In the last two blog post, I introduced you to the concept of changing New Year’s Resolutions into New Year’s Revolutions – not in the context of overthrowing anything, but from the perspective of a cyclical and sustainable process that continually energizes your organization. Revolutions act like the flywheel on a bike, delivering significant benefit even when you’re coasting on the pedals.
Are your customer service people STILL busy, even though you’ve invested in quality initiatives? That’s a sure sign that there’s hidden sludge in your systems that simply shouldn’t be there.
• Recurring issues that have been band-aided instead of fixed for good
• Metrics that are driving the wrong behaviors by your well-intentioned customer service staff
• Shortfalls in the Customer Experience that are leaving a bad taste in your customers’ mouth… and leave them just looking for reasons to complain.
One of the easiest ways to have a “revolutionary” increase in profitability is simply to get the sludge out, and reduce your unnecessary costs to serve. It’s a lot more productive to eliminate those types of costs which are the ones actually holding you back, then to implement conventional cost-cutting with things like training, travel, and perks – which are often the costs that are moving your business forward.
Simply get it right the first time.
And if you don’t… make it right the second.
When I conduct Root Cause Marathons with private clients (which are a lot more fun and energizing than they sound!), we surface amazingly simple fixes… like the manufacturing plant who had hired 8 people to fix damaged product coming off the line… and found that about 50% of the damages were scratches in the finish due to worn-out padding on the metal shelving used to transport freshly-finished products to the next stage of assembly. They eliminated $4M in unnecessary costs out of a $40M company as a result.
Another high-end sporting gear company who was increasingly losing business to the competition finally learned that the reason was “you’re too hard to do business with!” The barcodes on their products from China were unscannable and put a lot of overhead in at the customer end, with manual inventory inputting required from the receiving end to the sales counter. They returned to profitability for the first time in 5 years when they got to the bottom of the issue and fixed it for good.
These types of easy-to-resolve issues creep into EVERY organization over time, and well-intentioned staff often just keep fixing the issue every time, instead of fixing it for good.
This year, your third Revolution means shining a spotlight on the 5 categories of issues accounting for 80% of your costs-to-serve… and getting that sludge out of your system.
When you get to the root cause, you’ll continue to find opportunities to reduce costs by 1% or more in all kinds of places – and every 1% saved will almost effortlessly drive a 16-38% increase in profitability for most organizations.
You can increase profits the hard way – by chasing cutting costs in conventional ways. Or you can create a flywheel effect in your business that changes your results just by getting the sludge out.
Revolution #3 Checklist:
5 Costly Sludge Factors Causing 80% of Your Costs
Right now, share the biggest area of sludge you’re ALREADY aware of in your business. Then spot more in the checklist.