Ask most family business owners their biggest concern and challenge, and they’ll tell you first margins, followed by labor costs. This month let’s focus on labor. The first question you need to address is, “Are you overstaffed?”
Overstaffed? You think this is a joke, right? Your people are barely getting their work done as it is! In fact, you are paying lots of overtime, your managers are having to work cashier shifts, etc.
Well, here’s your wake-up call for this month. Inefficient internal systems create more work, thereby creating the need for more personnel. The answer to the overstaffed question should be a YES for about 99% of petroleum companies, they just don’t know it because everyone is busy all the time!
So, if the systems are so inefficient, why don’t we change them? Usually, because we are too busy trying to catch up that we don’t have time to step back and analyze how we do our daily work. And often, we don’t spend the needed capital to automate our systems and make them efficient.
If you want to reduce labor costs and overstaffing, you absolutely must look at how you do business and streamline your business processes.
To begin streamlining, you need to understand how you’re doing things now. The easiest way to tackle that is to begin by tracking the paperwork flow in your business. For retailers, this will mean you will identify every piece of paper and every action that happens from the time you order a product until it is sold and accounted for. For wholesalers, your starting point will be a customer order, all the way through delivery, billing and final cash collection.
To tackle system efficiency, you will need to assemble a small team of employees that are intimately involved in the paper flow. And yes, they may not want to do this project since it will get them behind in their work, which they never seem to catch up on! But have them do it anyway.
Identify a quiet room where you can assemble this small team. If you don’t have a room, you will need to assemble off-site. Next, gather needed supplies including flipchart paper and a pad of sticky notes plus a pen for each person.
Their task is to put each step in the paper flow process on a sticky note and assemble those notes in sequential order on the flipchart paper. The reason we use sticky notes is so that they can add in steps they forget, and move them around as needed.
Be as thorough as possible. Every time a piece of paper in your business system is touched by another hand, a new sticky note should be made and placed on the flowchart. The steps should show every hand that touches paper and every time a decision is made.
If you are like most family business owners, you will be appalled when you see your present system and the number of steps it takes to do business. No wonder you need so many people!
So here comes the fun part. First identify steps in the process that are completely unnecessary. Sometimes we keep doing things the same way because that’s how we’ve always done them without questioning why! In a healthy, lean, operationally efficient marketing organization, everyone questions everything as part of a positive company culture.
Next, take a hard look at the steps that are remaining, and ask yourself, what could we automate? On the wholesale side, could ordering occur on-line, with automated dispatch notification? Is your system setup to automatically monitor inventory levels and replenish at given levels? Does the system assume delivery as ordered, and only adjust when the delivery deviates from the order?
For retailers, you should be asking the same questions about automation. For instance, what steps would be alleviated with scanning at the inventory and POS levels. How is pricing handled? Where are the inefficiencies in the present paperwork system?
The next question the work team should address is, “Where do errors and rework occur in the present system?” How much time is spent on catching errors, researching them and then correcting them?
One method to identify problem areas in the system is called “bombing.” Once the paperwork flowchart is completed, the work team and all other employees get to place “bombs” (sticky colored dots) on the steps on the flowchart that in their perception, don’t work very smoothly right now. Then, by focusing on the bombed areas, streamlining and automating those areas first, you may be able to eliminate your first position!
While working on your processes, ask every employee to track and record errors, wasted time and rework. Let everyone know you are trying to streamline and improve. An interesting thing that happens when you emphasize streamlining is that the most inefficient workers, and those that don’t want the system to change, will eventually self-select out of your company due to peer pressure. This is a benefit and should not be looked upon as failure. The reason you began analyzing system efficiency was to reduce overstaffing. The folks who were dead weight anyway will leave, bringing you the lower staffing level you wanted which, if you recall, was your original goal when you started!
