By Jay Arthur
Every top cop show on television has one cardinal rule for
solving the crime: Follow the Money. The same is true in business.
In business, crimes are committed every day that siphon cash from
cash flow, threaten profitability and cause customer
dissatisfaction. These aren’t crimes of passion or greed, but crimes
of neglect. These aren’t criminal acts of employees, but crimes of
performance. The best way to solve these “crimes” is to follow the
The Crime Against
businesses lose cash to crimes of all sorts. Most companies suffer
from a plethora of performance problems, such as:
customers for mistakes and errors in the product or service
mistakes and errors and delays
inventory costs (raw and finished goods)
products and services to meet specifications and expectations
Costs of scrap
materials and products
In a typical, profitable company, these crimes can cost a
business a third of total revenues. Truth be told, most companies
are robbing themselves of huge profits because their systems and
processes let these crimes take place. Some are misdemeanors and
some are felonies, but together they can rob a company blind.
are three common criminals in this kind of robbery. They aren’t
people. People make mistakes, but they only do so because the
process and systems let them or force them to make mistakes. To help
companies solve this kind of crime, one can always turn to the usual
delays which increase turnaround time, cause missed commitments
and frustrate customers.
defects in the product or service that result in credits,
adjustments, returns, and rework.
deviation in the product or service that result in unnecessary
rework and scrap costs that devour profits.
business, people are busy, but the product or service can sit idle
for hours or days waiting on the next step in its creation or
delivery. Most business owners find it hard to believe, but
employees only work on the product or service for three minutes out
of every hour; the other 57 minutes are delay. One or two delays
between steps account for over half of the total delay time. The
effects of seemingly “normal” delays impact businesses on a large
scale. A recent consulting case revealed that a company had 120 days
of delay in a 140-day process.
Another illustrative consulting case involves a hospital,
which couldn’t produce a bill on the spot for self-pay patients in
the ER, resulting in long delays and unpaid bills. To solve the
issue, an Excel-based bill was developed that could be produced on
the spot with a few clicks of the mouse. No delays resulted in the
ability of the hospital to bill and receive tens if not hundreds of
thousands of dollars of previously lost revenue every month.
Delays do not always occur due to a lack of things, but also
a lack of people. One credit union HR group took 82 days on average
to replace a teller, which resulted in longer lines at the credit
union. With a little ingenuity, placement times for open positions
were reduced by 20 days and ways to forecast demand that allowed HR
to have tellers in the pipeline were created to further reduce
Eliminate these delays and your business can boost profits by
20-40-60 percent while doubling or tripling productivity. It’s not
unusual to reduce total turnaround time by 75 percent or more, just
by finding and eliminating the biggest delays. Where are the
biggest delays in your business?
processes have a three percent error rate: three items out of every
100 have a defect. This error rate extends to marketing, sales,
orders, production, billing, collections and so on. These defects
cause adjustments, returns, customer calls, rework and other costs
that could be prevented. It’s easy to see how these mistakes and
errors can add up to a third of total revenues.
Until their defects were found, one commercial printer was
scrapping over a million pounds of paper and ink every year due to
mistakes and errors. Analysis showed that the most common type of
errors were pages printed out of sequence. The source of the error
was not in the printing process itself, but mistakes made in layout.
Once the layout process was refined, the company drastically cut its
waste, and in doing so raised its profits.
Fortunately, these defects aren’t spread all over the
business like butter on bread; they cluster in a few key steps in
the process or a few key machines. Perhaps only one step out of 25
produces over half of all defects, mistakes and errors. Counting and
categorizing the source of errors will identify the culprit. Then it
takes a little ingenuity to figure out how to change the process to
prevent the defect, but once it’s fixed, the defect is gone
forever. What are the most common and expensive errors in your
businesses suffer from deviation from a customer’s target; products
that are a little too big, too small, too heavy, too light, too
brittle, and so on. Service industries suffer from variation in
turnaround times (e.g., wait times at a bank or durations in a call
One beverage company was struggling with the uniformity of
its products. At the end of production they were finding too many
cans that were under weight and had to be scrapped. The filler was
analyzed and one nozzle was found that needed to be adjusted to
restore error free production. On the same investigation other
nozzles that had to be adjusted to reduce overflows were also
identified and remedied. Where are the deviations in your business?
These three criminals – delays, defects and deviation – are stealing
profits, robbing customers of time and money and threatening
corporate survivability. Stop blaming employees and start blaming
the business processes and information systems that perpetrate these
With a little effort, it’s easy to prevent these criminal
acts. Only one gap, step or machine out of 25 causes most of the
delays, defects or deviation. Find them and fix them. Put procedures
in place to make sure they stay fixed.
Start with the major felonies and work your way down to the
misdemeanors. And keep an eye out for new breeds of criminals: new
systems or procedures that haven’t been vetted. Isn’t it time
to put a stop to crime in your business?
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