Is your firm operationally efficient? Well, we think, with a high degree of confidence that it’s definitely not and to understand why, you only need to acknowledge what efficiency, or ‘being efficient’ actually means. Once you’ve done that, you just need to work out what to do about it…
For an action, a system, or a process to be efficient, it has to produce its desired output with minimal wastage and by minimal we really do mean the least possible as in the dictionary definition and not just a low(ish) amount as per popular understanding.
Another way of looking at that is through resource usage. Using the lowest possible amount of resource to meet your objectives is efficient and anything else isn’t. Resource can be financial, effort or energy, time, people, materials, etc.
When you apply that to the operational processes employed in financial services, the primary resources used for most processes are people, systems, and time and a process’ efficiency could be calculated by considering the consumption of each and comparing their contribution to the end goal.
Examples of truly efficient processes are rarely seen (type “efficient process example” into a search engine and let us know if you find one) because it’s virtually impossible to achieve. Why? Because technology is not always able to deliver every aspect of every process, and where it can, it can still be sped up. But more importantly, people are instrumental in facilitating those processes and the output of a person cannot be controlled or predicted, no matter how strict you are.
People waste time at work through deliberate endeavours and through misguided focus on the wrong thing. A report we read titled “The 2020 State of Work” published by Workfront (available here) claims 60% of a knowledge worker’s (most of your colleagues) time is wasted through excessive email, unproductive meetings, lack of standard process and poor collaboration. Add to that the time spent using social media, talking, staring into space or whatever, and you start to wonder when anything is getting done at all.
Any such procrastination or misdirection onto other matters will affect the efficiency of an operational process. The power and speed of your software pales into insignificance if the operator takes an inordinate amount of time to press a button. If they have to read, digest and respond to emails and attend an unnecessary meeting before they think of doing so, it’s even worse. When it comes to efficiency, the human variable is a complicated matter and whilst people are still integral to operational process it’s difficult to see it changing.
However, there are ways in which you can reduce the impact of the human variable to make your processes more efficient. You can examine and redesign processes to remove bottlenecks and ensure your resources are focussed on the right parts of your value chain, in the right way. Some tasks, although necessary, will not contribute to your value chain. For example, you need a clean office, but your clients won’t really care much about it, so you outsource cleaning. Your clients want to receive high quality information from you, but aren’t really concerned about its production process, perhaps you can partner with someone to produce it for you. Working out what processes require re-design is a time-intensive exercise.
Disregarding management techniques and operational analysis, we think you can quickly deduce levels of efficiency in an operational process by counting, or observing the following:
Number of people
As we mentioned above, perhaps the biggest cause of inefficiency will be human involvement. Therefore, you can safely assume that the more of your people that are involved in a process, the more inefficient it will be. Looking at a process and counting the number of people that touch it will give you a strong indicator.
Excessive use of email points towards a process that relies on approval or comment and input from lots of people, usually sequentially. Additionally, it usually means information and data is stored in disparate systems and there are informal workflows around the organisation to facilitate the process, perhaps being saved numerous times, perhaps being altered incorrectly or suffering version control issues and therefore causing error and re-work. Whilst e-mail itself isn’t the problem – it’s integral to a lot of operational processes, it. can show that processes that over-use it can probably be re-defined with better technology.
Similarly, the number of systems used in an operational process will also hint at operational inefficiency. There’ll be issues at the interfaces, difficulties with intersystem reconciliations and the timing of updates, and complications with multiple system support, training and administration. The more systems that are used, to support a single process or outcome the more inefficient the process usually is.
As we said near the start, becoming truly efficient may be impossible, but you can work towards being as efficient as possible. To do so, you’ve got to look at each operational process and work out what’s going on and how they can be improved and that should be a focus of any functional head or forward-thinking employee today and tomorrow.
You can read more about our thoughts on efficiency here.