What Can a Small Business Owner Do to Increase Productivity? This question is one that is often not thought of at the establishment of a business, why would it be. People are often so excited and consumed by everything they need to line up to get the business off the ground they don’t take the time to think about where their pinch points will be. Additionally, by their nature many of the pinch points won’t be something that can be anticipated.
We will walk you through an approach that you can use to increase the productivity of your small business no matter what market you are in. This approach is time tested and has been used to make and save millions if not billions of dollars all over the world.
The approach comes from The Theory of Constraints and is known as the 5 focusing steps. The steps are:
- Identify the constraint
- Exploit the constraint
- Subordinate to the constraint
- Elevate the constraint
- Go back to step one
With these steps we will improve your business and likely do so with little to not cost.
1. How to Know Where to Start Increasing Productivity? Identifying the Constraint.
Our first step is to find the constraint so let’s make sure you are focusing on the right things. You have heard.
“Leaders focus on doing the right things, managers focus on doing things right”
Well, you are the leader of your petite little establishment and as such must identify the appropriate areas to improve. I will assume at this point that the constraints you are hitting are inside your organization and not from your market space. By this I mean you have more work than you can handle and simply need to figure out how to get more done. If this is not the case and the constraint is your market (you don’t have enough work to do and need to work on bringing in more business) than we will discuss that in another article.
So, the work is coming in, you have more to do than what you can handle, and you need to improve the amount of work you can complete. At its surface one may think “I simply need to hire more people” This may be correct at some level but there would be little to gain if each additional dollar you bring in costs you a dollar. If we are talking about a quick fix to a sudden surge then yes, some more hands on deck would help. What we are talking about here is greasing the wheels or tuning the engine of your business so that you can make more money with less effort.
In the Theory Of Constraints, the idea exists that an inherent simplicity can be found in all complex systems. The trouble isn’t that the system is complex it is usually that the inherent simplicity has not yet been identified. Once identified we can begin making the appropriate adjustments to improve throughput and increase productivity.
Where is the money made/lost?
To address the correct limitations, we will want to know more about how your business makes money. In manufacturing this is called value stream mapping. It may be something you know intuitively but if not take the time to map out, write down, all that needs to transpire for you to make a sale. It doesn’t have to be perfect but create the sequence of events that must occur for you to have a happy customer.
What we are looking for is what is known in the world of project management as the critical chain. The critical chain pertains more to scheduling and interdependence but embodies the idea of all the critical operations, their order, duration, and affect on completing the task.
With these in hand ask yourself which of these is consistently the hold up or issue. If you have a time sensitive business, which area takes the longest? If your service had a high-quality component; which area compromises your quality? There is a reason people come to you and not someone else and you want to find out what that is and what part of your system affects that the most.
In a production situation in which throughput is the key metric we know where this constraint is because it is the process that always has a pile of WIP (work in process) sitting in front of it.
This constraint is the culprit to your throughput and what we will need to address to increase productivity.
2. Once You Find a Place to Start What Do You Do To Increase Productivity? – Exploiting the Constraint.
Now you know where to focus your efforts you want to get the most out of the constant as possible. This could mean any number of things, but the idea is to make sure that the constraint is running at its highest possible capacity.
An example of this would be spindle up time for a machine shop. If you had a single machine and wanted to exploit the constraint to maximize through put you would want the down time of the spindle to be as close to zero as possible. This would mean that the machine is cutting material/adding value 24/7.
In a bakery this could be the oven. I don’t know if this is true, I am not a baker, but the idea would be if the limiting factor to throughput was the oven you would want that oven baking 24/7. You are not turning the oven up to cook faster, you would be making sure that every possible moment that it could be used it is.
For a lawn mowing business this could be the mower run time.
For a virtual assistant this could be emails sent.
The point is whatever it is that you identify as the weakest link you want to wring every bit of production out of it as possible without any changes or upgrades. Many times, it is simply the lack of utilization, not the constraint itself that is the issue.
3. Now That You Have Opened Your Bottleneck as Much as Possible What’s Next? -Subordinate to The Constraint
Now that you know what your constraint is and have exploited to as much as possible you want to adjust the rest of your system to work in line with and in concert to the constraint. We want the constraint to work at is maximum effectiveness which means we need to keep it fed. This could be a buffer of material in front of it, prepped ingredients being available, or collated documents for processing.
The constraint likely sees down time not because it can’t operate but because it is waiting for something to do. We don’t wan that. By subordinating everything to the constraint we are saying the constrain is calling the shots and must be supported 100%. It could mean that some aspects of you process need to slow down while others need to speed up. Whatever the adjustments are they need to be made relative to how they will allow the constraint to push more out.
Steps 1 through 3 can often be implemented at zero cost and result in as much as a 60% gain. How crazy is that. Simply by assessing your system and prioritizing the variables accordingly you can push your productivity though the roof.
4. With Everything in Line with Your Bottle Neck What Is the Next Move? – Elevate the Constraint.
Once you have your system adjusted to the above you will want to take a look at adding some fuel to the fire. Up to now you haven’t made any major investments into your system, but you have changed the way you used what you have. Now, you will want to take a look at investing some resources to increase what your constraint can do.
In a machine shop this could mean another machine. In the above bakery it could mean another oven. For a VA it could mean new software.
This step requires more skin in the game and will require you to make an investment. As the constraint elevates its possible that the nature of your system will change. If fore example you can triple the capacity of your constraint its quite possible the constraint of your system will move.
In the machine shop for example you may find that after adding an additional machine you are waiting on down stream processes that up to this point you simply didn’t tax as heavily. The bakery may find that now it can bake three times what it once could it now has to wait for all the materials to be prepped. The VA may find that they get everything done in ½ a day leaving them with nothing to do the rest of the day.
If this happens the constant has moved.
5. Now Everything Is Moving Faster Than Ever, What’s Next? Go Back to Step 1.
In the name of Kaizen (constant improvement) as you push your system though these steps you will find that your constraint has been broken and is no longer the limiting factor it once was. At this point you will start the process all over again by going back to step 1.
Wherever you are on your income journey be sure to check out The Four Stages Of Wealth Creation; From Clueless To Capitalist. We put this together as a guide for those looking to grow their financial acumen and take their next step towards financial independence.