Revenue Journal®

Looking for higher revenues this year? Pay attention to your projects and processes - Part 2

As I mentioned last week, successful companies are characterized by a series of successful projects.

There are other activities, however, that happen every day, which are not as "visible" as projects are. These activities are "processes" that take place as people work on projects, produce products or information, or carry on day-to-day administration such as accounting, IT, marketing, sales and order fulfillment.

If I were to do a "revenue growth audit" of your company, chances are you would get low marks for your processes. Inefficient processes would be inhibiting your ability to service customers and run an efficient operation.

How can I be so sure about that? Because process-centric companies are very, very rare.

Amazon.com has always been the poster child of the process-centric companies. Bezo's mantra for years has been that their goal is to become the "world's most customer-centric company." He understands that the best way to do that is to have processes that make it easier for everyone to interact with Amazon - including customers, employees, and partners.

FedEx was at the top of my "process-driven" list for years, but Google's outrageous revenue per employee and reputed rigorous adherence to certain processes and procedures have displaced it.

Most CEOs and entrepreneurs treat processes as an afterthought. Too bad, because strong processes can:

• Ensure your survival when your market changes
  
• Alert you to problems that you would otherwise miss
  
• Help you attract and retain talented people
  
• Make it easier for you to absorb growth spurts and unexpected success
  
• Help you recover from a problem
  
• Make it easier to acquire and incorporate another company into your operating infrastructure
  
• Reduce overhead and increase your revenue-per-employee
  

Revenue per employee is a great indicator of a whether your company's processes are helping it or hurting it. Examples of revenue-per-employee numbers, based on the most recent 2006 revenue/employee data:

• IBM = $276,689
  
• Yahoo! = $536,428
  
• Microsoft = $623,690
  
• Amazon = $707,500
  
• Google = $772,923
  

From an article in CNNMoney.com, which originally appeared in Fortune, we can see one of the reasons that Google has such a high revenue-per-employee number.

Winning MySpace kept the Web's gem of the moment out of the hands of Microsoft and Yahoo, which both privately claim that Google overpaid by several hundred million dollars. Whether that's true won't be known for years. Tim Armstrong, Google's New York-based head of North American sales and the company's point man in the MySpace negotiations, pooh-poohs the notion that Google got taken.

"What people aren't seeing is our ability to model deals," he says. "I would guess that Google was not offering to write the biggest check for this partnership."

Google, in spite of its reputed permissive environment, has certain processes that it follows. Its hiring process, for example, has always been rigorous - numerous interviews with multiple Googlers - to the point where some candidates give up. Lately, it's scaled back a little on the rigor of its hiring process, in order to make sure it can hire enough candidates (article is in The Wall Street Journal Online - may require registration).

Companies that excel in the process area always have a big advantage over those who don't.

If you want to turn your organization into an efficient machine that wrings every possible dollar of profit out of every dollar of revenue, turns you into a fast-mover, and makes you very hard to beat, you need to pay attention to processes.

Models for best practices, maps for current processes

The two main tools you need to find and fix process problems are models and mapping.

What's the difference between a model and a map?

I tend to think of a model as a picture of a "best practice." The model shows how a process should work. A map shows how a process works now. You need both - a picture of what a process should look like, and a picture of what the process looks like now.

Compare the model to the map to find, fix, and remove barriers to efficiency. Your goal should be to get the map as close to the best practices model as possible.

Models like this can be used by anyone in the company to understand how a process should work. Your models should be stored on your company's intranet. They are great training tools for new employees, and can be used as checklists. Contrast this with the usual training method, where the current employee tells the new employee how something is done - including the mistakes the current employee tends to make and the shortcuts the current employee tends to take.

Here's an example of a process model (click to enlarge):

I created this model using MindManagerPro from MindJet, a tool that works well for mapping processes (and websites). If you want to improve a process, or create a new process, you need to start with a model like this. This software is powerful because a you can create a chart like this in about 10 minutes.

Mapping processes

You can use the same kind of software tool to map out current processes, with the help of the people who do the work and the people who supervise them. You should include every step of each process in its map.

After your processes are mapped and verified, you will want to have a group meeting to identify the most damaging problems. In my experience there are usually three to five serious problems, that if fixed, would make a large difference in the efficiency of the operation.

In one client's case recently, we decided that scanning each inventory item in real-time, as it comes into the operation, and as it leaves the operation, would have the greatest effect on efficiency. Dozens of daily work interruptions and workarounds would disappear with this one change.

"Work interruptions" are those times when something isn't happening the way it should, and an employee has to go get something, look something up, or ask someone a question and wait for the answer. "Workarounds" are what happens when the employee - who hasn't gotten the answer or hasn't found a good way to solve the problem - decides to fake something, modify something, or substitute something. Workarounds always cause more work interruptions and more workarounds further down the line, and ultimately result in a negative experience for the customer. The more you eliminate work interruptions and workarounds, the more efficient you will be.

You'll also want to find ways to eliminate manual tasks. A little expenditure can result in a big gain. For example, $200 printer at a workstation could save you $5000 a year in unnecessary trips to a distant printer.

Be ruthless about redundant work. No one should ever have to enter the same data a second time. That one improvement can make a big difference in the efficiency of your operations.

Once you have fixed or eliminated inefficient processes, revisit the map and find the next three areas you want to improve.

It is possible to get to the point where your processes are completely optimized; when that happens, your revenue per employee will be at new, impressive levels.