Improving Business Performance; Pulling the Chain

Take a chain. Hold it up and stretch it, placing it under stress. You will see the links tightening, distributing the stress equally along the length of the chain. Now gradually increase the stress until the chain fails. Where did the chain fail? If the stress is passed equally along the length, then it must have failed at the weakest link.

So what?

Organisations too are complex chains of interlinked processes and relationships. They are subjected to the stresses of everyday business, meeting the demands of customers. And there are direct comparisons between a chain and a business process.

Think about this.

A process exists in order to deliver the demands of external stakeholders to a business. The stakeholder makes a demand, the process does its stuff, and the stakeholder gets back what they demanded. Stakeholders may vary the intensity of their demands, placing the process under varying levels of stress. Now if you look inside a process, it can be seen as a sequence of actions or steps, much like a chain. And if the process is to meet the demands of the external stakeholder then every step in that chain must equally bear that stress. If any step in the process is ‘weak’ then the process will fail when that step cannot cope any more with the demands placed by the stakeholder.

Let us take an example. We have a business development process. It has four steps (at a high level) – Promote the Business, Qualify Leads, Pursue Qualified Opportunities, Bid. If the business has to sell $1m then every dollar of that target has to pass through these same four steps – promotion, qualification, pursuit and bid. The process steps have to be designed to reliably cope with that volume. And if any step fails to meet the quota it doesn’t matter how capable the other steps are, you’ll miss your target.

Goldratt (as explained in The Goal, and It’s Not Luck) says that an organisation is only as strong as its weakest link. That any organisation, made up of a myriad of processes, links and chains, always has a single point where the organisation will fail if placed under too much stress. That point is a limiting factor – your business simply can’t perform better unless you fix it. So the secret to improving performance is to identify where the weakest link is, then to strengthen it so it no longer limits the organisation’s performance.

Having done that, of course, you’ve now moved the weak link to somewhere else in the business and you’ll have to fix that. But you have also raised performance, which isn’t a bad thing.

So where are the weak links?

Not always in obvious places:

• the most common weak link is in business development – the business could deliver more output, but it did not sell enough to keep the business fully utilised

• if business development is working fine, you might have a problem delivering what you’ve sold, an operational problem, often to do with inefficient scheduling and alignment

• then you might have a problem with management – can they cope with the number of decisions they are asked to make, is the organisation responsive enough to meet customer demands?

• or you might have a strategic weakness – resources are deployed in the wrong market space, there is an ineffective business model, or it has not reacted to threats and opportunities.

So how easy is it to find where the weakest link is? Let us look at an example, the following are ‘facts’ about a fictitious company…

• Our strategy is to grow the business – selling licenses and implementing a software product.

• We are not selling enough to grow the business; sales volume remains static.

• We are leaking margin on our projects because the software is difficult to implement.

• Our competition has a cheaper product with more functionality.

• We have lost staff to the competition, so the average skill of our consultants is falling.

What is the problem – where is the weakest link? Is the strategy wrong? Is our sales approach wrong? Is the method we use to implement the product at fault? Is the product the problem? Are we not differentiated enough? Are our HR and training policies at fault?

Difficult to diagnose? Yes. Impossible to diagnose? No.

Of course, we need more information, to dig deeper. But I would say it is likely that such an analysis would identify that the fundamental weakness is either the product (it is difficult to sell, it is not well positioned versus the competition, and it is too difficult to implement), or the strategy (competing in the wrong market or clarity over the business model)

So unless we improve the product or sharpen the strategy we are wasting our time and money fixing the wrong weaknesses.

And we only have to fix the product or strategic weakness sufficiently, so it is no longer the weakest link. We don’t have to run a massive, expensive project to make an area operate perfectly. So if the product was the weakest link, but the sales approach was weak as well (not the weakest, but nearly so), then the product may only need to improve a little before the sales approach became the new weakness. We may only need to run a small, cost-effective project to improve the product that little bit. And it is also very likely that the sales approach will only need a small improvement also before it too ceases to be the weakest link (the honour of weakest link may then switch back to the product, or elsewhere in the business).

In conclusion – chains do tell us something useful about our business. And the more you learn about your business and its weakest links the more effective your performance improvement investments will be.

This is an area where business intelligence systems can help provide the data and tools to analyse business performance and suggest, with some evidence, where the weakness lies.