What Poor Process Management Is Actually Costing You

Luke Walker
September 24, 2020

As business leaders – and especially operations leaders – we are usually focused on meeting the next, urgent business need.

That could be pulling off the next enterprise sale, or shipping that new product release, or delivering that big project, or even finding new investment. These revenue-driving activities are typically the first items on our lists, as they correlate most directly with the success of our business.

But what about how the work is getting done? Every leader knows that effective process management is critical to the success of the business too.

And yet, somehow, it ends up at the bottom of the to-do list. And that’s costing you a lot more than you think.

Process Management Pains and Rising Personnel Costs

In most businesses, recurring processes are well-defined, but still loosely managed using a combination of task managers, status meetings, emails, spreadsheets, and calendars.

Though considered “the standard” by many, this approach is massively time-consuming to maintain, difficult to prepare, hard to track, and doesn’t scale without introducing more and more layers of coordination management. A lot of resources are spent just to organize work, with the work itself still needing to be done.

And we’re talking about a lot of resources.

According to a 2019 study, an estimated 60 percent of skilled worker time is lost to coordination, leaving less than 27 percent of their time for execution of the skills-based role they were hired for.

With poor process management, there’s always additional personnel cost.

That’s because:

  • Someone needs to coordinate all the work that needs to be done
  • Someone needs to enter data manually
  • Someone needs to document work and progress
  • Someone needs to review and correct work completed with errors (which often are the result of poorly articulated work instructions)
  • Someone needs to provide an example of how to actually do the work, because SOPs, project management, and execution happen in three different systems (for example: SOP documentation in an intranet system > project or process instructions in Trello > execution in an ERP system)

Depending on your situation, that would probably constitute a full-time coordinator or equivalent, and very likely, an additional half-time role, working student, or internjust to manage process coordination.

Alternatively, you could load coordination responsibility onto your skilled workforce, who are normally responsible for execution. But with that – as in the aforementioned study – you’ll be sacrificing total output, quality of work, and more than likely the job satisfaction of your best skilled workers.

Or – last resort – process coordination ends up on your plate. Let’s see what that costs you.

Opportunity Costs are the Real Killer

Whether or not you accept high coordination costs as a “necessary evil” of doing business, there’s another side of poor process management that you absolutely cannot ignore:

The opportunity costs will actually kill your business.

Although opportunity cost can be harder to trace than coordination costs, the truth remains: the opportunities your business fails to capitalize can and will result in the rapid-decline of your business, often much faster than you would think.

Let’s look at a few examples:

Customer Satisfaction Opportunities

With poor organizational processes and low adaptation to changing demand, customers will quickly migrate to competitors who have adapted to their processes to incorporate new technologies and more efficient services. Period.

And if you don’t believe that overdelivering on customer satisfaction should be a process priority, you’d better think again.

Your customers won’t complain to you. Instead, they will leave you, and let your entire market know about it with a terrible review. In a few words, that customer could trigger a loss of market share, reputation, and profit that you won’t recover from.

Growth Opportunities

Missing growth opportunities can also be disastrous for businesses. Leadership indecision is another result of status quo process management.

Take for example the following statement:

“There’s just too many things going on at the moment. We don’t have time to look into this quarter”

Despite the “activity” evoked by these words, the sentiment actually represents stagnation, likely spurred on by poor process management, and coupled with a feeling of falling rapidly behind.

A more accurate, underlying translation might be:

“Management and coordination work is devouring all my time, and our processes are all over the place. No chance we’ll be looking into new growth channels, until this well dries up.”

Of course, you won’t be able to calculate the exact cost of a missed growth opportunity – that is, until you’ve already missed it, while you were stuck drinking from the firehose.

The list of opportunity costs stemming from poorly managed processes goes on and on. There are also strategic costs and competitive costs to consider, and no end to the amount of potential you will lose from a workforce full of unhappy, stressed out people.

So what should you be doing differently?

Take Away: Don’t Wait to Prioritize Process Management

Surprisingly, in many companies, status quo operations are still accepted as the norm.

This is happening – however – as those very companies are being eclipsed by competitors who have just developed better, more efficient processes.

The hardest part for the vast majority of operations leaders is taking the time to pull their heads back from the firehose to have a good, honest look at where they stand, and figure out where they need to improve.

There is no better time than now to rethink process management at your company. Believe me. Your competitors have already done it.

And the next time you have a coordination gap, and your first thought is to hire in additional help, think again. You might be able to solve the problem yourself – at a fraction of the cost – with the right process management solution.


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About the author
Luke Walker is the Product Marketing Manager at Next Matter. He is a longtime process hacker, and writes about marketing, business digitization, leadership, and work-life balance. When he's not at work, you can find him listening to records or climbing rocks.

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