady flow of sales into the pipeline, the output is always disappointing.

By the way, your cost of goods plus overhead expenses create a monthly sales break-even point for your business. Throughput should cover those costs as early in the month as possible. You only make a profit on orders shipped after you reach the break-even point!

TOC in Action

Kid's Korner manufactures and distributes a unique line of children's furniture and accessories through five retail stores located in shopping malls. Owners want to double annual sales from three to six million dollars without the cost of adding more stores. They also want to preserve the margin in their product by staying in the retail market. They decide to put their available resources into Internet marketing.

The first constraint the owners face is that not enough people visit their sorry website. They hire a person skilled at search engine optimization (SEO) and Google Ads to improve online traffic. With more people coming to the site, their constraint is now the low percentage of visitors who become paying customers.

The owners hire a professional copywriter to improve their message and add an irresistible offer of free shipping. To their surprise and excitement, product sales start to take off! Sales throughput, however, does not increase as expected. They soon discover the next constraint, their inability to fulfill all the orders on a timely basis. The company adds another person to their bottleneck shipping department, and the problem is solved; sales throughput goes up.

The results from the website continue to exceed the owner's expectations, but now they can't keep all of their products in stock—a new constraint to overcome. For example, they have a line of lamps that come in twelve different styles. Production is hampered because they must break down and set up the production line for each style.

A review of sales data shows that four lamp models account for 75% of their lamp revenue (see 80-20 Rule). They make a difficult decision to trim the models to four. A miracle occurs! While they lose a few sales, production is much more efficient and the throughput on lamps dramatically increases—overall business throughput also jumps.

Lamp production has improved enough that sales again become the constraint for this item. The owners decide to take advantage of the productivity and warehouse the excess inventory. This proves to be a costly decision. It ties up needed cash. Demand drops drastically on one of the stocked lamps, and a production flaw, not caught during the inventory buildup, causes a significant amount of rejects and waste.

The owners revise their strategy and begin to pace lamp production with sales—no inventory buildup of potentially obsolete items, no cash sitting on shelves, no hidden production flaws. They discover that more profit is made when sales and production flow through an evenly paced business system.

By applying the Theory of Constraints, the owners of Kid's Korner focused on the critical systems and processes that would increase throughput and help them reach their six-million-dollar goal.

While you may have a different business model, these TOC principles also pertain to your company.

Now, go find the constraints—weak links, bottlenecks, obstacles—that are hindering the throughput of your business!

 

The Next Step...

Tags: Laws/Principles, Efficiency/Speed

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.

 

The Next Step...

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

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!

 

The Next Step...

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

Voice of the Customer: Four Things That Will Earn You an “A”!

Posted byRon Carroll

After all my children left the nest, my wife and I decided to build a smaller home at Thanksgiving Point, Utah. Everyone knows that building a house can be a painful process. Like all customers, I was primarily interested in four things—quality, speed, value, and a pleasurable buying experience.

Voice of the Customer - Home Construction

Following our move-in, I had a casual conversation with some of my new neighbors. We talked about our home-building experience. The consensus was that the builder deserved a grade of “B.” He could have easily gotten an “A” (and also put more money in his pocket), if he just applied a little Systems Thinking.

I tried to offer some constructive ideas along the way. However, the builder always gave me a polite nod and continued doing things as before. He was not interested in listening to the “voice of the customer"—ME!

Quality, Speed, Value and Buying Experience

The builder’s major weakness was related to quality issues. Below are a few examples of needless waste that could have been eliminated with some simple system improvements. 

  • The builder ordered the wrong size door for a closet. It was returned. The replacement door was the right size but opened the wrong direction. It was returned again. The third door had the wrong style hinges. Finally, the right door arrived. The carpenter, of course, had to make a special trip back to hang the door, and the painter had to come again to paint it.

  • The subcontractor who poured the driveway forgot to lay a sprinkler pipe under the concrete. The landscape company had to run two pipes and electrical wire three-hundred feet around the house to get to the other side of the driveway, just twenty-five feet away.

  • The builder buys kitchen cabinets from Missouri (high humidity), where I assume he gets a better deal. The cabinets were installed in the very dry climate of Utah. Five of the cabinet doors warped in the first week. The builder said, “Don’t worry. It happens all the time. They are under warranty, and the manufacturer will replace them.” (Do you see anything wrong with this picture?)

After the footings and foundation walls were poured, Eric, the project foreman, told us we were on a thirty-nine-day schedule to completion and move-in. I calculated the date in my mind and thought he could never do it. To my surprise, the house was finished exactly on time. He gets an “A” for speed!

My wife and I shopped around before buying the house, so we felt it was a good value. The overall buying experience also met our expectations except for the frequent mistakes—most of which were fixed. The problems that couldn’t be fixed, we will have to live with. (I will probably murmur for a while and then forget about them.)

Our real estate agent was great, and Eric the foreman was a gem. He did everything possible to solve problems and keep us happy. He was patient, diligent, accessible, and easy to work with. Eric made all the difference!

A Simple Checklist

So, you can see, the builder did a pretty good job. His quality problems—with the accompanying waste of time and materials—could largely be eliminated if he were to provide a specific “builder’s checklist” to each of the twenty or so subcontractors hired to work on the house.

For example, the checklist for the concrete subcontractor might include: 1) Put expansion joints every ten feet, 2) Lay three-quarter inch sprinkler pipe under the driveway before pouring, and 3) Clean concrete splatter from house siding, door threshold, etc.

A signed checklist submitted with the vendor invoice keeps everyone informed that the task was completed as expected. This simple but important step added to the process will also prevent subcontractors from being victims of their own slip-ups. Everyone comes out ahead!

Let's be honest. Not all mistakes can be eliminated. However, good business systems will avoid the most common and repeated ones. You should strive to be at least a 4 Sigma company, as well as better, faster and cheaper than your competition.

How Would Customer's Grade Your Company?

Eric didn’t ask, but I am going to write him a letter of reference. He was an outstanding foreman and a great asset to his employer.

Good things happen when companies listen and build upon the voice of the customer to create a culture of excellence. Are you listening? What grade would your customers give you? If you don't know, maybe you should ask them!

 

The Next Step...

Tags: Systems Thinker, Business Systems, Customer Retention, Quality, Efficiency/Speed, System Example

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

Ten Tips to Increase Employee Productivity!

Posted byRon Carroll

The productivity of business operations can make or break your company. High productivity doesn’t happen by itself. However, dramatic improvements are common when you apply correct principles to elevate your people and processes.

Employee Productivity

Early in my career, and coming as a pleasant surprise, I doubled productivity in a manufacturing environment by applying some of the principles below. At the time, I was amazed by the results. It seemed like a miracle. Now I understand the productivity gains as simple Cause and Effect.

How to Create a Productive Workforce

  1. Be sure that each employee is a good fit to their work assignment. Keep in mind that people perform at their highest potential only when they are focusing on the most valuable use of their time. Avoid using highly-paid people for lower-value work.

  2. Invest in the learning and growth of your workforce. Provide clear job descriptions, relevant training (80% hands-on, 20% classroom), and educational activities such as in-house workshops. Tom Peters said, "If your company is doing well, double your training budget; if your company is not doing well, quadruple it!”

  3. Set performance standards, stretch-goals, and schedules or deadlines that engage workers and give them a target to shoot for. Productivity increases as people get closer to the goal, so make them short-term. Hold workers accountable for their results.

  4. Develop a business culture where productivity is recognized and rewarded. (This begins by putting people into effective business systems and processes.) Turn work into a game and keep score; people work harder at play than they do at work. Add incentives, fun, team competition, and don’t forget to celebrate victories. “When employees are happy, they are more creative and productive" (Daniel Gilbert, “January-February 2012 Harvard Business Review”).

  5. Measuring performance drives productivity and improvement. “When performance is measured, performance improves. When performance is measured and reported, the rate of improvement accelerates” (Thomas Monson, business/religious leader). Be sure to identify and carefully monitor your key performance indicators.

  6. To improve the productivity of any business activity, increase the frequency of performance feedback to those engaged in the activity; the more frequent the feedback, the better the results. It is best when workers know where they stand in relation to goals, without waiting for others to tell them.

  7. Create small work-group teams that bring added resources, talents, ideas, and energy toward the accomplishment of organizational goals. (The whole really is greater than the sum of its parts!) Teamwork tends to bring the best out in people and is essential in any great human endeavor.

  8. Focus-Finish-Focus-Finish. Multi-tasking, “wearing multiple hats,” or being “spread too thin” are signs of a start-stop work-flow that destroys continuity, momentum and productivity. When people focus on one task at a time, they are most efficient at getting work done.

  9. Address negative attitudes or personal issues of employees. For example, take action if they don’t like their job, supervisor, or co-workers, or when they have individual or family problems. Stop excessive chit-chat, personal phone calls, or wasting time on the Internet. These productivity busters will also diminish the effectiveness of co-workers!

  10. Avoid administrative meetings that kill time for a lot of people. Instead, use email or memos to keep people informed. The meetings that boost productivity include job training and process improvement or business improvement workshops.

Best Productivity Tip of All

Creating a work environment with good business systems and the ten productivity boosters described above will encourage discipline and excellence, and put more money in the pockets of you and your stakeholders—GUARANTEED!

Now, here is a bonus tip: When people enjoy their work and are performing at their best, they will also stay with the company longer. Retention of good people is perhaps the best productivity booster of all.

Related Article:
Ten Tips to Increase the Productivity of Your Business Processes!

 

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Tags: Business Systems, People, Improvement, Laws/Principles, Efficiency/Speed

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!

 

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

Repetition—The Boring Road to Riches!

Posted byRon Carroll

Recently, I awoke from a vivid dream. I was standing in line at a Krispy Kreme donut factory and feeling the most pleasant sensation as I watched those hypnotizing pastries pass under the frosting falls and down the conveyor belt toward the finish line. It was heaven.

System Repetition

However, before you jump to any conclusions, you should know that my dream-state was not focused on the melt-in-your-mouth donuts. Instead, I was mesmerized by the manufacturing system that produced six perfect donuts every second of every minute of every hour. (Even when I dream, I’m a Systems Thinker.)

I marveled at the power of this repetitive process to consistently earn money for the business owner. Those little donuts could just as well have been quarters—the profit on a donut—coming off the end of the conveyor belt.

Wouldn’t you like a company where you could open the door every morning, flip a switch and everything would start humming along, making you money? You may not have an automated factory; however, it is possible to create business systems and processes—marketing, hiring, training, customer service, order fulfillment, and so forth—that work consistently every day to accomplish your business and financial objectives.

Repetition Generates Profit

Being innovative gets me excited. I love to create and try new things. Innovation also attracts customers and creates buzz in the marketplace. However, the daily repetition of effective business systems and processes is what generates profit. I REPEAT: THE DAILY REPETITION OF EFFECTIVE BUSINESS SYSTEMS AND PROCESSES IS WHAT GENERATES PROFIT!

Those boring and repetitive routines will make your business remarkable. People will see your company as being organized, consistent, predictable, standardized, reliable, orderly, disciplined, and trustworthy. Repetition increases employee productivity and quality while lowering cost. It engenders confidence in customers and keeps them coming back for more.

Nature is Our Best Example

Ralph Waldo Emerson said, “Nature is an endless combination and repetition of a very few laws (American Poet, Lecturer and Essayist, 1803-1882). Like Nature, a business is a unique organism that operates best when there is a harmonious interaction of its vital systems. Repetition is the steady heartbeat of a prosperous organization.

You can only leverage the profit-generating power of repetition by implementing effective operational systems and processes that consistently produce your version of “melt-in-your-mouth donuts.” There is no other way!

The ultimate reward for creating a systematized business is the opportunity to hire someone who can run it for you, replicate it in other markets, or sell it for top dollar.

Just like Krispy Kreme, repetition is a key ingredient for you to enjoy the sweet smell of success!

 

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Tags: Business Systems, Laws/Principles, Quality, Efficiency/Speed, System Example