Richard Tyson
I have, on occasion, been labeled as being an “efficiency expert.” Most who used this description did not intend it to be a compliment.
On those occasions, I was invited by a client to audit key functions within their business to evaluate how effectively the organization was utilizing its resources — such as time, labor, capital and technology — to achieve their objectives. I was tasked with identifying inefficiencies, waste and areas for process improvement.
Inevitably, this required me to dig into what members of their team felt was their private domain — and this made me very unwelcome from the get-go. It wasn’t that they necessarily had something to hide; it was more that they resented that an outsider with little “real understanding” of their domain would be given carte blanche to snoop around.
Knowing that these assignments carry the onus of being very unpopular, I have invariably suggested that CEOs, general managers and department heads should periodically do their own internal audits, making these part of the expected, normal activities of business. Transparency builds trust and regular process audits will enhance the transparency of any organization.
What should such audits consist of?
To begin with, transparency should be broader than exposing fraud, corruption or wrongdoing. It should, in fact, be broader than even casting light on inefficiencies. In its most important role, transparency should illuminate the effectiveness of an enterprise, organization or business function.
Where efficiency addresses how well time, money, technology and people are being employed, effectiveness addresses whether a business or function should be done at all. It consistently asks two key questions:
- What is the purpose, mission and values of the organization?
- How does this business or function effectively work toward the accomplishment of the purpose, mission, and values of the organization?
If the answer to the second question is not clear, then the business or function is a candidate for elimination. More often than not, however, the business or function is well-aligned with the purpose, mission and values of the organization — and as such, it is essential to the effectiveness of the enterprise.
Having passed muster on this, efficiency issues should be addressed. My primary tool in this regard is value stream analysis (VSA), a strategic tool used to visually analyze the flow of value in a process from start to finish. It is commonly used in Lean and Six Sigma methodologies to enhance efficiency, eliminate waste and optimize resource allocation.
VSA begins with mapping the existing workflow to uncover inefficiencies, redundancies, delays and bottlenecks. I have often found that this is best done by first identifying all persons who, in any way, are involved in the process being analyzed.
I use Post-it notes to “paper the walls” with each person’s understanding of the process. Quite often, I find that people have differing perceptions of how things work — or how they are supposed to. All of these differences must be addressed and rationalized. When this is accomplished, a new value stream map for the entire process must be developed, identifying each step in delivering the desired outcome for the function. This must eliminate redundancies, waste and non-value-added activities, and it should create an optimized version of the process with streamlined workflows.
VSA ends with establishing actionable steps to transition from the current state to an improved state. I recommend that VSA be utilized in conjunction with zero-base budgeting (ZBB). ZBB requires that every expense must be justified for each new budgeting period, starting from a “zero base” rather than carrying over previous budgets. Unlike traditional budgeting, which adjusts prior budgets incrementally, ZBB requires organizations to re-evaluate all expenses, ensuring that resources are allocated efficiently and effectively aligned with strategic priorities. With the improved value stream map of a business or function in hand, ZBB can be effectively used to correlate budget allocations directly with the key components of the value stream.
The discipline of ZBB is based on the relative importance of activities, focusing on high-value initiatives, those that most directly contribute to the achievement of enterprise purpose, mission and values. It also helps eliminate unnecessary spending and allows organizations to respond to economic conditions as they occur.
So that brings us to the topic of the current federal super-charged auditing agency, the Department of Government Efficiency, or DOGE, under the direction of Elon Musk. In a matter of just a few days, his team has audited multiple federal agencies, finding billions of dollars of questionable spending and waste. It is not surprising that there is an incredible outcry against DOGE for assaulting what has been assumed to be sacred cows.
My intention in his column is not to take a position regarding DOGE, other than to say that Mr. Musk is consistently and appropriately stressing the importance of transparency. As the late U.S. Supreme Court Justice Louis Brandeis has said, “Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”
I leave you with this question: Who should be the primary source of sunlight in your business, an external efficiency policeman — or you, the leader thereof?
Richard Tyson is the founder, principal owner and president of CEObuilder, which provides forums for consulting and coaching to executives in small businesses.