Now more than ever, for a business to thrive it must embrace change. Entrepreneurs have to identify new ways of doing business and cost-effectively expand their businesses all while remaining in tune with customer demands. In a three-part series, black enterprise explores the best ways to identify and prepare for change; taking proactive steps toward implementing change; and managing change. Our first installment focuses on identifying and correcting operational inefficiencies.
As the owner of Criterion Flooring Systems, an 18-employee company in Elkridge, Maryland, that installs floors in businesses and home garages, Jim Peterson Jr. looked out for ways to run his business more efficiently. “In these economic times,” notes Peterson, “you always have to find ways to give customers more value for less money.”
So in 2008, when high gas prices raised the cost of transporting flooring supplies, Peterson prepared to shift gears. Unlike some of his competitors who were passing extra costs on to their clients, “we wanted to cut costs by becoming more efficient,” the 43-year-old says. By analyzing company procedures, Peterson discovered an area of inefficiency: The company had been using large diesel box trucks to deliver materials even when jobs were small, so Peterson purchased a couple of trailers that smaller trucks could pull. Now Criterion Flooring, which generates $500,000 in revenues (but this year expects revenues of $750,000), spends less on gas and maintenance. But the change also saved time. Installers could reach their destinations more quickly since smaller trucks could travel faster and avoid time-stealers like truck weigh stations. All told, the company saved about $10,000 a year.
All business owners must look out for ways to improve their businesses. Although many entrepreneurs judge their organization’s effectiveness through their profits, a more holistic approach should be taken, suggests Alonford J. Robinson Jr., Ph.D., chairman of Symphonic Strategies Inc., a business consulting company in Washington, D.C. According to Robinson, a company operates efficiently when it is achieving three things: retaining old customers, attracting new customers, and increasing value in products and services for current customers.
If your business is lacking in any of these areas, take a close look at every step of your current processes to determine whether a tweak or shift from the current model will make a difference. Even if you believe you’ve identified the problem, use research and prepare data to back it up. “Part of running a business is about instinct and perception,” Robinson adds, “but if you don’t have evidence, it’s hard to determine if your instinct and perception are correct.”
Ready to channel change?
Make sure everyone is on board.
1. Getting commitment from the top down is essential. The owner as well as the company’s top managers must be willing to invest the time and resources to analyze business processes, practices, and standards. Those in direct contact with both the owner and employees (think middle management) must be fully aware of the company’s existing failings as well as its planned vision, so they can be as forthcoming as possible with information to their direct reports. Thereafter, the new goals of the company need to be communicated consistently and with actionable instruction for each employee.
2. To determine whether the business’ processes are effective, ask the customer, suggests Calvin Speight Jr., a project management professional in northern Virginia.
“Look at survey data, customer service responses, or issues like product returns.” Another way to identify problem areas is to monitor employee performance and gain their feedback. Speight leads companies through the process of Lean Six Sigma, a business management strategy that identifies areas of waste and inefficiency in the workplace. Through Lean Six Sigma, companies define a problem, measure it, analyze it, improve it, and then finally control it. Speight adds, “Through this five-step process you’re able to quantify why the business is having performance issues and then come up with real-world solutions.”
Identify the cause
3. Once you identify a breakdown in performance or procedures, you can come up with a solution. Robinson advises considering the following six basic areas that can be at the root of a problem.
- The organization does not have the right people to do the job.
- The organization has the right talent but not in the right role.
- Certain groups in the organization do not work well together.
- The organization does not have a culture of excellence in which people care about outcomes.
- Employees do not have incentives to work harder.
- The proper rules are not in place to help people make the right decisions to achieve the right outcomes.
Be prepared to move people.
4. When checking the company’s efficiency, you will likely find those employees who can better serve the organization in another capacity. “Sometimes, as the organization becomes more effective and more profitable, roles can be eliminated or restructured,” says Speight. And often after further inquiry, some employees will fit into two categories: unwilling to change or incompetent.
Create a system of check-ins.
5. Falling back into old ways of thinking and working even as a company moves forward with implementing change is fairly easy to do and should be anticipated. Of course, reverting to past habits is often more mental than physical. Those driving the organization’s new direction and outlook need to remain committed to the decision to do things differently when situations, ideas, and communication arise that represent the old thinking. Speight concedes that change does not happen overnight, especially when it’s meant to reset or re-shift the standard. “The key is to do regular check-ins or audits,” Speight suggests. “This institutionalizes the positive change you’ve made and builds a culture of continuous improvement.”