Hidden waste comes in all shapes and sizes.
While “sell, sell, sell” may seem like the right mantra, consider first uncovering the hidden waste lurking in the crevices of your business. Hidden waste will interfere with all levels of growth and could cause more costs – and less margin – if left unaddressed.
Let’s look at the math (“maths” for my Brit friends).
Jonny is a full-time, entry-level staff member who takes 3 hours @ $20/hour to write a blog.
Josie is a mid-level staff member who takes 1.5 hours at $40/hour to write a blog.
(Assumptions: both are marked up 3x cost)
In this situation, who is more costly to the organization?
- Josie – because her hourly rate is double that of Jonny’s, and therefore costs more to the organization
- Jonny – because he only has 5 hours left in the day to deliver billable work, while Josie has 6.5 hours in a day left that she can bill
- Neither- because both cost $60 to write the blog and are therefore the same cost to the organization
The answer is B. While entry level staff may cost less to deliver per hour, you have a ceiling on how much you can make – an opportunity cost.
How does hidden waste affect you?
The above is an example of how opportunity cost presents one of the largest circumstances of hidden waste in a company. In additional to amount of experience, there are numerous other contributing factors that can cause hidden waste and excess times to deliver. Using the wrong tools, a lack of process, or too much process all could result longer delivery times, which costs you money.
Ready to make a change?
Here’s a helpful checklist to do a quick audit of your staff, tools and processes so that you can develop the insights you need to strengthen your business and eliminate waste. Check which issues you are facing under “Challenges” and then refer to the “Solutions” column for possible remedies.
|Staff||Entry level staff delivering mid-level or high-level work||Reorganize staff responsibilities and fees according to level of experience;
Offer reimbursement for training for continued education online like Lynda.com
|2 rounds+ of revisions or reworks for work done incorrectly|
|Generalist staff instead of specialists (ie. staff is cross-functional)|
|Staff billed out by department, not skill level|
|Staff’s client billable utilization is lower than 50%||Review workload to identify client billable hours that can be shifted amongst the staff to increase their utilization
Change position from full-time to part-time or non-employee for roles that have less than 30% utilization
|Tools||Unsure which tools to use to do the job||Create a spreadsheet to compare your needs versus capabilities and cost per tool;
Set a calendar reminder to reevaluate technology tools 2x year
|Paying monthly fees for client project tools that aren’t used|
|Paying monthly fees for client project tools that offer duplicate services|
|Missing or insufficient client project tools|
|Limited/no tools for internal analytical oversight||Evaluate retail rates and overhead costs for products and services; which ones have the least and most margin;
Create or implement budget and forecasting tools to manage cash flow
Conduct competitive analysis; where we our fees align and what will the market bear; eliminate services that are too costly for us to deliver within a budget that the market will bear
|Process||Projects going over budget|
|Inaccurate time reporting (putting billable time against overhead)||Establish role to provide checks and balances for each department group with budgets and fiscal oversight (ie team leader);
Define and detail scope in proposal prior to the sale (or bill for a discovery phase where this will be defined)
|Not charging for additional scope|
|Not receiving client sign offs for each phase of work delivered prior to moving forward to the next|
|Inaccurate proposal (also can be referred to as “mistakes” or “missing information”)|
Sharing ideas and information benefits us all in continuous improvement. Let me know how this information has helped you to uncover hidden waste in your company. Thanks for reading!