How to find opportunity in an organization

Observation #27

carpedia-observation-27Before we work for a client we do what we call an “opportunity analysis,” which, as it sounds, is designed to help us figure out if there is any opportunity to improve and where it might be. It’s usually conducted over two to three weeks. Clients are often curious how we go about doing it and afterward, in most cases, are intrigued by the amount we can learn about their organization in a very short space of time.

There are a few tricks to it that we can share, which may be useful for managers looking at their own functional areas. In any given functional area we do four basic things:

1. Figure out what drives the financial numbers.

The first thing we do is create what we call a “profit driver model,” which starts with financial numbers and determines what operating activities drive the financial number. When you’re trying to find opportunity, financial numbers on their own aren’t overly helpful; you need to understand what creates them. For example, a revenue number in a retail store is the result of the number of orders multiplied by the average price per order. It’s easier analytically to find potential opportunity by studying the types and patterns of orders and then, in turn, what drives those orders.

2. Look for gaps in the process. 

Every process has constraints — and that is where opportunity often resides. It’s usually easiest to first determine the major product or service “streams,” follow a specific order through the stream, map it out visually and then determine where breakdowns occur and which steps govern the pace of the process. If capacity is an issue, the constraints are what you need to study.

3. Find the disconnects in the management system.

To control a process, managers need to plan work, assign it, follow up on the progress, and then report on what happened. It’s helpful to map this out with all the actual documents or tools that the manager uses. Look for breakdowns where one tool is not properly linked to another. Schedules are usually a good place to start. Check their timeliness, accuracy and usefulness.

4. Observe what managers actually do.

Spending a “day in the life” of a manager is often fascinating. Seeing first-hand how managers spend their time tells you a lot about the nature of an organization and its culture. It shows you how managers and employees interact – and how well the management tools support the manager. These can all be very helpful insights into what existing behaviors help or hinder the effectiveness of the organization. Management behaviors are deeply ingrained and are often the hardest thing to change – and the most commonly overlooked aspect of an improvement program.