Who Follows the Rules?

Isn’t it frustrating when people speed down the road well over the posted limit, or exit the freeway from the left lane, or run a red light? Not only is it dangerous, but it causes traffic to jam up, slowing everyone down. When drivers hold themselves accountable and follow the rules, everyone can be safe and on time. Accountability is just as important in business.

In a number of recent client engagements, the root cause of poor profitability and slow growth wasn’t a lack of rules, but rather that employees and managers didn’t follow the rules already in place. As Albert Einstein said, “You have to learn the rules of the game, and then you have to play better than anyone else.” In other words, if you’re going to win in business, you need operations discipline.

Operations discipline is comprised of three factors:

  • Processes
  • Rules
  • Accountability

While many of the companies I work with lack processes, in a surprising number, the problem is that people don’t follow the processes that already exist. For example, a $100 million distributor had four people in the purchasing department, but over 82 people actually bought materials. While it is generally all right to have people outside of purchasing do some buying, this is where rules are essential.

Many of these ad hoc buyers didn’t know who the authorized suppliers were, and in many cases, they didn’t know the correct part numbers to use on POs. Without a standard way to look up parts, they created new numbers, causing an explosion of part numbers and inventory. There should have been about 17,000 parts in inventory, but over the years the number grew to over 164,000. You can imagine the frustration this caused for those just trying to pay the bills, not to mention the impact on inventory, cash flow, space utilization and the ability to find parts when they needed to be shipped.

Another distributor struggled with a receiving area that didn’t receive arriving materials promptly. Often the parts sat on the dock for days or occasionally weeks, waiting to be received. When people looked in the computer inventory for the parts, they weren’t there, so purchasing bought more, often paying for express freight to better serve the customer. By implementing a process I call “A Day’s Work In A Day,” in which employees don’t go home until the day’s work is complete, change occurred very quickly. Inventory was reduced, customer service improved and materials flowed smoothly.

Before you try to solve problems in the organization by buying a new ERP or going through a massive Lean implementation, first look to see if people are following the rules you already have. Good process discipline is vital to efficient and effective work. Holding people accountable can lead to dramatic change, and just might put you into the express lane to profit and growth.

 

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