Soundpoint Consulting Newsletter
News and Views 

August, 2016:  Volume 44
 
 
  
Welcome to the Soundpoint Consulting Newsletter where we share our perspective on topics and highlight case studies we believe are relevant to business owners and leaders.

If you have the feeling that your finance and other administrative groups aren't functioning at their fullest, then this article is for you. 

Enjoy!
 

Answering the Efficiency Question


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 as it could be. Here are some tell-tale signs that it might need an overhaul:

1.  Multiple people "touch" the same process or function
It is not uncommon for workflows to become fragmented 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 different 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. Efforts can be redundant and non-focused. And, some staff may not have the bigger picture, resulting in mis-guided actions.

Aligning and consolidating job functions is a simple concept. That said, 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 become involved. Also, unnecessary management layers can add costs. And, as more silos are created - decision-making becomes more inefficient. 

The appropriate span of control can vary with the needs of the organization. But, if you have moved beyond being a small business and still have many one-to-one reporting relationships, there may be an opportunity to increase efficiency. 

3. Unclear roles and responsibilities  
Do your people know what they are responsible and accountable for? If you were to ask your people who is responsible for a particular activity (ie, resolving customer complaints, product sales, managing a vendor relationship or inventory costs) - would you get the same answer from everyone? If "YES", then great, the roles are clear. 

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 and be as detailed as your employees need it to be. 

Then, set goals and make it part of their annual performance review.  

4. Policies and procedures are not well-articulated or understood
Fledgling and smaller organizations often don't have well documented policies and procedures. It can be part of what makes an organization feel entrepreneurial - loose and without much structure.  
This works when the organization is small and employees act as owners. They feel empowered to make the rules as they go and they know what is expected of them.  
 
In a small organization with like-minded, similarly motivated people with well-understood roles and responsibilities this can work, at least for awhile.

As an 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. 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 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.
 
If you would like help assessing the efficiency of your business, please give us a call. We would be happy to help.

Until next month, Point Your Business Where it Needs to Go! 

Best Wishes, 
Kelly

2016, Soundpoint Consulting, LLC
Sound Consulting. Solid Results
 
Interested in learning more about Soundpoint Consulting? 

Check out our website

or Call
206.842.4922 

 

About Us
 

Kelly Deis, Turning Point Financial

Kelly Deis

President

MBA, the Wharton School

CVA, Certified Valuation Analyst

CEPA, Certified Exit Planning Analyst

CDFA, Certified Divorce Financial Analyst


What We Do
 
We deliver full business valuations reports and related services for a variety of reasons, including exit planning,divorce and potential transactions.

We provide transition planning and value enhancement strategies for business owners who are ready for retirement or their next venture.

We offer strategy, operations and financial consulting for companies wanting profitable growth, improved efficiency and increased value.

We provide financial services for those in the process of divorce and needing to untangle the complexities of a financial separation.

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