In recent client conversations, I’ve heard repeatedly that waste in the office is much harder to see than is waste on the factory floor. It’s not. Just as the floor had to break through the mentality of large lot sizes, the office needs to break through the “we’ve always done it this way” mentality for agreement.
For example, we all know the word “audit.” For some reason, most accounting departments still feel the need to physically match three pieces of paper (“the 3-way match”) before paying a supplier invoice. Any discrepancy is turned back to purchasing to resolve. Talk about cost outweighing value! The Pareto Principle is useful here. No doubt 80 percent of the invoice / PO problems come from 20 percent of the suppliers/buyers. Check those until you get to root cause, which you then eliminate. For the others, audit at some level that lets your controller sleep at night.
Expense reports and time cards display those same crazy “verify every single one” traditions. We all know that you can’t expect quality in, don’t we? We also know that respect for people is a fundamental part of lean and organizational excellence. So why not figure out where the problems lie, get to root cause, and eliminate the problem? Again, so that your controller can sleep, feel free to audit expense reports. But time cards? Why do we even use them? Exception-based reporting works for most things; why not those? And don’t tell me the government requires them. Yes, you need to comply with all laws, but no, you don’t need time cards. And certainly don’t try to convince me that time reporting to jobs is important. All that does is create waste of supervisor time in explaining variances that have no real meaning anyway.
On the factory floor we’ve learned that batching is bad. But in the office we still create an annual budget (that often takes 3 months or more!) and require annual performance reviews.
Neither of those is effective, or required. A 12 or 18 month rolling budget is much more useful for everyone, including investors. That supports alignment with the Sales & Operations plan, creating a single set of numbers. Wow, what a concept. Real time conversations about performance support personnel development considerably more than does an annual “what have you done for me lately” large batch process. Other priorities don’t have to suffer with level loading of those activities. What else do you batch in the office? Accounts payable checks cut only once per week? If you can accept checks daily, why can’t you write them daily?
For all these time-consuming office processes, start by asking the ever popular “why?” Why do we invest valuable time executing a 3-way match? I’ve only sent 2 invoices in the past 5 or 10 years. I remember them because they’re so rare. With any client I have a contract which specifies payment terms. There’s no need for a Purchase Order, no need for an invoice. The contract suffices. So why waste resources creating more paperwork? Several accountants undoubtedly just rolled over in their graves, as an equal number of live ones had heart attacks. The production leaders who saw inventories plummet, lot sizes fall, and incoming inspections disappear can comfort them.
And this is just the beginning of office waste that should be obvious. Don’t even get me started talking about the ridiculous wastefulness of most transaction reporting into the ERP monster machine!
As published in AME’s Target Online