2022 Private Equity Scorecard: Would've, Should've, Could've Plaguing Your Thoughts?

We suggest embracing tiny improvements for powerful gains.?

As 2022 ends, it’s a natural time for reflection.?Pondering the “would haves, should haves, and could haves,” is natural.?Those of us with a continuous improvement mind-set will embrace this sort of reflection, however it can also feel punishing.???As you look to improve your company’s performance in 2023, perhaps setting an expectation to improve operations by 1% is an approach worth exploring.?While it may not be as sexy as a major core-process redesign of operations, it’s something that could provide major financial gains.

At The ProAction Group we believe that small changes can yield big results.??In Atomic Habits: An Easy and Proven Way to Build Good Habits and Break Bad Ones,?James Clear provides a playbook on how to make durable and long-lasting habits by compounding small improvements over long periods of time to have game changing impact.????

In our work, we've recognized some common mistakes with operational improvement initiatives:

Starting with huge initiatives, and chasing perfection:? ?It’s great to have big financial targets, but big targets can lead one to believe that big changes are necessary to achieve big goals.?That is not necessarily the case.?Borrowing an analogy from the movie Moneyball, we try to hit a home-run every time we step up to the plate. Not only is this unrealistic, but it’s also taxing on an organization. As an example, and continuing with the baseball analogy, we often find that 3 singles can lead to 30% to 60% (or more) increase in EBITDA.??As part of the process, we find that if we can also reduce the cost of purchased goods a bit, increase velocity a bit ,and achieve 10% growth -- that it quickly becomes a 37% improvement!

Embracing goals before systems:?Being too outcome-oriented can distract us from having the right processes in place to make the new changes feel effortless and scalable. ?Whether it is people development, process improvement, or technology enhancements, the idea of making 1% improvements in operations can compound to big gains over time.

If you are open to advice on identifying and planning for 1% improvements that provide powerful gains, please contact us. We’d be glad to help. Learn more at www.proactiongroup.com.