Time and Profitability
Time waits on no one and once spent it is lost.
For most organizations time is its most important asset. Waste it and it’s gone and with it the profits to keep your organization viable. How an organization spends its time can be the difference between success and failure.
Below is a tool to help assess how your organization spends time and the associated impact on profits. The tool is designed to bring awareness and understanding of the usage of time into four different quadrants.
1. Planning 5- 10%
2. Execution 85% +
3. Fire Fight < 5%
4. Crisis < 1 %
Time in this quadrant is spent on defining how and what the organization will deliver. Activities such as strategic planning, competitor analysis, product/service development, procedure definition, process mapping, performance measures and problem solving are done here.
Time spent is this quadrant is extremely valuable to your organization and should ensure your business has a focused plan for success. Depending on the size and maturity of the organization I recommend spending somewhere between 5 – 10% of the time here. The right amount is determined by the time needed to ensure the organization remains successful.
Time used here is spent delivering the products and services of your organization. In high performing businesses time spent here will be 85%+. This means 8.5 /10 or better the transaction is to standard.
To qualify as time spent in this quadrant, time must be used to meet performance standards. For instance, the time required to take a customer order and ship the product or perform the service should be in compliance with the process standard/job definition. If the required customer order information is missing or incorrect, the product is not available, you use excessive labour or other disruptions occur, that time is captured and allocated to time spent in quadrant 3 or 4. I have included an example below.
Time spent here is the incremental/reactive (Fire Fight) time spent to redo or correct for a failure. In a struggling organization time spent here can be moderate to excessive. For instance, a construction project with a 25% labor overrun, a capital project severely over budget and behind schedule or a failed service delivery would be an example of this. Any event where more labor, especially management intervention, is required than would be expected qualifies here.
Here is an example of a personal experience. I recently ordered 500 new business cards. The original order arrived and there was a minor error on the card. I called the company and, as promised, they agreed to correct it at no additional cost to me. While the original order was online it now involved a customer service representative and took approximately 20 minutes. The reorder was shipped express mail and was received about a week later. I opened the shipment and found they shipped me only 100 cards. Back on the phone again and another 20 minutes later they apologized and agreed to ship the order a third time and because they only ship in 100, 250, 500+ order sizes they informed me I would receive 500 more business cards. So now I have 1100 new business cards and this vendor spent their profit and more fulfilling the order. This could be a onetime occurrence but I doubt it!
I see these things go on everywhere. Redo’s can crush an organization’s profit and can be a leading cause of business losses. No business can sustain prolonged under-performance and the associated overspending on labor. Take a second and consider instances that occur inside your business.
To qualify as time spent in crisis, the circumstances are dire and the resulting cost/business impact would be considered extreme. Events here can be classified as internal and external.
Internal crisis are or should be controllable, whereas, external events are caused, arguably, as events beyond the control of your organization. I will explain why I say arguably, shortly.
Internal events are things like chronic labor overruns, major inventory mismanagement, extreme excess non valued added labor spending or simply failure to maintain a healthy organization culture and efficient customer focused workforce.
External causes include changes in government policy, major changes in economic conditions, changing customer preferences, disruptive competitive offerings or actions including anything from new entrants, price actions or new technology:
My arguably comments is relevant to the extent of your organization’s responsiveness to addressable events. The best example of this might be Yahoo, an undisputed market champion that fell prey to Google and others due to lack of focus and failure to correct course.
By classifying the time your organization spends in each of the quadrants, you can raise awareness and take the appropriate corrective action. This tool is intended to start conversations that will lead to addressing required changes as opposed to accepting that this is the way things work around here. Most organizations have standards; however, often the prevailing practice becomes the de facto standard. In some case an organization is knowingly underperforming and accepts this as acceptable due to weak leadership. Say for instance our standard is to return customer calls within 2 hours but call routinely don’t get make until 6 or more hours and no corrective action is initiated. Or more severe would be no investigation into labor overruns.
I recently led a strategic planning session for a client where – during a mid morning break – several managers began a conversation identifying several inefficiencies that we’re occurring and had been occurring for a long time. As I listened each manager shared their displeasure with the situation. As the break ended the conversation dropped.
Based on my observation I offered the following. First off all, you agreed this was a clear case of unnecessary disruption that was causing ongoing fire fighting to overcome these efficiencies. No one has taken ownership of any of the issues and no one has committed to addressing this issue for resolution. In short, they had accepted this as the way things were done. Reluctantly these issues were added to the ‘To-Do List’ by the leadership team.
This is not an isolated example. I have had similar experiences in many companies I have worked with. This is the low-hanging-fruit that successful organization harvest. Failure to identify and harvest the fruit results in decay and waste.
In my next post I will address how to best deal with undesirable findings in Time Management.