by Daniel Markovitz
Unlike suburban housing developments or modern cities, organizations don’t grow with some sort of rational, master plan. They evolve naturally over time. In urban areas, this organic development leads to a chaotic mess of narrow, twisty, confusing streets and dead-ends instead of a broad, easy to navigate grid. Just think of old European cities (or even Greenwich Village in New York).
Organizations grow in a similar fashion. Processes and pathways that were once simple and easy to negotiate when there were only 10 or 20 people in the company, become complex, inefficient, and time-consuming when the company grows to 500 or 1000 employees. Each individual increase in process complexity may make sense, but in aggregate, they significantly affect performance. Your once-nimble company becomes a lumbering behemoth that has to appoint a committee to determine how many committee meetings to hold. Pretty soon, you’re reading Facebook posts about how tough it is to deal with you, and eventually, a competitor is eating your lunch.
Bulldozing an historic neighborhood to lay down a soulless grid is bad for a city’s ambiance, but it’s not bad for a company. In fact, rebuilding your processes from the ground up with a focus on simplicity is a powerful way to improve your competitiveness and energize your staff. Netflix, for example, eliminated all the administrative labor and financial expense that went into managing paid time-off. As described in Patty McCord’s recent HBR article, the company got rid of the standard policies and tracking system and instead simply relied on employees’ judgment:
When Netflix launched, we had a standard paid-time-off policy: People got 10 vacation days, 10 holidays, and a few sick days. . . . But then Reed [Hastings, the CEO] asked, “Are companies required to give time off? If not, can’t we just handle it informally and skip the accounting rigmarole?”
Netflix did something similar with their formal travel and expense rules. The company’s policy is five words long: “Act in Netflix’s best interests.” The elimination of the formal process and “expense account police” saved time and money.
Of course, these are HR-related policies. What about processes that are more central to a company’s operations, such as product development, customer service, or materials purchasing? You can rebuild and simplify these processes just as easily by mapping them and identifying ways to eliminate handoffs between departments. Here are three principles to keep in mind.
You’re not a small company anymore. Focus on the big picture. The product development team in a sporting goods company I worked with had to deal with elaborate engineering change orders (ECOs) for even the most basic spec changes. At one point in the company’s history, these ECOs were a valuable way to track modifications and ensure that they were agreed upon. But as the company grew and communication channels were formalized, they outgrew their usefulness: between the electronic and paper forms that had to be filled out and filed, their sleek product development process looked more like a barnacle-encrusted scow. The company simplified the actual ECOs and set a higher threshold for requiring their use. The result? The developers and engineers spent more time on their core functions, reduced the number of errors and miscommunications, and reduced product development lead time by one month.
Drive authority down into the organization. Processing chargebacks from customers was a time consuming ordeal for another client, requiring three separate approvals before the credit memo could be issued. At one point in the distant past, of course, these were processed much faster, with fewer sign-offs—but as the company grew, the desire for greater oversight created a sclerotic system that bogged down the entire process. After a redesign that put more authority in the hands of the customer service agent closest to the customer, process lead-time was cut by 75%. Moreover, the change actually improved oversight of the important few customers and shipments by improving the “signal to noise ratio.”
Do a reality check on your processes. The purchasing department of another client took orders placed by customer service reps (CSRs), entered them into a spreadsheet, sent them back to the CSR for confirmation, and then submitted them to the factory for production. When this process was established years earlier, it ensured that customer orders didn’t outstrip production. Major improvements in manufacturing, however, enabled the factory to produce exactly to customer requirements. We changed the process to allow CSRs to submit orders directly to the factory, freed up the purchasing department to focus on other aspects of production, and reduced lead-time by one week.
Remember: many (most?) of your processes aren’t the result of intelligent design. They’re not necessarily the best or most efficient way to get the job done. Redesigning them with an eye towards simplicity will yield enormous benefits to your employees and your customers.