Metrics, Key-Performance Indicators (“KPIs”), and Benchmarking are hallmarks of a data-drive business. Within these businesses, managers seek to perfect how each employee’s day is spent in an effort to drive efficiency and effectiveness. The data and the processes that are derived from this data can become restrictive as business work to create “Best Practices” that can be monitored and tracked. And while there are many instances that require clearly defined business processes, are managers actually creating rigid businesses that many not be able to compete with more nimble competitors?
For example, an organization may define a process to approve an inventory purchase by directing “buyers” to a limited number of pre-approved wholesale sites. Purchase Orders are then reviewed by managers based on defined metrics (e.g. total cost of the purchase) and all of this is done in an effort to reduce procurement risk. What happens, however, if the buyer is able to identify a comparable product for 30% cheaper at an “un-approved” wholesaler?
In many organizations, this out-of-process behavior would be met with unnecessary rounds of approvals and red tape. Enough bureaucracy and the business may lose out on the opportunity to purchase inventory at these attractive margins. The organization, with its highly managed process, now sits in the same position it was in prior to the opportunity, only this time it has expended valuable resources (time, primarily) to be here.
Is there a better solution? Can organizations move past these highly managed processes? The simple answer is “yes.” Managers should not spending their time building defined avenues in which their employees are expected to walk unless there are clear and specific reasons to do so. Instead, managers should focus on building frameworks that their employees can use to perform their job functions more effectively.
In the example above, if the organization had focused its energy on defining a process to vet previously unused wholesalers and trained their buyers on how to utilize this framework, the buyer would have been able to follow through with this opportunity and secure inventory at the attractive margins. The manager can then focus his or her time on evaluating each buyer’s ability to identify attractive deals and their adherence to the wholesaler-vetting framework.
This updated approach also does not prevent managers from continuing to be “data-driven.” Managers, instead, will be able to review true performance indicators. In the previously noted example, the manager would still be able to track each buyer’s ability to identify inventory opportunities and the product margins that result from these deals. This approach also underscores this manager’s goals within the organization. Assuming that this manger is responsible for securing raw inventory for transformation into finished products at his/her respective organization, any reductions in the cost of these materials will have a direct impact on the profit margins of the organization.
While the original process may reduce procurement risk by blocking suppliers that may not be able to deliver raw resources to the correct specifications of the organization or with the required consistency, it does not allow this manager’s team to exceed profit margin expectations. Compounding this issue, a defined process may directly impact the business if a critical wholesaler/supplier chooses to raise rates or discontinue a specific product. Rigid business processes are slow to adapt to fluid situations.
A flexible approach that creates the ability for buyers to find the best deal with the right wholesaler/supplier creates an advantage for the business. This approach also drives flexibility within the organization without managers losing significant control over the actions of each employee. Managers should be reviewing their processes and asking the following question: is the organization’s control over the way this process is executed preventing our team from responding to opportunities? Managers who can answer “no” more often than not will be well positioned to take advantage of the ever changing world of business.