Increasing Profitability

4. Hidden Costs

Few people would dream of running a production line where every item was made differently, and without the right tools. The effect on efficiency and quality would be disastrous. But in far too many cases, that is exactly how other parts of the business are managed.

4.1 Create systems (eg procedures and methods) where possible. They will help you minimise errors and reduce time and money wasted fire-fighting.

• Time invested in creating systems is usually minimal compared to that spent solving a problem from scratch, and has a lasting effect.
• Systems are a vital part of quality control.
• Put checks in place to ensure that employees continue to follow systems. Never assume they are doing so.

4.2 Where appropriate, turn decisions into policies to avoid having to make the same decision again.

• Communicate your policies in writing to make them more effective.

4.3 Keep systems and policies simple.

• Build systems from common components and apply them across the company. They will be easier to use and improve.
• Avoid overloading employees by creating too many systems or policies, or by making them excessively complex. They will waste time or be ignored.

4.4 Learn from mistakes and problem areas.

• If systems go wrong, fix them. In any case, review systems periodically to see where improvements can be made.
• If regular tasks are time-consuming, investigate how you can improve matters. Finding information is a common time-waster. (See Filing and record management.)
• Prioritise systems in areas where costs, or the costs of mistakes, are high.

4.5 Use labour-saving equipment to reduce costs and errors substantially.

• Information technology is a powerful way of improving efficiency and controlling processes.

4.6 Be decisive, but think first.

• Putting off decisions, once you have the information you need, wastes time and delays progress.
• Indecisive leadership demoralises employees. (See Leadership.)