Process Overload and Its Impact on Business

managers resource handbook

 

How a Business Reduced Its Competitive Advantage Through Process Overload

 

The old risk and reward adage in business suggests that the higher one’s risk, the higher the reward will be.  Like a game of poker, high risk maneuvers can pay one back significantly if successful.  But high risk scenarios can also be severely detrimental should one fall down on their luck.

It is for this reason that many businesses tend to be risk averse and prefer control and predictability when it comes to the firm’s performance.  Creating 25% return on investment in a low risk business deal is far more enticing than an ROI of 50%, with only a 20% probability of success.  But how a business balances risk and reward is the subject of debate.  While continuous high risk business deals are not likely to end well, firms need to equally consider how predictable execution can make them so risk averse that it ultimately hurts the business.

As an example, consider a business I recently work with, which was very profitable, growing, and stable.   Despite these characteristics, there had been pockets of costly mistakes that impacted some key customers.  In very short terms, the business had won several design-and-build projects, but failed to deliver on its promises.

Mistake #1

Leading up to these costly mistakes were some key decisions concerning the size of the firm.  Known to be conservative, the firm had placed an extremely tight grip on hiring and staffing levels, particularly after the global financial crisis in 2009.  As the business improved with the recovering economy, though, hiring was kept to a minimum.  Frequent complaints of about manpower and ability to perform were heard.  Individuals found their names located on several organizational charts within the business, reflective of their extra duties.  The result was noticeably long days and a worn out work force.

The limited resources had a trickle down effect, particularly on the large scale projects with the company’s key customers.  In one of the most notable instances, the firm failed to fully evaluate and digest the customer’s requirements.  To put the errors into perspective, it was as if the firm incorporated 1 meter tall windows into the design of an office building, when the customer had clearly stated that all windows were to be 1.5 meters high in the documentation.  As a result of such embarrassing mistakes, several of these projects grew to be significantly over cost and behind schedule.

The primary culprit for missing the mark was a constrained organization – not enough qualified people to properly evaluate customer requirements, and insufficient senior employees to provide guidance and support.  Eventually, the company was overspent by millions on these projects and behind schedule by a matter of years.  Naturally, the customers were extremely unhappy.

Mistake #2

In response to such blunders, like a pendulum, the company swung the other way with many of its practices.  It sought solutions for the mistakes and the pain it had incurred.  Its goal was better performance of its large scale projects.  Moreover, the firm wanted predictable execution.  To do so, it sought ways to reduce the fire-fighting and stop bleeding cash to prevent the mistakes it had made in the past.

The problems that had occurred were indeed preventable, and the decisions and details leading up to mistakes were well understood – but not at the decision maker level.  Projects had been understaffed, and employees openly admitting the quality of their work suffered because they did not have enough time to be thorough.  Unfortunately, during its search for improved ways to execute large programs, the senior business leaders failed to engage the working level of the firm concerning their knowledge of the mistakes, as well as their ideas and solutions.

Mistake #3

As it turned out, the firm’s senior leaders believed that additional rigor and monitoring were required to improve its execution.  To this end, the firm quickly instituted a series of elaborate processes, controls, reviews and checkpoints for all new projects.  In tandem, it restructured and assigned highly experienced professionals to serve as watchdogs and gatekeepers.  Their job was to review projects on a regular basis to ensure vitality, and their performance was measured based on flawless implementation of the firm’s design work.  Oddly enough, they were not held accountable for project schedules.   Despite the addition of such layers, staffing levels still did not budge.

The new mode of operation for the business was outlined with the right goals in mind.  The extensive internal rigor was designed to deliver immaculate results, on time and on budget to its customers.  It was about creating predictable execution and eliminating all risk exposure.  However, as the opening phrase of this story suggests, if there is no risk, there will be no reward.

Predictably, the desired results were not achieved.  Instead of improving execution, the process rigor that had been imposed began to paralyze the business.  The gatekeepers routinely blocked the way, requesting additional data and supporting evidence.   Periodic meetings with executives resulted in frequent changes in direction.  The number of forms, documents and paperwork to be filled out suffocated employees.

In essence, the business had implemented such strict process controls and relentless checkpoints, that it slowed its pace of operation to a crawl.  The new processes had so many steps that employees joked about spending more time updating PowerPoint slides than doing their actual jobs.

The Impact

While this was going on, I sat down with one employee who was clearly frustrated.  He expressed how he had been through seven iterations of a checkpoint review.  During each review, he received additional requests for more data to satisfy the watchdog’s demands to pass the checkpoint.   Like many other employees, he joked about spending more time updating his slide presentation than doing valuable work.  “The customer doesn’t care about the details I’ve been asked to address seven times.  At this point, I’m not doing anything the customer will see.  This is no longer helping improve my high-rise design, it’s making me prove I did my homework.”  He continued.  “I understand the intent of what we’re trying to do.  But we are risk adverting ourselves out of business.”

From additional conversations I had with employees, similar sentiments were heard.  A recurring source of frustration was that the continuous unilateral flow of direction and instructions.  Decisions were being made at the top of the organization and passed down with lightning speed.  Individuals at the bottom, who were responsible for satisfying the objectives, had little outlet to voice concern.  While created with great intent, the process overload and inherent distrust of the employees capabilities had created an unhappy workforce, unhappy customers, and reduced competitive advantage.

The Lesson

There are three great lessons here for managers and businesses seeking to create structure and processes to help their businesses perform.

1.      Processes As a Backbone

Business processes and methods, when done correctly, serve as the backbone for a firm.  They offer deliberate roadmaps and blueprints for how to solve problems.  Like a skeleton, processes and guidelines provide a basic framework and structure around which muscle and strength are formed.  But just like the human spine, the backbone is flexible, allowing the body to move and flex as necessary.  In short, process infrastructure needs to serve as general framework for operation.

In the case of this firm, the processes were inflexible and hindered the pace at which it could do business.  The pace of operation reduced so significantly, though, that the firm began to lose on new contract bids.

2.      Bilateral Process Development

Classic theory behind organizations suggests the optimal approach to defining the business processes and controls is to share knowledge between the working level and the upper levels of the organization.  In this manner, the upper level provides the vision and the working level outlines the means of meeting the vision.  When it comes to developing radical new business processes, using a bilateral approach will ensure the decision makers and decision followers outline the processes and resourcing plans that will yield the desired results.

 For the company that is the subject of this story, the process rigor that was implemented with haste and untested.  It cast the vision of senior leadership, but failed to include input from those who had to follow the processes.

3.      Listen to The Organization

In the case of this company, there were clear signals of problems – verbal conversations, extensive working hours.  Despite the data, the firm opted to look the other way and hope for the best.  When you are in a leadership role, it is extremely important that you look for the messages and signals your organization is sending you.  Managers and business leaders who can observe and remain in tune with what the organization is experiencing will be able to quickly adjust to mounting pressure.

Closing Thoughts

The takeaway from the examples provided above is that while processes offer a great means of structure, but can be just as harmful when poorly conceived.  Furthermore, the upper levels of the organization did not engage lower levels of the firm to identify ways of preventing the mistakes it had made in the past.  Should the senior leaders have sought input, it would have forced some open discussions about how large scale projects were staffed.

Business is complex, and there is a tendency to outline predictable steps to getting things done.  To this point, many companies have successfully established roadmaps and guidelines for how to create desired results.  These successful examples of business processes offer direction, but permit flexibility and customization.  Further, they define a primary path to the destination while identifying alternate routes.  Such adaptability allows businesses to evaluate appropriate staffing levels, use common sense and eliminate non-value added activity.

 

Additional Resources

Is Organizational Friction Killing Productivity?  (White Paper)

Common Knowledge or Common Sense?  (Blog Post)

 

 

 

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