Valuation 2009 1st Quarter

it’s your business By Jay Arthur

The 3-57 Rule: Employees work on the product or service for only three minutes out of every hour of elapsed time. The product or service (and customer) are waiting for something to happen for the other 57 minutes. Most people don’t believe this until they map the workflow and put times on each activity and the time between activities. Ninety-five percent of all delay is in the gaps between processing steps. Most companies fail because they try to make their employees faster; the secret is to make your product faster.

While haste makes waste when you focus on the three minutes employees work on the product or service, speed makes profit when you eliminate the 57 minutes of delay.

The 15-2-20 Rule: Every 15-minute reduction in delay will double productivity and increase profit margins by 20 percent, accord-

ing to George Stalk, Jr., and Thomas M. Hout, authors of Competing Against Time (1990). By redesigning the workflow to eliminate delays, it’s not unusual to reduce total time by 75 percent or more. Use a pad of Post-it notes to diagram the process; put times on every activity and gap; then redesign the process to minimize delays. It’s that easy.

Simplifying and streamlining the workflow can be done quickly with the wisdom of employees, many of whom have been waiting for an opportunity to tune up the flow.

Step 3: Optimize

More than likely, you usually stop and check your order before leaving a fast food drive thru. Why? Experience has taught you restaurants make too many mistakes and you can’t afford to drive back. You’ve become

an unpaid inspector in the fast food company’s workflow, just as your customers have become an unpaid inspector in yours.

What is the cost of billing adjustments, discounts, rework, repeat visits and so on? What are the return and warrantee costs? How often does a service need to be repeated to satisfy a customer? Probably too often. In most companies, one employee out of every three is busy correcting mistakes made by the other two. But don’t blame the people; blame the process because it lets the employee make the mistake.

Once you’ve simplified and streamlined the workflow, the next step is to reduce the primary causes of mistakes, errors and defects in the product or service.