Article: How come so many companies are inefficient?

Oct. 12, 2011

It has lately been reported of inefficiency in the companies in EU and especially UK. Is this inefficiency something that we can remove and how efficient do we want to become? It is sometimes important to step back one step to think about what we are doing and why.

After reading about the organizations in the EU losing a lot of money due to inefficient working practices we have to ask if this is a trend that is possible to turn around. €60 billion in revenues is lost in the EU with UK being the biggest loser of €26 billion. It is reported that a lot of organizations feel that there is a necessity to improve efficiency with better use of IT. Companies interviewed in this study were large companies with more than 1000 employees locally.

So, how come the companies believe they are inefficient and how can they become more efficient?

Often inefficiency is a subjective feeling on how the management team feels that different activities are progressing in the company. This is usually where it all starts and then continues to the importance of measuring the activities to get the real results.
It is also common that a product or division that is losing money is decided to be inefficient. However, it is not always that easy to measure since a lot of organizations are sharing activities between departments.

To be able to understand how to make your company more efficient you usually have to go back to the basics and start understanding the purpose of what you are doing. Larger organization are usually better at documenting their business processes in a BPM software (Business Process Management software) or at least on paper using some kind of drawing software. However, that does not mean that they actually follow the processes as decided.
In any area you should be able to answer at least the following questions:

1. What?

What is it that you want to do?
Describe the what in detail to really understand what should be done. By describing this you will also have to write down what should not be done. By describing the “what not” you will be able to create the boundaries to what should be done.

2. Why?

Why are you doing what you are doing?
This is probably one of the biggest mistakes in a lot of companies today. There are not enough why asked. I have been in a lot of companies who only have the answer - Because!
By asking the question why you want to perform an activity, create a product or anything else, you will be able to understand why it is important to your company and how it will affect the rest of the organization.

3. How?

You have now decided why you want to do what you want to do. To decide on how to move forward is vital. It is the how that creates efficiency and also inefficiency. By documenting the processes and activities that should be performed, preferably in some sort of BPM software, you will be able to understand exactly what you want done and in what order. The business process charts will also make you think about what you should do in different situations.
By just documenting the how’s will help you become more efficient than otherwise. You will be able to think through things before and not get into a habit of doing things in an inefficient way.
After documenting the business processes you will be able to automate them using some kind of IT solution.

4. Result?

What is the expected result of what you are doing?
It is important to understand what result you expect from this activity. It is usually very connected to the why but also to the how since the how can create some initial investments and also of course ongoing costs. It is also very good to combine the result with some kind of timeline.
By connecting the result to different positions on a timeline you will be able to communicate what is expected to when.

There are a few more questions that need to be answered that will not be brought up at this moment. These four questions are questions that should be answered whenever starting new activities in a company but should also be gone through for existing activities. For existing activities you might want to start in a different order, though, to first make sure you document how an activity is done and then examine that activity with the four questions. What you will realise when interviewing people about how things are done today is that you will in most cases get as many different answers as amount of people you interview.

The definition of an activity can be anything from small activities such as time reporting to larger products or services created within the company. One thing that is usually very helpful for employees is to get a visual understanding of what should be done, in what order and what the exceptions are. This is usually drawn as business process charts and stored in some kind of BPM software.