June 2005

Todd Herman

In the late 1980's a quote was attributed to the CEO of an area textile company that was doing quite well at the time – "Show me an empty chair, and I'll show you a cost reduction."

This CEO is no longer there, and the company is a shadow of its former self. Many executives and managers approach bottom-line pressures as this CEO did – they look at areas of controllable costs, find that one of these is "Wages & Salaries", and reduce headcount. The problem – this approach ignores an unbreakable chain of relationships:

  • Processes consist of steps called activities.
  • Activities have a dual nature – they consume resources, and they produce results.
  • Resources include people, computer systems, and physical assets.
  • Costs are associated with all resources.

The "empty chair" mentality goes straight to the end of the chain, rather than working through the chain. Little wonder, then, that companies downsizing usually continue to have problems – a company that cuts costs without reviewing activities jeopardizes results.

Resources are investments, and most resources are tangible – people, computer systems, buildings, and machinery, as examples. There are also intangible resources – and process itself is one of these. Process defines how work gets done – process marshals resources to produce results. People, systems, and other tangible resources are the visible and physical manifestation of process.

Processes generally evolve unplanned, as one or two people work to meet a specific need – activities designed for a specific need are then chained together to try to meet a more general need.

Processes – already intangible – are also frequently undocumented, becoming part of the oral tradition passed among employees. This makes it easy to forget that process has a cost – whether planned or not, whether recognized in the accounting records or not. This cost makes process an investment and thus a resource to be managed.

What can a company expect as a return on its process investment? Almost always, an improved bottom-line. Very frequently, a better top-line.

Companies revamping their product development process typically do so for competitive advantage or sales growth. Clients we helped have reduced their development timeline by 50% or more, while also reducing work time. No one became an "empty chair", as workers were able to develop more products, helping the company grow sales.

Companies reviewing their monthly accounting process generally want to shorten their closing cycle or improve Sarbanes-Oxley compliance. We have helped clients reduce their closing schedule by 35% or more, freeing time for value-added analyses to aid both sales and profits.

Rare is the resource that has an initial investment without ongoing investment. Buildings need to be repaired; computer systems, upgraded; employees, developed. Processes need to be treated the same way – once processes become manageable, activities, costs, and results are better controlled. Perhaps a better quote would be: "Show me a well-defined process, and I'll show you an efficient and effective business."

Sincerely, 

toddsig

Todd L. Herman 


Jason C. Caudle of Todd Herman Associates
Jason C. Caudle, MBA recently joined the firm, bringing over six years of experience in reviewing processes, analyzing data, and managing projects in the areas of research and development, and product development. Jason joins our other consultants in helping our clients "find a better way".


Client Project Update:

I am pleased to provide you with an update on our client projects. Projects we have completed over this period are...

Configured and Trained Users on the BlackBerry Enterprise Server

Configured, deployed, and trained users on the BlackBerry Enterprise Server and the BlackBerry handheld devices for the Greensboro Chamber of Commerce, allowing the Chamber staff to immediately respond to requests from members and prospective employers.

Reviewed and Documented Internal Processes and Information Systems

Reviewed and documented internal processes and information systems related to customer order entry, fulfillment, and inventory management for a custom-engineered solutions business, identifying areas to improve sales growth and selling effectiveness.

Reviewed Operations Implications and Cost Savings

Reviewed the operations implications and cost savings of freight transloading for a manufacturer's supply chain, providing an objective review and estimates of the various options.

Integrated Development and Approval Process

Integrated the color development and approval process into an existing fabric development application, allowing this fabric manufacturer to plan orders more efficiently, provide better customer service, and reduce development cycle time.

Automated Various Aspects of Month-end Inventory Tracking

Automated various aspects of monthend inventory tracking and reporting for this medical services company, freeing staff time to focus on value-added activities outside of monthend closing and cutting 4 to 5 days out of the closing process. Developed procedures to accurately track and report actual and standard yarn usage for this knit goods manufacturer, identifying yarns requiring specific attention.

Analyzed and Streamlined Processes

Analyzed processes used by the finishing lab of an apparel company, streamlining these as a prerequisite to integration into an existing product development system.

Future projects we are planning include...

Wireless Synchronization to Blackberry Handhelds

Provide a wireless synchronization of third party applications to BlackBerry handhelds, giving immediate access o enterprise customer relationship management (CRM) to BlackBerry users.

Proposal to Purchase Materials Offshore

Review the process, technology, cost, and tax issues associated with a proposal to purchase materials offshore, providing executives with information to make an accurate and informed decision.

Custom Compliance, Reporting, and Audit Documentation

Analyze the process and technology implications of customs compliance, reporting, and audit documentation (including customs, financial, and Sarbanes-Oxley), allowing this manufacturer with offshore operations to address a revised customs requirement.

Time-Entry & Expense Reporting System

Deploy a time-entry and expense reporting system to BlackBerry, enabling this professional services firm to more quickly and efficiently track these items.

Up-To-Date Information & Contact History

Enhance the standard Lotus Notes address book to include basic contact management functions, allowing this pharmaceuticals client to cost-effectively leverage their Lotus Notes investment to provide relationship managers with up-to-date information and contact history.