It’s All About the Process
Since processes drive performance, we need to have the right ones in place.
Every action we take is the result of a process. We need a process to get from point A to point B, to buy an item we need, to make what we eat, to fix what is broken and more. Sometimes our processes are very good and lead to desired results. Other times, our processes are not so good and cause confusion, inconsistency and poor results. To determine how effective our processes are in meeting the needs of our business, they must be reviewed, measured and evaluated regularly. Ultimately, processes drive performance.
A great way to start evaluating any of our processes is by using one of the late Stephen Covey’s Habits of Highly Effective People: Begin with the end in mind. If the process was working perfectly, what would the results be? Once we understand what a process is supposed to achieve, we can determine how effectively it is performing. If we are achieving the desired results, or close to achieving them, our process is most likely okay as is. However, if there is a large gap between the results we are seeking and those we are getting, the process needs to be modified or replaced as quickly as possible.
Processes need to be evaluated in each of the major business functions, namely sales, operations and administration. Of course, the size and structure of each of these business functions will vary from company to company, but associating the “end in mind” result with the major business function will help maintain proper focus. Remember, regardless of the structure of these business functions, we know sales sells, operations makes and administration supports.
Evaluating Sales Processes
Someone once said that “nothing happens until somebody sells something.” Therefore, the “end in mind” for sales is usually a volume of business expressed in dollars, orders or units, or a combination of all three. Sales processes typically include customer development, quoting and negotiation, and obtaining orders from customers. The process for customer development will depend on the channel of distribution employed by the company, but can be evaluated based on qualified leads generated, quote requests received, repeat orders booked, customer retention rates and possibly even website hits. Quoting effectiveness can be evaluated using the number and the value of quotes completed, as well as the percentage of quotes converted into orders. Obtaining orders, although more a function of the effectiveness of prior processes, is easy to evaluate, as incoming orders are recorded and reviewed when they are received. If any sales processes are not contributing to the overall “end in mind” sales target, they should be addressed immediately.
Evaluating Operations Processes
Similar to the statement “nothing happens until something is sold,” is the statement “a sale is not complete until the customer receives something.” The operations group is charged with converting customer needs into goods and services. The “end in mind” for operations is typically expressed in terms of cost (actual versus standard or quoted), quality (conformance to specification) and service (promises met). Operations processes usually include manufacturing, technical support, quality management, and materials management. We have many proven means for evaluating the effectiveness of manufacturing, such as first-pass yield rate, throughput time and performance efficiency. Technical support can be evaluated using tooling cost, equipment downtime, setup time and equipment programming effectiveness. The cost of non-conformance and customer returns are great tools for evaluating the effectiveness of quality management. Finally, materials management can be evaluated based on the timeliness of incoming material delivery, material cost variance, inventory turns and inventory accuracy. Any process that is not having a positive impact on the operation’s “end in mind” result is a candidate for overhaul.
Evaluating Administration Processes
“A sale is not a sale until payment is received” is a good way to summarize the importance of many administration processes. Throughout the life of a customer order, steps need to be taken not only to ensure that the product or service is completed and done properly, but also that the customer receives proper documentation and submits a complete, accurate payment. An “end in mind” result for administration likely focuses on the level of payables and receivables outstanding, although of similar importance could be employee lost time hours, worker’s compensation management or wage payment accuracy. Focusing on the numbers, accounts payable processes must effectively manage the receipt and payment of vendor invoices, while accounts receivable processes must ensure that invoices for customers are accurately generated and sent to the appropriate place in a timely manner. When evaluated, any process that does not support these essential needs and provide an up-to-date financial picture must be changed. Likewise, processes that do not maintain accurate and confidential employee records, including performance and salary information, need to be addressed and corrected.
As I stated earlier, our processes drive our performance. We need to ensure that we have the right processes in place in order to achieve the results we have in mind.