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Automation isn't always the answer.

The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.         - Bill Gates

 

The first instinct of new consulting clients is usually to voice their expectations of how we can make their lives easier. We're expected to help automate processes and make calculations about the best staffing configurations, among other expectations. Save costs and increase sales, right? That's why we get hired.

You can imagine their confusion and sometimes disappointment when our first conversations are instead about company priorities. The reason why we start here is that world class businesses understand how to arrange tasks by priority. Task prioritization and elimination are important for the company as well as every single employee.

A business' activities need to be in line with their goal in all three areas: sales, operations, and administration. When the activities don't match the company goal, and move the company forward we call this ineffectiveness. If your business is transacting activities in line with your company goals but could do so in a more practical fashion, then we call this inefficiency. Don't confuse the two, .

Treating ineffectiveness as inefficiency will destroy your business.

This truth cannot be understated. Automating ineffective processes only makes your business more ineffective. It's a magnifier, not a solution. Doing the wrong process better by either automating or adding people will harm your business.

The order goes something like this:

So here's how we apply this truth claim.

1.       Your business must have stated goals. Without stated goals, you do not know if you are effective or efficient since your stated goals are the measuring stick as to whether you are moving closer or farther away.

2.       Prioritize. Not all tasks are created equal in a business. Know what ones help the most and do those. Consider the Pareto Principle. 80% of your profits will come from 20% of your efforts.

3.       Eliminate. Do away with all activities that do not bring your company’s goals closer. Automating something that doesn't need to be done only magnifies the inefficiency of business. So does adding people.

4.       Automate and right-size all tasks. Acquire the expertise internally or externally to understand how a process should look. These experts will guide you to automating everything that can be automated and staff processes correctly.

5.       Outsource when another firm can do it better. Most first outsource their legal counsel and tax support. General Electric recently outsourced their entire tax department. Consider what other tasks an outsource company can do better. Human resources? Safety? Cash management? Planning and analysis?

6.       The lowest level of expertise capable of doing a task should be doing the task. e.g. Your lead engineer shouldn't be answering customer emails about lead times unless there are no other employees who can.

This isn't just true at the high organization levels. It applies to each employee you have at the individual level. For this, you’re left relying on each employee's judgment to prioritize correctly and not participate in tasks that don't move the business forward.

For more information on understanding the benefits and risks in changes to your company's processes, reach out via LinkedIn or tweet me @james_h_j.

James H Johnson CPA.CITP, MBA, CGMA