Lose Money

 

The Ideal Machine

This article is not about the money you are wasting on travel or even the fact that you don’t switch the lights out when you leave the room. I’m sure there are loads of places your wasting money on things like that, this article is about the real money you lose when your internal processes are not optimised. I also think, that the reason why more than 96% of all software firms have fewer than 10 employees, is partially due to them not optimising or even implementing processes.

So if you are running a small company and dream of running a bigger one, read on !

My experience is that companies are generally far from optimal. In short, they waste money and squander opportunity. Many are not even aware they are doing it. So I thought I’d give my quick heads up on where I think companies have the best opportunity to reverse this loss into a profit. In the spirit of all good storytellers, I’m going to attempt to fit my observations into a metaphor for your delight and delectation.

I remember a lecture once about the ‘Ideal Machine’. For those of you who don’t remember, an Ideal Machine is a hypothetical mechanical system where energy and power are not dissipated through friction, wear or other deficiencies. I started to think, if a business were an ‘ideal machine’, where would I look to see where energy (money) was being lost. So, I took the analogy one stage further and asked myself how is energy lost in a machine. The main losses are to light, sound and heat. So I’ve decided to use these three losses as an example way of introducing loss in a software business.

Light

I‘m going to use light as a great metaphor for vision. If your team does not understand the vision, strategy or direction of the company then they will not be optimal in their endeavors. For example: The company does not have a strategy to differentiate it from its competitors, therefore they never do. The marketing team produces the wrong set of messages, as they do not understand the strategy and objectives of the company. The wrong thing gets built; sometimes, even though people know it’s the wrong, they figure it’s not their responsibility. The development team feels dis-engaged with the business as they only have visibility of development tasks therefore great ideas are never captured.

Sound

I think this is a great metaphor for the loss of energy that happens when a company does not internally communicate well enough. Members of the team feel dis-engaged, as they are ‘mushroom managed’ and don’t feel included in the companies’ vision. The development team builds features that are not relevant to the target market. The executive makes incorrect strategy decisions as their view of the market is flawed, even though the sales and marketing team could have told them otherwise. Sales team fails to win a deal because it does not understand that a current benefit exists or cannot get effective input from marketing and development on a sensitive bid.

Departmental targets reduce trust between departments and encourage personal protection over company benefit. The net results are that folks don’t mention things that they know to be wrong.

Heat

Internal friction or politics generate useless noise that reduces the benefits a company can produce. Good examples of this are: Department work in Silos’ with little concern for their colleague success. A lack of trust builds up and teams tend to work in isolation. Hidden features in the product are not converted to benefit statements because the marketing team did not know they existed or where planned. The wrong features are development because of an overwhelming and uncontrolled demand from the sales team. No one cares about what is being built and staff attrition rises. The business is not somewhere people want to be. It’s just not any fun.

OK, I’m going to stop the metaphor now. The point I’m trying to make is that an effective and efficient company is one where all the parts join up properly. It is an inclusive environment, which understands that the people on the top of an organization need to be connected to the people at the bottom. Even more it understands that one of the most expensive and effective parts of any business is the people who work there. However, little attempt is made to connect the business and as a result opportunities (and key staff) are lost.

What can be done

The most important part of any business is to identify a product or service that adds value to their customers and differentiates it from its competitors. However it is really common that strategy does not include either of these parties in their definition. Incidentally, by strategy I am not talking about vision or mission statements but more about what the underlying strategy of the businesses is.

A good strategy will put blue water between you and your competitors and delight your customers. But if you don’t have one or have not communicated it to your team your chances of successful execution will be limited. So, number one thing is, determine what your strategy is. However, bear in mind that your strategy may be wrong. So test it often. If it is not working, change it. The quickest way to determine if it is wrong is to include your team and collect information from them.

The next thing is to set up an appropriate structure to ensure that necessary information is collected and distributed to your business. Be inclusive. Your team will respond well and are likely to stick around longer if they feel they are part of the journey of the company. Make your machine more efficient by tightening the connections of the various parts of your company. A loose machine will lose money!

How do I lube my joints

For me, the key objective is to get the whole team working in the same direction. They will feel better If they feel included in the direction of the business and will be more effective if they know what direction the business is heading. So a few things, some more obvious than others :

1. Your working environment: Physical walls create emotional barriers. If it is possible to have an open plan-working environment, then have one. People are tribal, if you put people in a room they will become the tribe of the room ! This makes it harder to get people to communicate effectively. Have break out area’s (with free tea, coffee and maybe a wee biscuit) and meeting rooms but try not to have offices.
2. Build a governance structure: Now I know all the young companies hate meetings and any kind of structure. The reason why you are so successful is that you just get on with it. I’m a big fan of this. I also know that the bigger companies tend to have too many ineffective meetings, it’s used as an excuse to seem busy. So somewhere along the line you will move from doing nothing to nothing doing. Be honest with yourself and re-evaluate what is working and what is not. But test yourself to see if you have enough structure in place to keep the business informed and aligned to your purpose. It’s a constant struggle but a necessary one. However, of all things please ask yourself if you are being totally re-active or if you have an end goal in mind and are truly trying to reach it. If not, you need urgently to set yourself a new target. If you do reach your target, then also be aware of the ‘now we have arrived syndrome’, that’s the one where you settle back into your own comfort zone and stop testing yourself and growing. Again, in this situation, work out where you are going next and re-communicate.
3. Have a strategy: If you have not sat down and worked out your strategy and how you are going to achieve it, do it now. By the way, a mission statement is not a strategy. A strategy will understand how you are going to attract customers and how you will differentiate between competitors. Saying something like “being best in the world” on it’s own is meaningless. Once you have agreed the strategy make sure the objectives to achieve this are known and communicated. Also make sure they are kept front of mind and current, often they will be lost to operational issues. A good way of doing this is with a balanced scorecard (see Kaplan and Norris, Harvard Business Review 1992).
4. Revisit your strategy: Guess what, you might have chosen the wrong strategy. If it is not panning out, then change it. You will have a better chance of knowing if is not working by looking into the future as well as the past. Are your original concepts still valid, has the world changed? The best way to know this is to listen to your own people and what they are hearing from the field, don’t cut them out. This means you will need to invest time to work out what communications strategy and governance works for your organisation. No matter what you are doing you need to keep internal comms alive.
5. Walk about a bit: If you are in a management position you should walk around your company a bit. Do it regularly so folks are not shocked. Talk to people in an informal way, tell them stuff if you are given the opportunity. Use your emotional intelligence sensors and try to pick up the vibe. How your team feels will have a direct result on how your customers are being treated.
6. Try to keep the secrets to a minimum: It’s often the case that managers think people are not in a ‘need to know’ situation. As a result they keep secrets, particularly to do with the performance of the company. I believe this is a mistake. If things are not looking good then your team are the people who need to fix them. Not telling them won’t help. If things are good then it’s probably because of them. Keep them informed, the decisions they make are guided by the data they have.
7. Communicate all the time: You need to work out your meetings schedules etc., and you need to have good and optimal meetings but make sure you over communicate.
8. Thank you all the time: Great performance is a great chance to give a public thank you to an employee. Not only will this raise the morale of the employee and their team, it gives a great opportunity to re-enforce why what they did was good. This re-enforcement will probably have an affect on the customer and your strategy; so don’t waste the chance to praise where possible. It is also a great way of helping to keep those great guys working in your company.

If you focus on tightening up the gaps between your departments then I think you are well on the way to optimising your performance. I think that the reason behind most inefficiency in a business can be identified as an issue of communication. The issues of communication should be smaller for smaller companies but if you are being successful be aware that these issues lie just around the corner. It is one of the main failings of a company going from ad-hoc to needing to delegate, they assume folks will just get it. They won’t and you will have to work at it. So, my friends, get out there and start talking !

The roadblock’s will be there as you grow, but if you expect them you can remove them very quickly.