Is your com­pa­ny sail­ing towards an ice­berg of hid­den losses?

On a chilly Sun­day on April 14, 1912, the Roy­al Mail Steam­er Titan­ic hit an ice­berg. It sank in three hours. There were 2,224 pas­sen­gers and crew onboard. More than 1,500 died.

His­to­ry record­ed the series of bad deci­sions that led to the RMS Titanic’s sink­ing. How a wire­less radio oper­a­tor dis­missed a key ice­berg warn­ing. That the Titan­ic only car­ried enough lifeboats for half the peo­ple onboard. Or how the ship’s builders tried to cut cost by using poor qual­i­ty riv­ets, which may have weak­ened the hull and caused it to break apart when the ship hit the iceberg.

The Titanic’s trag­ic end is a chill­ing reminder that seem­ing­ly small, bad deci­sions could snow­ball into big consequences.

Many cap­tains of com­pa­nies are sail­ing unknow­ing­ly towards ice­bergs, unaware of the hid­den loss­es that are eat­ing away at their bot­tom line.

Most busi­ness­es do not have a full pic­ture regard­ing their loss­es. Many loss­es are unrecord­ed and there­fore, hidden.

For exam­ple, we once dealt with a client where third of all their sales orders lacked nec­es­sary infor­ma­tion. One out of every three appli­ca­tions were reworked, sales rep­re­sen­ta­tives had to approach cus­tomers once again for clar­i­fi­ca­tion, lead­ing to cus­tomer dis­sat­is­fac­tion. This also slowed down sales order pro­cess­ing times and added sig­nif­i­cant­ly more labour hours than necessary.

In pros­per­ous days, sit­u­a­tions like these were tol­er­at­ed and even writ­ten off. But in today’s chal­leng­ing envi­ron­ment, inef­fi­cien­cies of any kind must be viewed as loss­es because they can pre­vent an organ­i­sa­tion from achiev­ing its true targets. 

Get on top of your hid­den losses

Many com­pa­nies suf­fer from the “Ice­berg Syn­drome” where deci­sions are made based on what can be seen above the sur­face but ignore what is hid­den below. And like an ice­berg, 90% of prob­lems are often hid­den below the sur­face, unno­ticed. As a result, com­pa­nies do not have a clear pic­ture of how the busi­ness is impact­ed and what is need­ed to rem­e­dy the problem.

Suc­cess­ful com­pa­nies make the right deci­sions to min­imise loss­es and max­imise gains. They do that by con­tin­u­ous­ly eval­u­at­ing their oper­a­tions to uncov­er what’s below the surface.

Here’s how you can solve your company’s hid­den loss­es problem:

1. Define the problem

First, iden­ti­fy the objec­tives, scope, play­ers and work areas you need to work on. Then, iden­ti­fy mem­bers of a team that will brain­storm a list of all major activ­i­ties, inputs, out­puts and deci­sions in the cur­rent process.

2. Gath­er the right information

When talk­ing to peo­ple, ask not only for the process per­for­mance mea­sures, also seek out process input and process exe­cu­tion mea­sures. For exam­ple, sales rev­enue is a process per­for­mance mea­sure, but num­ber of sales calls is and input mea­sure and order pro­cess­ing time is an exam­ple exe­cu­tion measure.

3. Process the information

Now that we have all the infor­ma­tion, it’s time to process it. Uncov­er for­mal and infor­mal processes.

For exam­ple, there may be a for­mal pur­chase req­ui­si­tion doc­u­ment, but infor­mal­ly, some peo­ple may be request­ing mate­ri­als by phone or email. The lat­ter two meth­ods must be includ­ed in the infor­ma­tion gath­er­ing process.

At times, employ­ees may need prod­ding to uncov­er infor­mal process­es. Get the peo­ple to describe, in their own words, how events real­ly hap­pen. That’s when infor­mal process­es emerge from the depths.

4. Map the process and make the decision

It’s time to con­vert the infor­ma­tion we’ve gath­ered into a process map.

The process map is a sim­ple tool that pro­vides a detailed under­stand­ing of what goes on in a process. It also serves as a handy doc­u­ment that can be “inter­ro­gat­ed” to cre­ate a bet­ter process.

Based on the infor­ma­tion col­lect­ed, iden­ti­fy the stake­hold­ers involved in the activ­i­ties laid out in the process map. Work through the process map with them – check that it is cor­rect and chal­lenge each step.

Record any obser­va­tions or cri­tiques and be sure to estab­lish their root caus­es. This knowl­edge is impor­tant in the next step.

5. Devel­op the solu­tions and make the decision

It’s cru­cial to include the views of all rel­e­vant par­ties in the decision-making process. Not only will they be direct­ly impact­ed by the change, they will have impor­tant insights that can help devel­op the solution.

For exam­ple, these stake­hold­ers can help iden­ti­fy non-value activ­i­ties and brain­storm for ways to remove them. They can also come up with ways to reduce the time tak­en to per­form the remain­ing activities.

By tak­ing their views into account, it will cre­ate own­er­ship and make the changes sustainable.

6. Imple­ment and sus­tain performance

To ensure that the new process will be com­plete­ly adopt­ed by the work­force, on-the-job coach­ing is essen­tial. Work­ers must be direct­ly trained to per­form their new duties until it becomes sec­ond nature.

We find that it’s often bet­ter to use process maps instead of writ­ten pro­ce­dures to train the work­force because they are more eas­i­ly digestible and pro­vide a bet­ter view on how their role is inte­grate to the whole effort.

Under­stand the root of hid­den losses

Here are some ques­tions organ­i­sa­tions should ask them­selves on a reg­u­lar basis:

• Do you under­stand your hid­den losses?
• Have you iden­ti­fied their root causes?
• Are you mea­sur­ing the right metrics?
• Could you have han­dled the cri­sis bet­ter if you had tak­en infor­ma­tion you didn’t know you had access to into account?
• How about the infor­ma­tion you didn’t know you need­ed – Don­ald Rumsfeld’s famous unknown unknowns?

It is like­ly that a com­bi­na­tion of some or all these fac­tors was at play.

For a com­pa­ny to stay on top of its hid­den loss­es and ahead of the com­pe­ti­tion, it needs to know how things are run inside and out, and how to improve. Process maps are great tools to facil­i­tate that understanding.

Also, process­es need to be con­trolled using the input and exe­cu­tion mea­sures as well as out­put per­for­mance lev­els in the plan-do-check-action cycle that we refer to as a Man­age­ment Con­trol Sys­tem. This alerts us when­ev­er a hid­den loss may reoccur.

Our bespoke solu­tions, devel­oped togeth­er with the company’s man­agers and staff, give busi­ness­es the tools to under­stand where loss­es are hid­den so they can address them. Con­tact us to start your trans­for­ma­tion journey.