Communication Inefficiencies Cost Businesses 5% of Gross Sales

Originally published by: ProSales MagazineNovember 30, 2020
by Todd Drummond

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Think beyond the physical investment of trucks, equipment, and buildings when it comes to investments for improving your bottom line for 2021. If a company wants to improve the net profits, improving the project communication process can add serious dollars to the bottom line. As W. Edwards Deming once stated: “Your system is perfectly designed to give you the results you’re getting.”

Illustration of Todd Drummond

Most companies have grown so accustomed to their current business practices that they feel the way they operate is expected and is the most efficient. Yet, the vast majority of companies suffer from poor project communication processes and practices that cost the company far more than they realize. If one measures these communication inefficiencies using Six Sigma, the cost of defects is at least 5% or greater of waste and inefficiencies of total gross sales. Let’s look at how this figure was estimated.

Labor Costs. The number of countless person-hours being wasted finding information, correcting information in error, and using the information in error is quite shocking. The vast majority of companies have a project communication process of printed paperwork located in different departments, undocumented phone calls, emails on different employee’s computers, and disjointed software apps that retain certain aspects of each project, such as scheduling of components production, delivery trucks, or other department resources.

Think about your day-to-day actions and consider how many times daily someone tracks you down for a face-to-face conversation, calls you on your cellphone, or sends you an email or text to find out important project information details that they don’t have immediate access to. Why is it that 80% of the repeated questions being asked involve information that is available somewhere in the company but somehow segmented, so people do not have that information at their fingertips without asking someone else? Ask any salesperson within your company about how much time they spend daily searching for project information by calling someone within the company and the vast majority of companies will find that the company needs improvement in its project communication process.

Costly Errors. When was the last time an error was recorded that was not a communication problem in your company? Yes, there are errors in the project process of defective material and quality of workmanship. Still, most often the costliest project errors originate from missing or incorrect project information. Furthermore, the often-missing information was known to someone or documented somewhere within the company, but not relayed to everyone who needed the critical change or special request to avoid the error. If a company wants to reduce costly mistakes, it must improve its project communication process.

Segmented or Silo Project Information. Why is it so difficult to find the needed project information most of the time? The answer is simple: Because most of the information is scattered across many types of platforms or methods of communications being used in the company. Emails, text, specialized department apps such as component manufacturing, in-house developed database, accounting enterprise resource planning (ERP), and material requirement planning (MRP) systems all have bits and pieces of any particular project. All promise to deliver a seamless means to give everyone the needed project information, yet this promise is always some time in the future. Deming said “Ninety-five percent of the reasons for failure are deficiencies in the system and process rather than the employee. The role of management is to change the process rather than badgering the individuals to do better.”

Resolving the Project Communication Process. Having all these disjointed bits of information, including emails, task status, and every department’s schedule, merged into a single platform associated with each project could help resolve several common project communication wastes and inefficiencies. Such a system could be streamline so that virtually any aspect of any given project could be accessed with live, up-to-date information from any cellphone, tablet, or computer.

Rather than reinventing the wheel writing, there are fully customizable, affordable platforms that can be plugged into existing accounting and specialized department software to act as a communication hub between different departments. I have witnessed apps that are available that will fulfill these critical needs that do not require inhouse development. When your company is ready to take the next step, look outside the box your group has found itself constrained in.

At the beginning of this article, it asked you to think beyond the physical investment of trucks, equipment, and buildings when it comes to investments for improving the bottom line for 2021. Maybe it is time to review your project communication process and system. Once you revamp to the type of system that I describe, you will be so glad that you did.