Scaling operations is a challenging part of growing a business.
While it is easy to get caught up in the monetary rewards of growth, it is important to remember that unless your business has a stable operating environment, then growth will only create greater levels of chaos within your business.
Without a strong foundation of operational stability, businesses are likely to experience increased inefficiency, causing lower profits and higher costs of operation.
The operational relationship between growth and operations is a strong one.
Every time an organization duplicates work, does not document all decisions, or uses fragmented software tools to manage its work, it creates drag on its operations.
For a company to be prepared for rapid growth, it must eliminate all friction within its operations.
Instead of using the generic best practices approach to optimizing operations, leadership needs to apply time-tested principles to identify opportunities for improvement and systematically implement them to create a more efficient way of operating.
The following guide outlines a process to create an operating model that will support long-term growth while protecting the organization's core values and mission.
1. Expose the Invisible Workflow
Inefficiencies are often found in the open.
However, when teams are lacking in clarity around their official processes, they tend to create temporary workarounds that, over time, become permanent solutions.
Process mapping is an important first step in the identification of inefficiencies.
This information will allow you to document each step in all core business workflows from the moment an employee requests a specific service to the time the service is delivered to that employee.
You need to document exactly how it works in reality, not what you believe to be the way it works according to your Employee Handbook.
You will not be able to see where and how the workflow processes and systems have created redundancy until you have visibility into the approvals and handoffs, rework loops, and any delays created by the organization.
2. Optimize Only What You Can See
The majority of new software companies promote automation as a solution to all problems.
However, automating a failed process only increases the company's capacity for making mistakes at an exponential rate.
It is essential to simplify and stabilize a process before purchasing an automated system to support it.
If you have an ongoing task that frequently requires subjective decision-making, exceptions, or additional context, it is best to keep that task as manual as possible.
Automate stable, consistent, rules-based processes through the use of automation; such as transferring data, generating regular invoices, and reporting on an ongoing basis.
3. Consolidate SaaS Tools
To combat the negative impact of tool fragmentation on employee productivity to an organization, consolidate SaaS tools used by teams within a business to help reduce the impact of Switching costs that accumulate when Teams are using distinct platforms (e.g., Chat, email, Project Management, CRM & File Storage).
When tool fragmentation exists, information silos are created.
Employees waste time and effort searching for the correct version of a document to meet their needs or attempting to reconcile the information in multiple, unconnected dashboards.
Therefore, it is essential that you aggressively consolidate your tool sets by selecting platforms that can adequately support multiple functions instead of selecting an overly-specialized tool to support a single function that will not integrate well with any other tools in your ecosystem.
Less Tool Set = Less Training Required = Cleaner, More Accurate Data = Fewer Instances of Employee Burnout and Mental Fatigue.
4. Define Decision Rights
Make sure that you clearly define the Decision Rights (or accountability) of Employees who participate in the Decision-Making Process.
In many cases, an organization does not have a defined structure to determine who is responsible for a decision and who is accountable for the decision.
Many times, people develop a false sense of collaboration in an attempt to agree collectively on a decision.
In most cases, this delays Work and puts teams at risk of missing their deadlines while they await either executive approval or a consensus from all decision-makers.
A structured decision framework such as a "RACI" or Responsible/Accountable/Consulted/Informed can help eliminate ambiguity in determining the Point of Execution for the Work (e.g., Who executes the Work) and the Point of Sign-off for the Work (e.g., Who is ultimately accountable for approving the Work).
If there is an approval layer that does not catch material errors (i.e., misuse or failure to produce safe, high-quality goods), recommend that it be removed.
The speed of an organization is the result of a high level of trust within the organization for Employees to make decisions within their level of Authority.
5. Implement Strict Capacity Planning
Use strict capacity planning to take advantage of the connection between the capacity to sell and the capacity to deliver.
Delivering sales without regard to your Operational capacity (or willingness to maintain a Customer-centric culture) will damage your reputation faster than the best marketing.
The connection between Sales Pipeline Metrics and the Production Ready Metric enables Managers to forecast when their systems will break.
Managers must monitor their Utilization Metrics and when to Stop Selling and Hire People.
The ability to identify when to stop hiring (and business) when the organization is at its Capacity for selling (and subsequently serving/fulfilling) a customer ensures sustainable growth for the organization.
6. Standardize and Limit Customization
Make sure that you Standardize or Limit the Degree of Customization applied to your Repetitive Business Processes.
The perception that internal projects and client requests are all unique events creates a loss of leverage and presents challenges for delegation.
Standard Operating Procedures (SOPs), Checklists and Templates provide a baseline of quality that both is non-negotiable and allows junior staff to perform complex tasks consistently while lessening the cognitive load on the more senior staff.
Standardization does not impede the creative process; rather, it enables creative resources to be saved for only those challenges that require creativity.
7. Outsource Strategic Distractions
Internal Teams need to concentrate on providing distinctive work that differentiates a Company from its competitors.
All other work should be evaluated for potential Outsourcing.
Most Routine Bookkeeping, IT Support, Payroll Processing, and General Administrative tasks do not provide a competitive advantage and should therefore be outsourced to specialized Vendors.
This not only saves time for the Core Team, but it also allows them to focus more on their core work.
Outsourcing is about allowing Executives to stay focused and not just taking advantage of Labor Arbitrage.
8. Track Leading Operational Indicators
Revenue is a Lagging Indicator of how healthy a company is.
It provides insight about what has already occurred; however, it does not provide insight about the current state of a Company's Operations which might cause Negative impacts to the Company’s P&L in the future.
Therefore, Companies need to also track Leading Indicators to identify and resolve any Operational issues before they negatively impact the Company's P&L.
Cycle Times, Error Rates, Queue Lengths and Client Response Times are all important Daily Operational Indicators.
When Cycle Times are Extended, a Company has a growing Operational Bottleneck.
Tracking the right data allows Leaders to bridge the gap between the company and its operational performance during the actual management of the Company.
9. Create a Frontline Feedback Loop
Executive’s often do not know where the highest levels of friction occur within their Company.
In most instances, Frontline Staff can provide the answers to where these problems exist, because they are the ones that deal with the company’s Software Applications, Duplicate Processes and Unprofitable Clients on a daily basis.
Companies that provide frontline staff with a structured method for providing feedback are able to identify and resolve friction much quicker than Companies that rely exclusively on their annual performance reviews to gather feedback from their employees.
Examples of structured methods of collecting feedback are Regular ‘Pulse Checks’ or Continuous Improvement Boards where frontline staff can report inefficiencies within the Company’s Operations.
When businesses fail to address the issues that arise between employees and customers, they will experience a high level of employee turnover among top performers.
10. Connect Incentives to Efficiency
Employees that are compensated solely based on sales volume will sell to poorly matched customers who drain operational capacity.
Likewise, employees in customer support who are evaluated on a speed basis will rush through calls with customers and urge them to call back.
There is a constant battle within an organization due to misalignment of KPIs.
In order for an organization to grow, it has to be in alignment with every department.
11. Make Client Onboarding Easier
Difficult onboarding processes create immediate operational debt for a company.
If new clients are always requiring extensive manual setups or assistance, the company will be limited in its ability to scale unless it hires many more employees.
The majority of client onboarding should be self-serve or highly standardized.
Clearly written documentation and automated welcome sequences minimize the need for extra human interaction. For businesses building their brand alongside scalable processes, using a logo maker can also help create consistent visual assets for onboarding materials and customer communications.
Eliminating this stage in the client onboarding process will help minimize churn during the first few months of service and also reduce the support cost associated with every customer contract.
12. Eliminate Low-Value Meetings
Meetings are the most costly form of business communication.
A one-hour meeting with six participants represents six hours of time wasted due to lack of productivity.
Whenever possible, communicate through written communication and use meetings only when complex problems arise or when discussing sensitive personnel issues.
If a meeting does not have a written agenda and has no defined leader or owner, cancel it.
13. Develop a Process for Reviewing Operations
Consider that operational efficiency is not a one-time project to be completed by a specific date.
As employees and tools enter the operational system, entropy will cause the processes to degrade.
To ensure that your operational system stays efficient, set up a periodic (quarterly) operational review that will allow you to examine all workflows, your software stack, and the leading indicators associated with all of your departments.
Inquire about things that are moving at a slower speed today than it was six months ago.
The ongoing elimination and restoration of waste is the only way to achieve agility.
14. Correct Handoff Locations
Error usually does not occur while something is being done; it occurs at the time of transition between departments.
When sales transitions an existing customer to operations or product to marketing, the information that is exchanged is often incomplete.
Therefore, every handoff must have a clearly defined transition point.
In addition, the transition point must include specific documentation as part of the handoff process.
When there is a well-defined transition point, the possibility of misunderstanding is greatly reduced; therefore, the need for the "I thought you were taking care of it" defense is eliminated.
15. Audit the Supply Chain
An operational failure is supply chain disruptions.
Dependence on one source vendor for any critical component or service creates an unacceptable level of risk.
You should regularly audit the performance of your suppliers.
As they are audited, track their ability to deliver products in a timely manner, track the number of errors that occur, and track how fast they communicate.
To protect against unexpected regional disruptions or sudden price increases, it is essential to have a diversified supplier base
Competitively, having a resilient supply chain is a distinct advantage.
16. Implement Lean Inventory Management
Excess inventory reduces the ability of the working capital that could be used for business expansion.
Implementing a Just-In-Time (JIT) philosophy wherever possible allows us to balance the risk of stock outs with the costs associated with storage.
We should be using forecasting tools to identify our needs moving forward, as opposed to using instinct and history.
The effective use of capital is one of the key components of operational leverage.
17. Train for Cross-Functional Capability
Having a rigid delineation of responsibilities can create a bottleneck when someone critical to a task is not available
It is essential to offer cross-training to your employees for critical adjacent tasks.
If only one person in the organization knows how to run payroll or generate a specific report, it presents unnecessary risk.
Flexibility allows employees using their time wisely, which avoids minor absences creating a major impact.
18. Centralize the Knowledge Base
Tribal Knowledge has been harmful to businesses.
When critical knowledge exists only in the memory of certain employees, the business is at risk.
Create a centralized knowledge base that can be searched easily, including documenting all processes, decision-making reasons, and troubleshooting common errors.
Centralizing the knowledge base minimizes the time needed for new hires to be onboarded.
19. Optimize the Physical Workspace for Maximum Efficiency
For businesses that have a physical location, the layout affects how quickly and efficiently employees can do their jobs.
Evaluate how employees move through the workplace; look for ways to reduce the distance between departments by reorganizing the layout to allow for greater efficiency between frequently used tools and departments that frequently collaborate with each other.
Small changes made to the physical logistics of the workplace will yield a significant time savings over a period of 12 months.
20. Automate Customer Support Ticket Routing
Routing Customer Support tickets manually is costly for companies both in terms of administrative costs and delayed ticket resolution.
Therefore, Intelligent Triage systems should be implemented to automatically sort and direct incoming Customer Support requests to the appropriate department.
Speed of ticket resolution is a key factor that determines customer satisfaction.
21. Standardize Technology Hardware and Operating Systems
A company that provides its employees with the ability to choose their own operating system and technology hardware creates confusion and headaches for its technology support staff.
Establishing standardized operating systems/hardware for all Company employees is the best approach to reducing the amount of technology support time devoted to troubleshooting compatibility issues and making hardware replacements.
Standardization of technology infrastructure significantly reduces costs associated with supporting a Company.
22. Implement Zero-Based Budgeting with Regards to Time
Treat time just like you treat money.
Enforcing zero-based time budgeting forces departments to justify how they utilize their time, whereas in the past, they typically just continued operating on the same cycle of time from one quarter to another.
As a result, Zero-Based Time Budgeting is a great way to identify time-wasting tasks that generate no measurable value.
The act of "time auditing" reveals the tasks that individuals dislike doing yet do not have the authority to remove from their workload.
23. Minimize Available Product Lines
Complexity is the killer of efficiency.
A large number of minor variations on product offerings or tiers of services dilutes operational focus.
Conduct a profitability analysis for each SKU and Service Line.
Then eliminate the lowest 10 percent of SKUs or Lines based on their significant consumption of support resources (time) with very little revenue.
A streamlined catalog makes marketing, sales, and fulfillment much more efficient.
24. Change to Exception Management
Managers do not need to review every transaction or project phase in detail.
Develop an exception management process.
Establish a range of acceptable cycle time and error rates.
Once a process falls outside the established limits, that is when the manager should be notified.
Managers have the ability to be more strategic rather than being bogged down in micromanagement.
25. Emphasize First Contact Resolution
Within the customer service function, any time a ticket is worked on more than once by a representative, it is an operational failure.
Representatives should be trained and empowered to resolve issues during the first contact.
They must have the authority to refund customers and make technical adjustments to products without having to escalate the request to a manager.
Emphasizing First Contact Resolution will greatly decrease ticket volume and significantly improve customer retention.
26. Review Communication Platforms
Using multiple communication platforms creates noise and lack of clarity.
When teams communicate via Slack, Teams, e-mail, Texting, and Project Management Comments at the same time, there is a good chance they have missed some of the important communication.
It is crucial to have clear rules about which communications are done via which platform.
Establishing a communications discipline prevents redundant effort.
27. Implement Agile Procurement Processes
Businesses today need to move faster than traditional procurement allows for.
To speed up the purchase approval process for low-risk, low-cost purchases, establish a list of pre-approved vendors, and empower department heads with defined spending limits.
Speeding up the procurement process by implementing a purchase order system means that teams are able to purchase and use necessary tools without delay due to bureaucracy.
28. Refine Remote Work Protocols
Operationally, remote work only provides maximum efficiency if the underlying infrastructure provides adequate support.
Provide clear core hours for all team members to enable maximum collaboration through overlapping timeframes.
Ensure your VPN and Cloud Access are built with redundancy in mind to avoid any downtime for employees.
Remote efficiency requires strength in asynchronous processes, not constant observation or supervision.
29. Conduct Post-Mortem Reviews
When a project fails, or a client abruptly stops using a company's services/products, the immediate default reaction is to place blame on someone or something.
Post-Mortem reviews should be structured, and should not include blame.
Rather than focusing on what individual(s) caused the process failure, the focus should be on the process itself and how to prevent it from occuring in the future by documenting what failed, and updating the SOP immediately after.
Failing is a great opportunity for organizations to learn from their own mistakes, and create systemic improvements.
30. Adopt a Continuous Improvement Mindset
There is no finish line for operational excellence.
Create a Kaizen Culture of Continuous Improvement for every employee!
The compounding benefits of small incremental changes over the course of many years equal massive leverage.
Business Continuity Planning for Resilience
Companies that continuously strive to improve their operations are the most resilient and will consistently outperform their competitors who have chaotic processes.
Strategies to Execute the Above
The above strategies were not meant to be theoretical.
They are mechanical adjustments necessary to build a successful and scalable organization.
The objective of a business is to grow; therefore, the engine of a successful company is Efficiency.
Companies that have mastered their internal operations are capable of maneuvering around competitors who are bogged down and unable to adapt to market shifts, due to chaos in their processes.
It is Execution that is the only differentiating factor that matters.
FAQ
How long until I receive ROI on Operational Improvements?
For companies that are consolidating software, or reducing meetings, the initial returns will be realized within several weeks. However, companies that are looking for structural improvements (e.g. Process Mapping or Supply Chain Audits) will generally see measurable ROI within 3-6 months.
Should I hire an internal operations manager, or work with a fractional operations Support?
If your company has less than 20 employees, it is generally acceptable to receive Fractional Operations Support. Once your employee count exceeds 20, and your cross departmental hand-offs become more intricate, hiring an Internal Operations Manager can help to maintain your velocity.
What are the most common mistakes companies make when scaling?
Many companies attempt to solve process issues by merely adding more people to their teams. Hiring additional employees into a broken system will only inflate the inefficiency of your process and make future disentanglement even more difficult and expensive.
