Fast growth, complex ventures Featured

7:00pm EDT December 26, 2009

Fast-growing companies face constraints due to the lack of ability to effectively execute.

“As a result, instead of focusing on the big picture of sustaining growth, leaders get bogged down in the day-to-day operations, micromanaging staff and systems that cannot adequately adjust to increased customer demands,” says Kevin Linehan, project manager at Definity Partners.

“Leaders too often lack confidence in daily decisions due to a deficient operational process,” he says. “As the leader, you cannot do everything yourself. You must empower your employees and properly invest in your operational systems to increase production capabilities. Typically, the operational systems that got your company to existing performance levels are ill-equipped to effectively deliver at increased volumes.”

Smart Business spoke with Linehan about how to operate smoothly in times of rapid growth by implementing change initiatives.

What pain points do executives experience during times of rapid growth?

Many executives want to succeed at all costs in taking advantage of favorable market conditions. However, if existing operational capabilities are not nimble enough to meet the new demand, they invariably get involved in ramping up production. Immersing themselves in the day-to-day has the unintended consequence of taking their focus away from the critical aspect of continually positioning the business in a highly competitive marketplace. If a leader has less time and energy for future growth opportunities due to operational distractions, the enterprise will suffer in the long term. At a minimum, leaders must devote 80 percent of their time on growth initiatives; otherwise the company is essentially running in place. Furthermore, the personal toll of getting involved in every aspect of the business leads to long hours, increased stress and lower personal productivity.

How can an executive deal with pain points when addressing operations?

You must create a sustainable system by simplifying, standardizing and automating operations. In today’s market conditions, operations must efficiently ramp up production and conversely ramp down. If business activities are expected to increase, you want to meet the increased volume through your existing resources by improving productivity.

Effective process improvement efforts are built in three fundamental steps.

Step one: Simplify your process through proven lean principles and tools by engaging front-line employees. Collaborate to remove all unnecessary steps and eliminate wastes that are a drag on productivity. Challenge them to come up with ways to improve operations. Leaders cannot come up with all the solutions; by communicating your expectations, you empower employees to take ownership in the outcomes.

Step two: Standardize the process throughout the functional areas of your business. Standard procedures allow people to respond faster to upticks in production levels. Establish performance goals and objectives. Trust but verify; keep the improvements coming by keeping score.

Step three: Automate your process by leveraging technology. Many companies are tempted to install a new computer system, because they are under the impression that this will automatically streamline their business. But automating an inefficient system wastes an excessive amount of time and resources.

How do you monitor operational performance during times of rapid growth?

Develop measurement systems to track real-time status; do not simply rely on lagging financial indicators. By measuring key performance indicators you can make adjustments on the production floor sooner instead of waiting for a monthly or quarterly report. Make sure your measurements are driving the right behaviors for cost, delivery and quality. Do not get caught up in perfecting a measurement system prior to implementation due to variations or difficulty in acquiring data. The worst thing is to not measure, because learning and improvements will then be delayed. Experiment with your measurement system; just make sure you properly evaluate and modify it to drive improvements.

How do executives develop employees while meeting the operational challenges of growth?

If you have a work force that is ingrained in how things have always been done, you need to shatter that paradigm to transform operations and capitalize on existing opportunities in the market. Tell employees that adapting is essential in realizing the full growth potential for both them and the company. Build momentum for implementing change by realizing quick wins that increase employees’ confidence in the new way of operating.

Reward employees for driving change. Develop a system of reward and recognition for the behaviors that you seek, including being held accountable for outcomes, the ability to adapt and contributing new ideas to sustain improvements. Most employee engagements are driven not so much by monetary rewards but by being allowed to contribute to success. People want to work for a company that is not going to settle for second best and will continue to get better and leave them with a good feeling about long-term potential.

What are mistakes executives often make involving operational improvement initiatives?

One of the biggest incorrect assumptions leaders make is thinking that operational improvement is a single event rather than a collective mindset and continual process. Be sure you are investing in people’s ongoing skills and knowledge of lean principles through continual training; do not make it just a one-time expenditure.

Another mistake is spending too much time trying to develop the ideal solution. Overengineering the ‘perfect’ system keeps you from taking action. Instead, have an exchange of ideas that starts with rapid implementation and is followed by an evaluation, which allows for any necessary adjustments.

Kevin Linehan is a project manager at Definity Partners. Reach him at (866) 520-2003 or klinehan@definitypartners.com.