Establish Processes for Routine Practices

Businesses get things done consistently and correctly by putting processes in place?— processes for buying things, paying bills, entering orders, and so forth. There should?also?be processes in place for doing periodic projections and making big decisions.?

Having good processes is critical for consistent business success. Overall, and as I discussed?previously , a process is working well when things happen consistently, efficiently, and with no surprises.?Today’s newsletter is about how to establish such processes, with a particular focus on daily routine practices.

[The business world has a tendency to go through fads on how to do this or that. When it comes to process, past fads include “Best Practices” and “Process Re-Engineering.” I found the latter of these two especially amusing as most of the culprit processes had never been engineered in the first place!]

Steal the Wheel

Businesses have more in common than many people realize.?This is particularly true for routine processes, something that financial auditors are well aware of. They even have names for some of the major macro processes, such as “order to cash” (i.e., the revenue cycle) and “order to pay” (i.e., the procurement cycle).?

This leads to my first suggestion: when possible, “steal the wheel.” I coined this term years ago while consolidating collapsing accounting offices in the rent-a-car business. My point to staff was simple —?don’t reinvent the “wheel” when somebody else has already figured out a good way to get things done.?

The truth is, “stealing” isn’t usually necessary. Often, companies, even competitors, will happily share how they do things. So ask and compare notes. For example, a client of mine had a call with a competitor (too far away to compete because of freight costs) that offered to share samples of its production reports.

Know Where You Differ

When comparing notes on process, understand how your business is different from others.?These differences are part of the reason customers choose your company?(hopefully, it’s not just based on price!); they represent your competitive advantage. So, spend extra time on processes that will help you maintain that advantage.

The size of the business matters, too,?so make sure you take this into account. Big companies, by necessity, do things differently than smaller ones. A very small business just needs to think about how to get things done. Big ones need to think about that, too, in addition to deciding?where?in the organization certain activities should occur.?

For example, when I consolidated the accounting offices mentioned earlier, I centralized the processing of credit card charge backs. Why? Because processing was time-sensitive but the volume in the field offices was too low to warrant a full-time person. So we were losing money.?Centralization allowed for much faster turnaround.?

Going the other way, customer service representatives — the people behind the counter or on the phone — were empowered to resolve customer complaints by giving customers a credit up to the full amount of the invoice. This is how our company chose to be different. Our competitors had bigger and better systems and processes, but they were also more costly and less nimble.

Lastly, when looking at process, always keep in mind whatever it is that your business is trying to get done.?After all, that is why the process exists in the first place. Big companies tend to get caught up in the process and forget the why. Smaller ones often don’t even know the why to begin with.?

A Few Tips…

Determine the critical path.?Decide on the work that needs to be done and look to?remove any bottlenecks ?. Why are we doing the steps? Are all the steps still needed? Where are the log jams??

Establish a means for handling exceptions.?Setting up exception-processing rules beforehand will streamline their handling when these inevitably occur. Determine which criteria must be met (or not met) as a tripwire for staff to consult with a manager. For recurring exceptions, such as when?limits of authority are exceeded ?, have a process that defines what to do.

Institutionalize the process.?Document the workflow in writing so employees can reference how to do it and do it consistently. Absent this documentation, the process will evolve over time, often not for the better. Documentation also helps new employees get up to speed and serves as a guide for vacation relief. Periodically inspect the process, too. Big companies often do this with the internal audit department.?

Eliminate redundant input.?Data input is a source of error. Thanks to IT systems these days, there is no need to input much of anything more than once. Even better, find ways for machines to input the original information.?

For example, a client of mine is making the leap from systems that are antiquated (or nonexistent) to a state-of-the-art ERP system. Their current approach to manufacturing requires lots of measurement — quantities, energy used, time elapsed, etc. The new systems will use sensors tied to manufacturing computers that will measure and electronically input that information into the ERP system, removing the possibility of human error.

Final Thoughts

Routine processes are critical to business success. So, don’t ignore them.?Make sure they are as robust as possible and you will generate more profits as a result.

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Charlie Goodrich is Founder and Principal of?Goodrich & Associates , a management consulting firm that specializes in helping its business clients solve urgent liquidity problems. He holds an MBA in Finance from the University of Chicago and a Bachelor's Degree in Economics from the University of Virginia and has over 30 years' experience in this area.