There’s something to be said about working on the floor in a manufacturing plant. Each day there is a quota of stamped widgets that needs to be achieved in order for the plant to make its goals and success is measured by each employee’s daily productivity. What I don’t understand, is why more businesses don’t apply the same strategy when looking at internal performance within the finance organization, specifically Order to Cash.
Typically, when I’m reviewing projects for potential outsource engagements, productivity metrics are simply unavailable. I remember a case early in my career of a company that had 4 cash appliers to manage the variance from the auto cash process. The manager kept skirting the key question: How many items per day are you managing? Oh, she cited that the volume was “very high” and “you wouldn’t believe me if I told you”. By the end of the fourth day, we uncovered that the total number of items requiring manual apply amounted to 5 per day. That was 5 items per day that needed to be manually applied. This company spent hundreds of thousands of dollars per year to manage 5 items per day. So what was the problem?
First, in the case above, the management team had zero visibility to the daily productivity of their employees. System limitations prevented adequate reporting of productivity. If the systems can’t measure keystrokes, attempts, items processed, adequate resource allocation can never be realized and the cost burden will increase exponentially. But while the system should provide productivity information with ease, management has to understand the basic philosophy and employ it. Which brings us to the second part of the problem: using productivity data to manage the employees. I’ve seen too many cases where managers simply ignore low producing employees out of some sense of fairness or unfairness depending on the perspective. In other cases, even the notion of reviewing the number of items processed was almost foreign to them. The fact is though, that for every employee with low production, there is another employee at the opposite end of the spectrum that has to pick up the slack. That creates a culture of resentment, overall inefficiency and burnout for those exceeding their normal capacity.
I use productivity as a starting point for nearly all conversations regarding process efficiency. If the systems I am reviewing don’t have the ability to provide this data, I suggest implementation of our tools to support the project. What I want to know is how many items are there? How often are they processed? How many close normally? How many close with variance? Without that information as a starting point, one has no reference for the effectiveness of people, processes and systems combined. It’s like the secret equation that’s different in every company and once you understand it, it unlocks the truth about performance and resource allocation. Once mastered, productivity puts the power of change at your fingertips.