We’d like to extend our sincere gratitude to Jim Counts of Counts Consulting, LLC for allowing us to post their previously published article. Permission granted VIA email 10/13/11. All articles are reprinted in their entirety as originally published.
Rules, Rules and More Rules
Have you ever noticed that we just keep creating and adding rules? Every time something goes wrong or a customer figures out how to get a part without paying we establish another rule, procedure or step.
Here’s an example: A friend of mine called a recycler to buy a part which they found on the internet for about $50 and wanted it shipped to their home. The salesperson wanted to fax them a form that required a name, address and method of payment and then fax it back to the recycler. For $50, they wanted their potential customer to go through all this hassle. How many retail customers have a fax machine? How many businesses that do have one are going to go through all this trouble for a $50 part?
So why do you think the recycler has this RULE? My guess would be that someone, sometime got a part shipped to them and somehow did not have to pay for the part. So, what’s the solution? Treat every customer like they plan to cheat you? Folks, I buy things off the Internet all the time without any of this paperwork, and most of the time, it’s from a company which sells millions of dollars of products this way each and every month. I could understand if I was buying a $1,000 engine that’s being shipped out of state, but no, they have that RULE for ALL parts and ALL prices. I wonder if any consideration was given to their labor cost of faxing forms back and forth, or how many people do what my friend did, hang up and call someone else.
I worked for a big company that had over 500 outlets. In one of those outlets, an employee embezzled about $40,000. The solution that headquarters accounting came up with to keep this from happening again cost our unit/outlet about $5,000 per year!! So the one-time loss of $40,000 just turned into a $2,500,000 increase in overhead, company wide. It took them almost 2 years to figure out their solution was 60 times worse than the problem.
Have you looked at all your rules recently and questioned whether they may be costing you more than the original problem?
I understand that safety rules and requirements are necessary, but even there I see some that I have to question. When I do question them, they often give me some example that has about as much chance of happening as me finding a chicken that has lips. Yet the employees have to go through extra steps every day to avoid the chance that this chicken might actually exist! Again, I question whether the prevention is more costly than the potential problem.
A long time customer of our company asked me to work with his sales staff to improve the number of sales they closed. After spending a little time with the salespeople, I discovered the company had a rules and special handlings manual for sales.
I went to the owner’s office and ask about them about having so many sales rules. He reached back to a shelf and handed me his copy of the manual and suggested I might go through them and see if any needed to be dropped or revised. My hand dropped from the weight. I looked around his desk for the trash can and dropped the manual into it. Then I said “let’s start over”.
Rule 1. Sell the part.
Rule 2. Figure out how they are going to pay for the part.
Rule 3. Where do they want the part delivered?
Rule 4. Create a work order or invoice so the part can be pulled or shipped.
“Now what other rules do we actually HAVE TO HAVE?” The point I was trying to make was we need to try to keep it simple and manage to what normally happens, not some exception that occurred “xx” years ago, or we heard someone talk about.
Here’s a few examples of what I have seen in my travels:
- The accounting department keeps an extra copy of every invoice in case someone might ask for one. They then file these in invoice number order, or worse, by customer name instead of just reprinting the invoice when needed.
- The dismantler pulls more parts than we ever sell because management once commented “we had several of those vehicles go through so why isn’t one of those parts already off on a shelf?” Result: the warehouse is full of parts that will never sell because the inventory person makes sure we have at least two of everything pulled, just in case one is bad or missing. The owner got his wish, but the cost eats up most of the profits of any sales made by having these extra parts “off and on the shelf”.
- A driver once used a gas card to fill his personal vehicle. Solution: They ordered a 500 gallon fuel tank, built a concrete pad (with a roof) for it, put an 8 ft. fence around it and then designed a special housing for the lock to keep people from stealing fuel. They now prepay $1,500 – $2,000 for a load of fuel because someone stole $100 worth of gas.
- An impact gun came up missing so the owner has the parts clerk check them out every morning and back in every evening so they can lock them up in an iron box they paid a welder to make.
Have you re-evaluated your company rules recently? Have you looked for processes and steps in which some exception was created? Maybe we should try to drop one every time we make one or just stop managing the exception.
Many times I find enough unnecessary processes, steps and rules the owner can use plus they will have a whole list of ways to improve sales and profits. Remember, we don’t know what we don’t know, and we are not likely to learn unless we seek help and information from someone who knows more than we do.