A bird does not sing because it has an answer.  It sings because it has a song.

12 March 2010

Follow the Money

A colleague of mine recently said to me, "if you understand the flow of cash in a business, you understand the business." While I'm not sure an understanding of the cash flow alone would make me an expert in a particular industry, there's no doubt that "following the money" provides a lot of insight into how a company works. It can also shed some light on the ways in which a company doesn't.

Supposing Jane in procurement doesn't much care for the way Joe over in marketing treats her. Joe puts together a purchase order for some promotional items to be handed out at an upcoming trade show, and tosses it on Jane's desk along with a terse remark. She carefully places it at the bottom of the pile on her desk. The P.O. gets processed eventually, and the items arrive (barely) on time. Joe's and Jane's distaste for each other deepens, and more to the point, the company pays rush charges on the last-minute order.

The invoice for the order makes its way over to accounting, where Bill, who doesn't like Joe any better than Jane does, tucks it into the bottom of his in-basket. And misses the deadline to get the discount for paying within 15 days.

There's nothing wrong with the process at this company. Everyone does exactly what they are supposed to do, according to the letter of the procedure. Yet they are missing obvious opportunities to save money. Why? Because processes don't run companies. People run companies. And when people let their personal gripes or grudges get in the way of productivity, chances are there's a deeper problem that process improvement alone won't solve.

In this case, following the money would reveal these disconnects. The challenge for the person who discovers them is to recognize the real problem. Telling Jane and Bill to pay more attention to the urgency of this paperwork, or giving them more "training" on the procedure, won't make the slightest difference. They know how do to it efficiently. They choose to undermine Joe instead of acting in the company's best interests. It will take noticing the pattern -- that this happens regularly with Joe's purchase orders and not with Bob's or Mary's -- and resolving the people conflict to put the cash flow back on track.

The soft stuff is the hard stuff, and people are the bottom line when it comes to your bottom line. What might you discover by "following the money" at your office?

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