By Tim Connor, Rodeo! Performance Group, Inc.
Teams seem to move in and out of vogue, but the simple fact is that 99% of business is performed in concert with other people in the organization. If that concert is well orchestrated, the outcome is beautiful and valuable; if it’s NOT, the effect is the same as fingernails running down a blackboard. Teamwork is the breath of business life.
Start with Your Business’s Framework
As the framework of a building defines its final shape, so it also defines its final product quality. Unfortunately in today’s businesses, a commonly used framework has had an unintended but disastrous effect on business quality: that framework is the Generally Accepted Accounting Principles. These accounting principles – GAAP for short – are very well organized and commonly used. The problem they cause arises from their assumption that controlling costs in the functions of the business, (functions such as accounting, production, sales, etc.) will automatically control costs across the whole organization. That doesn’t work.
How Is Your Product Produced?
A business’s product, whether it’s held in the hand orma service that’s experienced, is produced, sold, and serviced by a people from across the company. It has to be designed or planned first, then assembled or organized. Someone needs to contact the customer and point out its benefits, and someone else makes sure it’s shipped. Follow up is provided after the sale, and if a problem occurs someone has to be sure it’s corrected promptly and well. Do you see the movement in this large process? It’s horizontal. But GAAP organizes a company functionally, or in a vertical direction. The result is that authority, departmental flow, and budgeting move up and down, and really have nothing to do with the horizontal flow needs of the company’s core process at all. There’s a name for this, by the way, it’s called “silos”; and it’s common in U.S. companies.
What’s the result? Department policies and procedures interfere with the flow of the production process. Productivity drops, costs go up instead of being contained, and conflict erupts throughout the organization. That’s not even mentioning the drop in quality which is obvious to external customers. Dr. Edwards Deming estimated that up to 90% of business processes are waste, most due to poor organization of the process itself.
Can Anything Be Done about It?
One of the easiest solutions is to stand back and look at that horizontal process from a team perspective. What does that mean? It means starting at the end: What does the customer want?, and then backing through the process toward the beginning, asking along the way: What has to be done to make this work? This sounds easy, but it gets harder as the size of the organization increases. The bigger the company, the more territorial departments tend to be, and the more demanding the budgeting process imposed by GAAP.
An Example of a Team Approach
In one organization, a large hospital, the issue came down to the flow of inpatients through the institution. Since payment was on a fixed basis (a set payment for treatment of a specific medical problem), it was prudent to make the patients as well as possible and discharge them in a timely manner. Doing this allowed beds to open up for other patients to be treated. The executive staff knew that getting each patient treated in an optimum time – not too short, not too long, just enough to get better –allowed the hospital to treat more patients, and kept finances on a more even keel.
Since many department-based teams had tried and failed to make lasting improvement in the lengthy stays, a team was chartered to approach the analyze the way the process really flowed – across department lines. Team members were pulled from all the involved departments, and charged to find out if length of stay could be shortened by removing waste and rework from the flow. The team learned that the average revenue generated per patient day (one patient in one bed for one day) was about $3000. Their goal, then, became the removal of process waste, shortening the overall length of stay and opening up beds to generate revenue.
One of the first things the team found was that departments were being penalized for working to shorten length of stay! Now, don’t get the wrong idea, this wasn’t done intentionally. But GAAP dictated that the way to keep costs down overall was to keep costs down in the various departments. Each department head therefore lowered those costs in the best way possible, which usually meant limiting staff. But the limited staff meant that the overall process was hurt by late test results, missing reports, or slow support response. When the team members discovered this, the team was able to show the execs that by optimizing staff levels (putting the right number of people on instead of keeping staff artificially low) the extra staff costs would be offset by the new revenue.
An $12 Million Dollar Benefit
There was some trepidation among team members in making their recommendations, because the cost of increasing staff was calculated to come to about $200,000. But the team’s plan was implemented, and length of stay dropped drastically within 3 months. In fact, the saved time and newly opened beds allowed enough new admissions that the hospital projected new revenues of $12 million, offsetting the $200,000 expenditure by a significant amount(!).
But there was another benefit to this as well. Because improvements actually followed the flow of the service delivery process (inpatient care), hospital staff from across the departments could see that progress was really being made. Patients were seen faster and actually got better faster. Physicians were happier because they were able to get information quickly and do a better job with their patients. And best of all, staff felt they had enough people to do the job right, and could see the benefits they were providing. Morale shot up across the organization.
How Can This Help You?
So employing teams is really systematically using the people you have to carefully plan and deliver your processes. Organizing your business to do this can add considerably to your bottom line, and take morale to new heights. What would it be worth to your business?