8 steps to organizational efficiency

Regardless of how you define success, there are many strategies that will help a business achieve it. The most important question to answer is ‘Why does one business thrive in a down economy while dozens of others struggle just to survive?' There are many reasons ranging from having great staff to targeting the ideal market. No matter your strength or strategy, no business can achieve maximum benefit unless it is operating efficiently. Anything less will result in wasted dollars and wasted time, expensive and unrecoverable once gone.

Efficiency becomes the critical aspect for success in the coming year and beyond. With competition fierce and price a major consideration for all, only those firms that minimize overhead and maximize output will be winners.

The trick to winning in the stock market is buy low, sell high. Unfortunately most investors tend to sell when stocks are on sale and buy when they're selling at premium prices. The trick to winning in business is to sell needed products and services for a fair price with minimum cost.

This approach is highly sensitive to leadership's ability to provide laser-like focus with respect to value delivered, the market being served and the manner in which that product or service provides value to the customer.

Once focus is created, high levels of performance from staff and organizational infrastructure is next. Ultimately this means ensuring everyone is working towards common goals and leveraging the collective wisdom, talent and efforts of everyone in the business. This is what I call performance.

The Elusive Objective

Performance begs for consistency, and consistency can create a staleness brought on by repetition and boredom. If your business keeps doing what it's always done, your deliverables will become stale and easy competition. Hence, the need to innovate and experiment. Therein lays the Catch-22: The more you change the less consistent and dependable you become, and the harder it is to perform; to be efficient and avoid mistakes.

Only nimble firms that adapt quickly are able to stay ahead of trends while maintaining value and interest. The ability to keep your business focused while looking for new products and services is what innovation is all about. Doing so efficiently is like trying to cook a unique, tasty meal from scratch without wasting ingredients or time preparing it.

If you can figure out how to do that, you are well on your way to success. I define success as increasing capacity without increasing overhead which means greater gross profit.

The Multiplying Effect of Leverage

In the book The Goal by Eliyahu M. Goldratt, the reader is taken on a roller coaster ride of personal and business complications that undermine efficiency at every turn. The story describes the personal and professional life of a plant manager struggling with his marriage and his manufacturing facility.

The main character, Al Rogo, battles with conventional manufacturing wisdom while trying to achieve seemingly impossible results. Only when failure comes knocking on his door just as his wife begins to question their marriage does he accept the fact that things have to change.

Rogo comes to understand that traditional wisdom leads to traditional results. One man has only so many hours in the day and can only do so much. This is when he stops looking at his plant as a manufacturing facility and begins looking at it scientifically with an eye toward efficiency.

What ensues as the book winds its way through the story is a study of what to do and what not to do. With the help of his staff, Rogo begins to measure and adjust systems and processes. As he makes changes, success leads to problems that pop up in the most unlikely of places. The story makes you feel like Rogo is at the carnival playing Whack-a-mole.

By the end of the book, the plant is producing more finished product than other plants in the system in a fraction of the time and with greater profits.

The plant's success springs from a well thought out and documented series of processes that formalize measurement, planning, and adjustments. Eventually he finds the magic combination of systems and structure that allow his staff to perform at unheard of levels. In the end, they become a model for efficiency and profit, and Rogo is promoted to Division President overseeing all of the company's manufacturing facilities.

8 Simple Steps

How do you achieve this in your business? The answer is found in 8 simple steps.

  1. Identify your ethical framework, your values. This will define how employees should act under stress or difficult circumstances and provides the basis for your corporate culture.
  2. Describe the business you're building. The description must be clear and concise, creating a picture in every employee's mind of what the organization will become.
  3. Explain the value the business delivers to its clients in the simplest, most basic form.
  4. Document your strategies and tactics. Lay out the details behind delivering the value described above along with the structure of the organization, how it works, and how it will lead to what you are building.
  5. Explain how you sell your products and services. Describes how you will promote them and the markets they are expected to serve.
  6. Be crystal clear about what each person is responsible for. Assign specific goals and define boundaries within which each contributor should work to achieve them.
  7. Design how work flows through your business. This allows everyone to understand processes that occur before and after they are involved to ensure effective execution in their respective areas.
  8. Create a communications plan that ensures information is shared with the appropriate people at the appropriate time. Your plan should include everyone that is touched by your organization, the manner in which they need to be communicated with, the information they need, and the frequency with which that communication must occur.
This is what I call the Foundation of business. The problems of every organization, no matter how large or difficult they may be, are created by failure to fully execute each of these 8 steps.

Approach your business with the singular purpose of completing each of the 8 steps above and you will be well on your way to increased capacity and reduced overhead. And that is where profit comes from.

Author:.

Larry Mandelberg is a business consultant specializing in helping entrepreneurial companies through the go-go stage of development and become professional organizatoins.

With over 30 years experience as CEO and consultant, Mandelberg has has launched 4 start-ups, led a merger, and headed a successful turn-around. He is a frequent speaker at business events throughout the western U.S. Larry has been writing his 'Eyes on Business' column for the Sacramento Business Journ...

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Have a question for Larry?

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Hannah Wanjiru
25th April 2016 9:17am
Hi, I work at a referral hospital and we treat cancer patients from all over the country. A good number of these patients can/should be treated at other peripheral facilities but most of these other hospitals are understaffed (lack specialists) and also lack the capacity to provide care to cancer patients (chemotherapy and radiation therapy). How can we efficiently reduce the number of patients coming to the referral hospital without locking out those who need treatment?
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Larry Mandelberg
25th April 2016 11:17am
Your question may require a more robust dialogue than this forum allows. Let me begin with some questions and please know that my intent is not to be judgmental or critical, it is to gather information and gain clarity: - There are many meanings for a referral hospital, what type yours is? It sounds like you do a lot of treatment, so I assume you are a hospital that is the recipient of referrals from many other hospitals. - You also said many patients should be treated at other peripheral ... Read More

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Hannah Wanjiru
26th April 2016 7:46am
Thanks for your response, I'd like to possibly clarify what i meant: 1. Referral hospital I mean that we receive referrals from other hospitals within the country 2. In an ideal situation the peripheral hospitals should be able to manage most of these cases that they refer to us but they are not able to do so because they lack the expertise and capacity to do so. So this means that they refer all their cancer patients to us for treatment, leading to very high patient numbers and a ... Read More

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Larry Mandelberg
26th April 2016 11:44pm
Sounds like youre saying the peripheral facilities are either unaware of what they can do that would be effective and appropriate, dont know how to do some of those things, or know and just dont want to. So, depending on the why, and with totally insufficient evaluation of the issue, it sounds like you have three options: - a technology solution that allows for some real-time distance diagnosis and possibly mentoring on evaluation and recommendations for treatment options - training and some ... Read More

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