Don't Let Procedures Become a Casualty in Frugal Times
The organisation for Economic Co-operation and Development (OECD) is forecasting increasing growth in the Australian economy, reaching 3% during 2018. Commodity prices are rising and the export of services is helping to “re-balance” the economy. Surveys indicate business confidence continues to improve, with increasing numbers of employers looking to hire in the next 12 months.
It appears the economic cycle is moving into a growth phase and the time for frugality is coming to and end.
Never let a downturn go to waste
Organisations learn a lot during difficult times (specifically what they can do without). For many leaders, a downturn creates the ideal environment to drive long desired structural change, which would have been more difficult to sell during good times.
While taking out costs and perceived inefficiencies may initially improve financial performance, there is a fine line between tuning the organisation in response to a downturn or structural change and overreaching for efficiencies, resulting in unintended medium term consequences.
Stress testing resourcing levels and non-core activities without breaking core business procedures and client / employee relationships is a challenge. Often business procedures are assessed during these periods, and if perceived to be unnecessary or burdensome are removed or modified in the rush for efficiencies.
One obvious risk is that dialing in too much frugality and procedural change can lead to diminishing levels of integrated knowledge, damaging those elemental functions (including safety and well being) which support organisational success.
Why is this happening again? I thought we fixed this
Often the affects take around 12 months to impact key metrics, as loss of integrated knowledge and procedural guidance manifests into procedure slippage. Mistakes from the past return, (which the modified / deleted procedures were originally designed to prevent), creating new yet familiar inefficiencies.
These inefficiencies float in the organisational ether, are singular in nature, difficult to identify and strike at random. It’s hard to measure how many opportunities were lost, how much profit was forgone during periods of procedure slippage.
These singular inefficiencies eventually cluster and create a material problem. In response, new or refreshed procedures and training are implemented. Hopefully these repairs take affect before the economic upswing drives the push for growth. Decision makers should consult experienced stakeholders to understand original intent, along with current and historical context
Whatever the driver, it’s important to ensure any review of procedures is a controlled process. Decision makers should consult experienced stakeholders to understand original intent, along with current and historical context.
A holistic understanding of the operational environment is also crucial if suitable, low risk alternatives are to be both effective and compatible.
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