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Turning Point Financial Newsletter                                      March, 2013:  Vol 3
Greetings!

Welcome to the Turning Point Financial Newsletter.  We provide a fresh perspective on the state of your finances, strategy, and operations so you can point your business where it needs to go.

Sincerely,

Kelly Deis
Principal, Turning Point Financial, LLC

 

Improving Your Operations
4 Tell-Tale Signs of Administrative Inefficiency

 

Something just doesn't feel right - but you can't put your finger on it.  You aren't exactly sure what your staff is working on - but they are always busy.  You run a small operation, yet you seem to have almost as many administrative personnel as you do producers.  You look at your expenses, and your overhead costs are eating away at your profits. 

 
What's going on?


It is possible that your organization is not running quite as efficiently or effectively as it could be.  Here are some tell-tale signs that your administrative organization might need an overhaul:


1.  Multiple people "touch" the same process or function

It is not uncommon for processes and workflows to become fragmented or fractured across an organization.  This is the situation where many hands are involved in the same or similar process.  Consider the organization where calls from the field are not consistently routed to the same person(s) for resolution, where data entry is performed by multiple people, or management reports - with much of the same information - are generated by various groups. 
  
When many people across the organization are involved in the same function then it is prone to errors, inconsistencies and dropped balls.  Hand-offs can create inefficiencies and delays which result in added cost.  Often efforts are redundant and non-focused.  And, in many cases staff doesn't have knowledge of the broader objective or implications of the work they are preforming, possibly resulting in mis-guided actions.
  
Aligning and consolidating job functions is a simple concept.  But it is surprising how many companies find that similar activities are scattered throughout the organization - often due to fast growth, desire for expediency and/or ill-defined roles and responsibilities.

 

2. Narrow spans of control 
A narrow span of control is when a manager has just a few people reporting to him or her.  This type of management is often used when employees are less skilled and need to be closely supervised. 
  
In very small companies, narrow spans of control are often appropriate - there just isn't enough work to justify additional people.  Managers are expected to not only supervise, but also to be heavily involved in day-to-day operations. 
  
However, if this is not the case, narrow spans of control can result in a loss of accountability as more managers are involved in the same functional area.  Additionally, unnecessary management layers can add costs.  And, as more managers become involved - and more silos are created - decision-making becomes more inefficient.  Even well-qualified employees are generally less autonomous and therefore less likely to stretch to their full potential. 
  
The appropriate span of control can vary depending upon the needs of the organization and its employees.  But, if you have moved beyond being a very small business and have many one-to-one reporting relationships - there may be an opportunity for increased efficiency and decreased costs. 

 

3. Unclear roles and responsibilities  
Do your people know what they are responsible and accountable for?  Ask 5 people "who is responsible for blank" (fill in the blank:  resolving customer complaints / product XYZ sales / managing a vender relationship / inventory costs / etc).  If all 5 people quickly give you the same answer - then great! - you (and they) know who is responsible.  If, on the other hand, you get a glazed look - or multiple answers - then you know no one has ultimate responsibility for that particular item. 
  
Keep it simple - define job responsibilities, be clear on expectations and assign accountability to one person.  Write the responsibilities down - be as detailed as your employee needs it to be.   Manage it daily and make it part of their performance review.   Then, measure the outcome and reward success.

 

4. Policies and procedures are not well-articulated or understood 
Fledging and smaller organizations often don't have well documented policies and procedures.  Some don't have any, at all.  It is part of what makes an organization feel entrepreneurial - it's loose and many people thrive in that kind of environment.  This works when the organization is small and employees act as owners because - in most cases - they will do the right thing, without it needing to be well defined.  In this environment, employees feel empowered to make the rules as they go.  In a small organization with like-minded, similarly motivated people with well-defined roles and responsibilities this can work - at least for awhile.
 
However, inevitably as the organization gets larger, there is an increased need for more structure - new employees coming from larger organizations often expect more definition, workflows become more interdependent, and/or some people simply take advantage of ill-defined expectations.  Lack of clarity can lead to a drain - in both energy and dollars - and possibly put the company at legal risk.  If expectations aren't clear, people speculate on the correct course of action, or worse - chose a path which benefits them without regard to the company.   At a minimum, every company should have documented HR policies and procedures as well as well-defined financial checks and balances.
  
If you suspect that your organization might be less efficient than it could be, then consider the four points above.   If any one of them resonant, then odds are that there are opportunities for both process and cost improvement.

 

In This Issue
Improving Your Operations:
4 Tell-Tale Signs of Administrative Inefficiency
Who We Are
Turning Point Financial
provides financial, strategic, and operational consulting services to businesses in Seattle and Kitsap County.  Learn more abut Turning Point Financial's services.
 

 

Kelly Deis, Turning Point Financial
Kelly Deis, Principal

Kelly Deis is a senior finance, strategy and operations professional with an MBA from The Wharton School, over 20 years of experience (including Deloitte Consulting), and a proven track record of driving business results. Kelly brings depth and breadth of experience in all facets of finance, operations and strategy - from hands on financial management to strategic direction setting and cost reduction. 
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Is your organization structured to be as efficient and effective as possible? 

 

Are your people - and the jobs they perform - aligned with your business objectives? 

 

If you need help thinking about these and other financial, strategic and operational questions, call Turning Point Financial to schedule a free initial consultation and complimentary benchmark of industry comparables.

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