With the spectre of Brexit looming large, many UK businesses are battening down the hatches and preparing to navigate the stormy waters ahead. Although the impending realities of rising trade costs and reduced immigration will almost certainly have an impact on productivity and profit, it’s not all doom and gloom — with the right measures in place it doesn’t have to end with an iceberg and a sunken ship. But what are those measures and how do you implement them?
After 20 years in his field as a business transformation consultant and now as a Vistage speaker, Peter Jenner knows a thing or two about how to cut unnecessary costs and achieve a healthy bottom line. A former engineer, Peter’s programs and government business guides have helped to save the UK economy millions of pounds. His most recent guide, ‘Cutting Costs by Reducing Waste and Boosting Productivity’ has perhaps never been more pertinent than in these times of economic uncertainty.
We caught up with Peter to get his 5 top tips for boosting your business productivity and bottom line.
1. Find the problems: Hold a ‘structured moaning session’
To find out how to fix something, you need to establish first what the problem is. Sounds like the easy bit, doesn’t it? In fact, discovering where wastage is happening and where errors are being made can be the most challenging part of the process. One way to investigate is by facilitating what Peter calls a ‘structured moaning session.’
“You’ve got to get a team together of people that represent different aspects of the business, and you’ve got to make sure that they’re allowed to tell the truth, which is hard for some organisations,” Peter explains. “These sessions are structured ways to explore ‘what’s wrong with this company.’”
Creating a ‘safe’ platform where employees are free to speak the truth about perceived problems is key to uncovering areas of wastage. As part of the C-level, you are unlikely to know all the details of what takes place at the coalface or every stage of the supply chain, so the insights and observations of employees can be invaluable. But as Peter points out “this is where great leadership comes in — because you know — why shoot the messenger?” In essence, if you want people to speak the truth, they need to be reassured that there won’t be punitive repercussions.
2. Inspiration can come from anywhere: Engage your frontline
Once the problems have been established, how do you come up with a solution? Peter believes engaging your front line can dramatically increase your chances of creating positive change.
“I look at organisational pyramids, and you have the Board at the top, then the CEO, then you have the Senior Management Team and the Middle Management and right the way down the bottom you have the ordinary people, the workers. Now the tragedy here is the opinion that the 15% of the people in the company who are in so called management or supervision are the thinkers, and the vast majority are not thinkers, they’re just doers.
“But the reality is everybody’s got a brain attached and if you tell them what you’re trying to do and engage them in helping along that road, you’ll be absolutely gobsmacked what they come up with… If you engage your front line people, by which I mean not just production people but also those who meet the customers, you’ll have a massive platform — not only for reducing cost — but also for innovation because people like that – van drivers and others, they meet the customers. They know what they want.”
3. Measuring Up: Put a value on it
Establishing problem areas is all well and good, but to discover the real implications, you need to put a value on what it’s costing your business.
As Jenner says: “It’s a matter of looking at the processes, finding out what’s wrong, then measuring it and putting a dollar value on it before deciding what the plan of action is. I worked with one metal manufacturer, the business leader said ‘we don’t have any problems with wasted product because we just sell them on into the trade’, and I said ‘well if you look outside, I’ve just measured you’ve got £900,000 worth of secondary produced product which you’re putting into the market to destroy your prime product. So I think you’ve got a serious problem here’.”
Measuring and putting a monetary value on something can highlight the true scope of the problem: it may look innocuous but it could be costing your company a fortune. In the aforementioned ‘Cutting Costs by Reducing Waste and Boosting Productivity’ report Peter produced for the government, waste is defined as anything that does not add value to the customer. This, incredibly, constitutes 40% of turnover.
Adding a monetary value also means that the results can be demonstrated tangibly. Through his work with waste and productivity, savings are a minimum of 4% of turnover delivered to the bottom line. As Peter says: “ 4% is a minimum, since this programme well executed can have a dramatic impact on profitability and what I term the “meal-deal” of profitability. In the centre of the bun is the meat, the profit, the top of the bun is the “earn more” part and the bottom of the bun “spend less”.
“This programme focuses on productivity and all forms of waste to “spend less” BUT in the process comes up with ideas to add customer value and hence earn more. This has a dramatic impact on sustained profits and well executed creates an essential “can-do” culture for the company going forward. This process has been successfully applied in all aspects of service and manufacturing environments and within the NHS and public sector.”
Savings are large, a A major UK-based sub contract furniture manufacturer identified waste as £800k per annum, they saved £380k per year and increased productivity by 15%. Service sector clients have used the approach to create new processes and increased productivity by between 20 and 30%.
4. Create Systems
When something works, you need to know how to repeat it. By implementing systems or structures, you create a template for repeated success. Peter believes wholeheartedly in the value of structures: “I have learned that there are lots of support structures, value structures that need to be in place, practical stuff — measurement structures, that need to be in place, without which businesses do not sustain the benefit.
“What you do is we get a one-time benefit of saving a few hundred grand and everybody’s chuffed to conkers, but you lose the dividend in terms of the engagement going forward, which will make businesses competitive over the long-term. This is particularly important post-Brexit; because we’ve got a lot of uncertainty here. We have tariff barriers we may have to face, and, frankly we’d have to take out cost equivalent to those tariff barriers if we’re going to maintain our markets. Now this is not a small thing. This is not a peripheral issue, it’s a very, very big deal for the UK PLC I think.
5. Reward and Empower
By engendering a culture of empowerment and rewarding positive action, you can instil a sense of confidence and pride in your workforce. The results? A happier environment, team spirit and most importantly, a boost in productivity. In Peter’s experience, these positive changes can have a huge impact on your business. “I think that you need to put the structures in place to make sure that you engage the front line and that you engage them by creating empowerment structures and measurement regimes which reward their initiative and don’t penalise them. I know it works because I’ve done it loads of times. But it does require strong leadership from the top.”
While organisational change is never easy and often met with resistance, the end result is usually worth the struggle. A shift towards a culture of better communication, engagement and empowerment could make all the difference in a post-Brexit economy.