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Supplemental Material for
CASE HISTORY: HYPER ACTIVE, INC.
Turbo-Charge Your Company With A
Simple 3-Step Process
Sidebar: Breaking Constraints
1. IDENTIFY the constraint.
LIST the undesirable elements of your business.
IDENTIFY the causes and effects that connect the undesirable elements.
IDENTIFY (by looking at the interrelationships between causes and effects) the main cause that results in the most undesirable effects. This is your main constraint.
2. FOCUS your resources and attention to breaking the main constraint.
ASK: Is there a single activity that will break the constraint? If "yes," implement it. If "no," identify the multiple activities required to break the constraint. Determine the order in which they should be implemented.
3. ANTICIPATE the next big constraint.
ASK: What will result if we are successful in breaking the main constraint? If the predicted results will stretch or misalign the organization too far, START TO PREPARE now for breaking the next resulting/predicted constraint.
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Sidebar: Identifying the Constraints at HYPERACTIVE
Projects are behind.
Projects are over budget.
We don't know if projects are behind.
Constantly putting out fires.
No time to plan.
We don't know if projects are over budget.
Cash-flow is a problem.
Getting proposals written in time is a problem.
Quality of finished programs is excellent, but too much debugging required. We aren't getting checks in on time.
Staff is not working together enough.
Staff is getting tired.
Weiker and Neumann are getting tired.
There just isn't enough time.
We aren't getting invoices out on time.
We're doing a lot of expediting on every project.
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Sidebar: Breaking Many Constraints at Once
Taking actions related to the money problems would not have solved the overall systemic/process problems. Having or getting more money might have helped ease the pain but only by masking the problems... for awhile. Because typically, if money is spent on anything but addressing the root constraint, the problems tend to return and be much larger.
We were operating under the theory that improved processes would reduce the need for Neumann and Weiker to fight fires. Improved processes would also mean projects would go more smoothly, customers would be more delighted with the finished work, and HYPER ACTIVE would be profitable, so Neumann and Weiker would have more time to grow the business.
The reality was, however, if Neumann and Weiker took time off from fighting fires and from billable (revenue generating) project work, the cash-flow situation would worsen quickly. We also predicted that if they spent less time talking with clients about how the fires were being fought, clients were going to be frustrated and angry by the lack of communication. As a result there would be even more fires to fight, and possibly more accounts to try to save.
HYPER ACTIVE also focused on collecting long-standing overdue receivables. "In the past we just couldn't bear to take the time off from project work to collect what was owed to us," Neumann says. "We just knew it was going to be an onerous task. In retrospect it sounds crazy not to keep up with overdue receivables, but it takes a great deal of emotional energy and time to focus on overdues, and we didn't have much of either. Chris took over collecting the receivables. Of course, as it turns out in almost every case, there was just some paperwork snafu. Chris's attention to this meant that within 60 days we were able to collect enough overdue receivables to put money in the bank to make payroll for two months!"
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Sidebar: Process Shifts
"This process of involving more people also helped us to segue to a point where the staff who were doing the project work gradually became more involved with the clients," Neumann adds. "In the past, it had been more efficient for just one or two of us to communicate with clients, but in reality, we were just adding a layer of management to the communication process."
HYPER ACTIVE also talked with clients and negotiated deadline extensions on some jobs. The company also put really tight controls on expenditures and postponed all they could. "And, it may not sound important, but we also started thinking in a more process-oriented fashion," Weiker observes. "That mental shift helped us get a bigger, longer-term picture, and helped us see the entire system at work."
Sidebar: The Multiplier Effect
Return on a time investment in process improvement can be one of the biggest payoffs possible. For HYPER ACTIVE it worked like this:
9 hours (3 hours x 3 people) invested in proposal/contract process improvements = an immediate savings of 6 hours (2 hours x 3 people) on the very next proposal.
With an average of 1.5 proposals per month, that's a savings of 108 hours in the first year.
In addition, because of the streamlined process, HYPER ACTIVE can respond to more requests for proposal.
The higher-quality proposals also have meant fewer misunderstandings with clients and fewer fires to fight. The new proposal process also resulted in faster, easier communications with clients. In one case, a client questioned $23,000 in fees. When Weiker pulled out the proposal and reviewed it with the client, the client said, "You're absolutely right. I'd forgotten that this was a part of the work, and I'm glad to have this phase already completed."
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Sidebar: Anticipating Constraints
Breaking the constraint of TIME (via process improvements), leads to:
A potential constraint on growth, because everyone has more time, but NOT ENOUGH WORK. Breaking this constraint (via marketing/sales efforts), leads to:
A potential constraint on growth, because there is NOT ENOUGH STAFF to do the work. Breaking this constraint (via attracting and hiring candidates), leads to:
A potential constraint on growth because the NEW HIRES MUST BE TRAINED. Breaking this constraint (via teamwork and mentoring of new hires), leads to: ???
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