Process Purpose

With the continued increase of the process-oriented approach to all facets of business, a new phrase has found its way into almost every business conversation and lexicon: “How do we fix the process?”. Immediately upon hearing this, it is not uncommon for multiple teams to set up multiple cross functional calls, across multiple geographies and time zones to discuss the problems. Multiple issues will be defined with the process, and multiple action items will be assigned.

We are no longer fixing business problems or issues. We are fixing processes. Much of the generated activity and churn associated with fixing the process might be avoided with the simple act of stepping back and first correctly understanding what the purpose of the process is.

Many times, we all take it for granted that the process is there to help employees perform their required tasks. We associate processes with making things go faster. Making tasks easier to complete. Sometimes this is the case. Many times, however, maybe not. I’ll provide a few generic examples.

Long ago, in a galaxy far, far away, back when I was relatively new to business, I remember there used to be a very special place where companies, business units, groups, teams, etc., kept a very special resource known as supplies. Supplies usually consisted of the little things that made it easier for employees to do their jobs, such as pens, pencils, paper, notebooks, staplers, tape and tape dispensers, highlighters and the like. When people needed these supplies, they would go find the person that had the key to the supply location, get access to it and select the supplies that they needed to continue efficiently performing their job.

As time passed and costs and cash flows continued to draw greater and greater attention from the company’s financial community, it was decided that this anachronistic way of providing employees supplies was not in the company’s best interest. It may have been efficient for the employee, but not for the company. Seemingly random and untracked amounts of money were being spent on supplies, and then these supplies would just sit idle (reference to the utility of money and cash flow) somewhere, waiting for someone to come by and use them. And then there was no specific process or methodology to be able to track who was actually using these supplies.

Unaccounted for money and expense was sitting in supply cabinets everywhere.

The result was that associated support teams and their supply budgets were reduced. And usually in their place a new process was created where individual employees would then have to access the on-line purchasing systems themselves where they could then order their required supplies.

Now admittedly the preceding topic has created an exacerbated issue in that it does require a change in employee behaviors. In the past, an employee would wait until their pen ran out of ink, or they used their last piece of paper before going to the supply location and getting more. Now they had to take into account the added time and complication of gaining access to the supply ordering system, and the delay associated with the supply provider delivering the desired supplies, and the internal delivery system to get desired supplies from the loading dock to their office.

What used to be a simple walk to the supply location to get any required supplies, had now become a multi-day, multi-system, multi-approval ordering process.

Now a days, if you need supplies, you had better plan ahead. Or you can just run by the office supply store yourself, and buy your own supplies. Either way, the corporate goal of the new office supplies process has been achieved: the amount of money the company spends on supplies has been reduced.

The point I am making here is that the supply ordering process was not implemented to make it easier to order supplies. It was put in place to reduce the amount spent on supplies. It was put in place to reduce the amount of money the company has tied up in supplies, sitting in some supply cabinet, waiting for someone to come by and get them.

The same can now be said just about any process that involves the expenditure of company funds. Travel approval policies are not there to make it easier for people to travel. Hiring processes are not there to make it easier to hire people. These processes are not put in place not to make it easier, or faster to perform these functions. They are in place for corporate tracking and control.

Just because they take extra time and require multiple approvals does not mean they are broken processes. In many instances it means that they are working as planned.

On the other side of the coin, we can look at those processes that are associated with the provision of the product or service that the company sells in its selected markets.

Sales people inherently understand that the relatively cheaper a product is versus its competition, the easier it is to sell and the greater the probability for a successful sale. Companies that vest too much uncontrolled authority in the sales arm have a tendency to experience lower margins and profitability, as sales tries to press for lower prices.

As proof of this point, would you be willing to go to the gas station across the street to buy their gasoline if it was five cents a gallon cheaper? How about two cents a gallon? There is always a point where convenience and timing can outweigh price differential, but in today’s cost intensive world price always plays a key role in everyone’s purchase decisions.

Sales and pricing processes are then normally put in place to enable business management to have greater influence on pricing in an effort to achieve desired profit levels. These are not processes designed to make it easier to create quotes and provide lower prices. These are processes designed to put checks and balances in place that protect the company’s profitability.

If you are a sales person attempting to compete for a customer’s order, they are an impediment and hindrance to your potential success. They are a broken process that is making it more difficult for you to obtain the order.

They are also probably the result of someone (or multiple someone’s) demonstrating bad judgement. Somewhere, sometime, someone probably knew that a price that was supplied to a customer was probably not in the best interest of the company as a whole, but did it anyway in order to get an order. The individual goal was achieved, but the corporate profitability suffered.

I have said many times that process is implemented as a substitute for judgement. In this case, bad judgement.

Sales people inherently know that the company must be profitable, if it is to continue in business. Margins must be at sufficient levels to meet the numerous business objectives such as paying for expenses, investing in new product development, paying sales commissions and providing a reasonable return to its investors.

Unfortunately, most sales incentive plans are focused solely on obtaining a top line order level. This is the objective that drives sales people to try and drive prices down, thereby making it easier for them to sell. It is also contrary to business objectives listed above.

In this situation there would be two key aspects of the business structure creating friction. The physics definition of friction is:

“… the resistance to motion of one object moving relative to another.”

One trying to move price down, and one trying to increase prices. Process or not, this is inefficient for the company and creates waste.

Instead of creating a process to govern a function that generates corporate friction, which I would liken to the “stick” approach to problem resolution, (removing independent thought and decision making capability from those closest to the customer) I would suggest that It might be better to implement incentives that encourage the desired behaviors, or the “carrot” approach.

What might happen if the company offered the incentive of increased commissions to sales with higher margins, and at the same time offered the deterrent of significantly reduced commissions on sales with lower margins?

Instead of creating a process that can become an obstacle to the desired event (getting office supplies, or generating competitive customer offers and proposals…) which must be dealt with, or in some instances overcome, why not reexamine the event (and judgement point) that is driving the creation of the proposed process? Aligning individual, business unit and corporate goals, with appropriate incentives and deterrents for specific behaviors could be a much more efficient way of dealing with the issue.

With this approach in mind, it might be found that much of the effort that may be currently spent on “fixing the process” can be refocused on solving the underlying business issue and need. This is because, as has just been demonstrated, just because a process is not helping the individual be more effective and efficient at doing their job, does not mean that it is a broken process.

The “Hail Mary” Career Strategy

I was riffing through the Yahoo! Finance page the other day and saw what I thought might be an interesting article: “The Real World Is Increasingly Rough For 30-Year-Old Americans”, by Katie Krzaczek.
So, I clicked on it, hoping it was not the obligatory “click-bait” that we have all come to love. To my surprise it wasn’t. But it did send me to “The Huffington Post” page. Before I went any further, I did a little research on just who the Huffington Post is. I didn’t want to be responsible for furthering some Russian troll’s agenda.

It turns out that Wikipedia has this to say about the Huffington Post:

“HuffPost (formerly The Huffington Post and sometimes abbreviated HuffPo) is a liberal American news and opinion website and blog that has localized and international editions.”

With that out of the way, and despite the fact that am probably far from being considered either a thirty-year-old, or a liberal, I read on.

The article dealt with the idea that despite the fact that all the available empirical evidence that that should logically lead to a different conclusion, this age group demographic was by and large positive about their earning potential.

The article cited the available data that the current percentage of thirty-year-olds earning more than their parents was at an all-time low: approximately fifty percent as opposed to almost ninety percent fifty years ago. It brought up these additional facts:

“Bloomberg recently used Federal Reserve Bank of St. Louis data to highlight how today’s young people “are weighed down by student debt and stagnant wages”, and

“Axios published several charts to show how more of today’s 30-year-olds are living with their parents, paying higher college tuition, taking on significant debt, and buying fewer homes than 30-year-olds four decades ago.”

In short it was painting a pretty bleak picture for what has been termed Generation Y, but was noting that they were still positive about their earnings prospects. In fact, it pointed out that more than half the people in this demographic expected to be millionaires.

Now, perhaps with inflation a million dollars neither goes as far, nor is as difficult to obtain as when I was in this age group, but even so, this seemed pretty amazing to me. What was even more amazing to me was the way they thought that they would get there.

Ethan Wolff-Mann and Melody Hamm of Yahoo Finance noted in the article:

“I’m not exactly sure where all of this positive sentiment is coming from… I’m not sure whether the stagnant wages are contributing to this or anything like that. I do think … people [are] just hoping that something comes along that they walk into luck.”

“… some young people “think they can become influencers or they can sort of get a following, perhaps have a YouTube channel, perhaps be on Instagram and get $5,000 to pose with a bag or a beauty product.”

“Unfortunately, the power of social media, and the “Hail Mary shot” it presents …. works for only a fraction of those hoping to get rich quick.”

Oh, my goodness…

This approach strikes me as betting your future on winning the lottery, or the Readers Digest Sweepstakes, or some such equivalent opportunity. Yes, it is true that someone usually wins, but as noted above, it is usually a small fraction of those that are playing. However, planning on being “lucky” does not strike me as either a good or intelligent strategy for making money, or prospering in business.

If you don’t believe me, just walk into any casino on the planet. When inside, look around. Notice all the nice employees, luxurious prizes, and very nice crystal, wood and marble appointments. Then look at all the people in there gambling. Understand that those are the people paying for all those nice things in that casino. Yes, there may be a very small percentage of them that actually win and are held up as examples to all the rest, but by and large, the vast majority of people that enter a casino leave it with less money than when they entered it. That’s how casinos stay in business and pay for all the nice appointments.

It seems that many may now have the opinion that you no longer have to work hard and excel at something to be successful. Perhaps it is the constant bombardment from the media depicting reality “stars” who seem to only excel at being famous as opposed to being talented, that is influencing this generation as to what success is. Perhaps it is the commercials only showing the Publishers Clearing House winners, and not the millions who don’t win.

Rightly or wrongly I have learned to associate success with hard work. Yes, there has to be some innate ability, but it is the drive and hard work to make something of that ability that leads to success. It seems that too often we attribute success to “luck”. Perhaps that is why so many now are relying on this Hail Mary approach to success. They just expect to get lucky.

The Roman philosopher Seneca is attributed as being the source of the following quote on luck:

“Luck Is What Happens When Preparation Meets Opportunity”

But we now depict the successful as not being prepared to be anything other than famous and successful. They are no longer famous because they were successful, they were successful because they were famous.

Too often we see the successful after they have “paid their dues”. Gates, Bezos, Jobs, Buffet and the others all worked long hours and were driven to be successful. I guess watching people work hard doesn’t make for good television, although the “Jobs vs. Gates” episode of the “American Genius” series on The National Geographic channel was an outstanding depiction of what hard work looked like.

It was also condensed down into a one-hour time frame and put together thirty years after the actual events. It seems today that people want to know and see who will be kicked off the island, or out of the house, tonight.

In business there are very few opportunities for the Hail Mary approach to success. I am sure that they happen occasionally. I just have never seen one, let alone had the opportunity to participate in one. That doesn’t mean that they don’t exist. Just that they appear to be very rare opportunities and events.

As an example, when discussing the rarity of events, for the longest time people thought that the only type of swan that existed was a white one. There was even an old proverb relating to them (“A rare bird in the land”, first attributed to the Roman satirist Juvenal.)

It was not until relatively recent times that it was found that black swans do actually exist (in western Australia). This idea of “The Highly Improbable” was then put into a theory by Nassim Nicholas Taleb, present day scholar and statistician, to explain the rarity of certain events:

“The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. The term is based on an ancient saying that presumed black swans did not exist – a saying that became reinterpreted to teach a different lesson after black swans were discovered in the wild.”

Furthering the idea of the rarity of the business Hail Mary, or Black Swan event, is the continued relative drift away from critical thinking business opportunities in favor of process expansion and edification. Simply put, the business structure of today does not lend itself to many Hail Mary opportunities for success.

Instead business presents the opportunity for focused and hard work, and the potential opportunity for advancement and increased responsibility. “Potential” being the key word. In business today, many have the ability and intellect for advancement, but few have the focus and drive that Gates, Jobs, Bezos and others have demonstrated as a requisite for their levels of success.

The opportunity for success in business is still there, as shown by those that do rise to the most senior levels of leaders in it. It seems it is more the internal drive (and hard work) that separates the successful in business as opposed to them planning on being lucky.

This idea does not play as well when stacked against reality TV, or YouTube channel auteurs who are seemingly being successful at being famous – although I am sure that being famous is probably hard work as well.

What is interesting to me is the way Krzaczek ends her article on thirty-year old’s plans and methodologies for success and getting rich, in a seemingly “liberal” publication. She cites Andy Sewer, Yahoo Finance’s editor-in-chief, who said:

“Get real, work hard, and don’t spend money. The best way to get rich in America is not to spend money.”

That sounds like a pretty conservative, but smart approach to success to both getting rich, and being successful in business to me.