One of the distinctive features of the development and successful functioning of business in the new economic reality is its optimal sufficiency, Dmitry Leus, an entrepreneur and banking and financial services professional believes
Optimization is in the trend! Such a conclusion could be made if we analyze the actions of many strong players of the domestic and world market over the past few years. Almost every second company one way or another attempts to optimize something, increase efficiency and start to dispose of its material and nonmaterial resources (use the so-called Lean-approach) more competently, reach a new level of development. At the heart of this development are changes that begin and end first of all in the head. They begin, as a rule, in the head of the owner or top manager, and end in the head of an ordinary employee.
This is the most ideal option. The option, when the objectives of optimization and result are clearly understood, the actions are clear and agreed by all participants, the resources are sufficient, and the risks are taken into account and assessed. However, in reality this is not always the case. Over the past few years, I have often been invited by influential players of European business market as an independent financial adviser to analyze their current situation. This significant practical experience and insight allowed me to pick out the main and most popular mistakes that “reformers” make.
Typical mistakes of “reformers”
Very few companies think about the timeliness of introducing change in order to keep and strengthen their own position in the market. When everything is going well, the sales plan is implementing, the profit is growing (although at a much lower rate than the revenue), it seems as though there is no special need to think about what will happen tomorrow, and how steadily your business will work in this “tomorrow “. But as soon as the situation worsens, and profit starts fading fast, many people start “optimizing” their business and do it the way they deem it necessary.
Most often they resort to the method of abrupt reduction of all costs and apply the so-called “method of mathematical equality”, the essence of which is that the result in the form of “Profit” should remain unchanged for any values of “Income” and “Costs”. However, the result becomes even worse, and the company enters the “planning” state (using aviation terminology) when the “engines” are practically not working and the fate of the whole “airplane” depends only on the ability and competence of the only person—pilot-leader. Among the typical mistakes dealing with the process of business optimization the most distinctive are the following:
- Lack of clear and correctly formulated goals of change. They can be started under the auspices of “something needs to be changed—so let’s do something”. Sometimes it seems to such reformers that the more they change, the better result they get. And they are wrong;
- Emphasis on secondary indicators and evaluation criteria. The case when it seems that the situation is not so critical, and we use secondary indicators for only one purpose—to calm ourselves down a little, thereby not recognizing the true state of affairs;
- Attempt to optimize chaos. In other words, your business processes are not described and there are no even minimal regulations. So, if you are trying to optimize something, you are trying to optimize the emptiness;
- Insufficient competencies of personnel involved in the process of transformation, for the introduction of these very changes. Either raise the level of existing employees in the company, or engage experts in cooperation;
- Elimination of the company’s top management from the process of change. This, in my opinion, is the most frequent and most common problem when the “poor reformer” considers his mission accomplished, simply announcing in the company that “a new reality awaits all of us and you will have to work a little more”;
- Changes from “top to bottom”, when the management of the company, without consulting with line employees who are directly engaged in the process, make decision, which is based solely on the desire and vision of the “boss.” As a rule, it has nothing common with reality. The desire to do it quickly and with a minimum level of preparation increases the negative effect.
As you may see, it is impossible to expect some change or improvements in this situation. At best, everything will go back to the way things were, and the company, making ends meet, will be able to survive for a while in the market. In the worst case the company will face the cessation of activity and bankruptcy. There is a lot of such examples. In this case the crisis is a good “indicator” of the company’s sustainability and its readiness for change. So, it happened. Many companies which thought that nothing could happen to the market ceased to exist. Many companies which even in the most stable and highly profitable periods thought about the changes and prepared for them, today are market leaders. I would not talk about “luck” in this case. No, this is the result of consistent and substantive work on the continuous optimization of business and working with a high level of efficiency.
Surely, your brain has asked you a completely logical question: “How can you effectively optimize your business so that you and your company will get benefit?” I think that every professional businessman has his own secrets and “code” ways, but I am ready to share my experience of optimizing my investment business, which is more than 10 years old player on the market.
Successful optimization based on the case of investment business
What are the secrets or reasons for successful optimization? How to correctly organize this process, so that what you conceived would be 100% successfully implemented?
You cannot start changing process without understanding what result should be reached. I suggest the basic points you may start from:
- Openly admit the problem. At the same time, you should be prepared to do two things: take full responsibility for the situation and openly announce the current state of affairs in the company. Several years ago I launched a mechanism for optimizing all the processes of my business functioning. Of course, there were some weaknesses in my business structure. And one could blame these shortcomings on top managers. But I took a different course—first of all I have decided that it is me who is responsible for the company current situation and only I could launch all important changes;
- Analyze and act on the basis of facts. Exclude opinions and advice from your attention. Operate only with verified data and believe reliable sources. This stage was very simple to me. My business philosophy involves making decisions, only based on proven facts and exact figures of investment exchanges, so any advice is immediately filtered for the presence of these two components;
- Involve the employees in the development plan and delegate some of the tasks to them. Make them your agents, sell them the need to make change just as you sell your business plan to investors, be sincere and open, gather all fears and concerns and find the answer to each of them. For every fear you must have a solution, every fear must be neutralized. Only in this case you will look ahead and reach the goal, rather than constantly looking around. The team in our company has always been strong and close-knit, so our teamwork incredibly accelerated the entire process of optimizing all business processes;
- Develop a transformation plan and start implementing it. Do not stop. Even if someone does not agree with you (and they certainly will), do not stop. Remember the main thing— change above all! Frankly speaking, I planned to optimize the company six months before its implementation. I created an effective plan and a clear timing for the transition to my business new functionality;
- Always start with yourself! If you are not ready inside, then do not begin.
Thus, if you take these rules as the basis, I can confidently guarantee that you will achieve a positive result.
In addition to this, I want to share with you some of the techniques that I personally used to optimize business processes of my company and my clients, with the help of which the whole business and all corporate management are built:
- “The optimal eventual result—OER.” Walk away from the current situation and the capabilities of your business at the moment and look at the RESULT from the point of view of your customers, partners and competitors. You can be surprised to find out that the boundaries of your transformations are much wider than you imagined before;
- “Extra element”. Simplify and eliminate unnecessary (usually duplicated) steps, actions or employees from the process. At the same time, you should keep in mind balance and separation of execution and control levels;
- “Barley-break”. Simple change in the sequence of steps can free up additional resources or increase overall efficiency;
- “Pros instead of all-round craftsmen”. The fragmentation of processes into smaller ones and the use of additional employees immediately reduces your personal dependence on all-round craftsmen, who are very difficult (and sometimes impossible) to replace.
- “Master and apprentice.” Transfer supportive processes which take a long time, but do not bring appreciable results to a less competent employee. In this case your highly paid pros will earn money and the result, as a rule, would increase by 30-40%;
- “Everything that could be done by robot should be done by robot”. Automate your processes wherever it is possible. “Take off” the routine from the employees, provide them with interesting and developing work. But do not forget to set markers and checkpoints where you can quickly and easily influence the situation and the result as a whole.
And if you did everything right, then in 2-3 months you will see new results. Not earlier. Generally speaking of terms, well-planned changes in the average company (more than 50 people) will require at least 6 months of daily, intense, systematic and painstaking work from you, before you see the first results. Be prepared for this morally (for many it seems too long), and financially (you should have a sufficient financial reserve).
Look for reserves in staff efficiency, optimize business processes and be ready for changes!