This article is based on a segment from Process Street‘s Highway 2021 virtual event, where Leverage CEO Nick Sonnenberg shares with us how his team kicked their operational efficiency into overdrive from start to finish.
Supercharging Operational Efficiency with Leverage CEO Nick Sonnenberg was the fourth segment of Highway.
Here’s the Supercharging Operational Efficiency with Nick Sonnenberg segment in full:
- The scavenger hunt problem
- How fast should you scale your business?
- Complexity scales exponentially with team size
- CPR: Communicate, Plan, Resource
- Static knowledge vs. dynamic knowledge
- Pro-tips for optimizing company processes
The scavenger hunt problem
- The #1 most common pattern in businesses of all sizes is the scavenger hunt problem.
- A basic operational efficiency framework can save 5 hours per week per person.
Nick: “I’m talking about a business scavenger hunt where it takes 27 different places to look to find what you’re looking for (Was that in an email? Or Slack? Or was it at an Asana? Or is that a Google Doc?) and it takes longer sometimes to find information than it would have just to simply get it done in the first place.
On average, we’re seeing that there’s at least five hours a week per person in a team that you can get back very quickly if you just roll out the basics of operational efficiency, and let’s just take a moment to look at what that means in terms of bottom line.
If you are a ten-person team, five hours a week ends up being over a hundred thousand dollars per year back into the company’s bottom line.
Now, if you’re a 100-person team, that’s over a million dollars and a 1000-person team, that’s into the eight figures already, So, obviously, that’s not small numbers. You have to take this seriously.”
How fast should you grow your business?
- You should be optimizing company processes for the speed of retrieval of information, not the speed of transfer of information.
- The speed of retrieval of information will dictate how fast you are able to grow as a company.
Nick: “So, how fast can you grow?
Well, I used to think that the name of the game was speed of transfer of information; how can we just get things transferred to people as fast as possible? But, I realized over time that this was incorrect and the right thing that you should be optimizing for is speed of retrieval of information.
Set up systems and processes so that it’s as fast as possible for you or your colleagues to find what they’re looking for. It might mean that you take an extra ten seconds in the moment to put it in the right bucket, but if everyone has this mentality, it’s going to make everyone’s life much easier.”
Complexity scales exponentially with team size
- Growing your team before you have a solid framework for operational efficiency can make matters worse.
- Bad processes are like “superstar tar”. Even superstar employees can’t produce ideal results if they have a bad process.
Nick: “Even superstars can’t produce ideal results if they have a bad process. Individual productivity is necessary, but it’s not sufficient for a team to be productive. You have to have collaboration, coordination, sometimes people have to sacrifice their own productivity for the greater good of their team.
I like to call this ‘superstar tar’. Imagine Michael Jordan; he’s a great player, but if you put tar on his shoes and it takes him an extra 10 seconds per step, you’re not going to fully utilize that talent, right?
So, these problems are rooted in process, not people. And actually, when we see our clients just brute force hiring more people, it really makes matters worse.
Complexity scales exponentially with team size. The sooner that you roll out a framework of operational efficiency, the easier it’s going to be for you to scale. Adding more people on a broken framework, broken system, broken processes, odds are it’s going to make life harder for you, not easier, and it’s going to just amplify the scavenger hunt issue.”
CPR: Communicate, Plan, Resource
- Nick’s framework, CPR, stands for Communicate, Plan, and Resource.
- Separate the different types of communication (internal communication, external communication, and personal communication) and use different tools for each of them.
- A good project management software is going to hold people accountable and provide transparency and visibility.
- Make sure to document all the company’s core processes and knowledge.
Nick: “This is the core of my book that’s coming out. Our framework is called CPR. It stands for Communicate, Plan, and Resource and this is what we found is the core of every company’s needs to be operationally efficient.
Every company here needs to communicate internally and externally. They need to plan, they need to manage their tasks and projects, and then they have resources, that’s proprietary assets, knowledge, things that make the company who they are.”
Nick: “Communication [can be] so fragmented, that it’s hard to find and keep track of what you’re talking about. So, here are some quick tips that you can do really really, really quickly to save a bunch of time.
So first, separate into buckets the different types of communication. You have internal communication with your team, external communication with clients and vendors, and personal communication. These are three distinctly different types of communication that require different tools to use for each of them.”
Nick: “Pro tip: You can create (and we do this a lot at Leverage) a fake user for someone that you need to hire in the future.
So, say you’re looking to hire a director of design; they don’t exist yet, but there’s a bunch of things that are popping up that you would ultimately want to hand over to this person that don’t need to be done in some urgent fashion.
Create that fake user, start assigning them tasks, and in three months or six months, whenever you hire that person, you just click a button and now they’re already loaded up with potentially hundreds of tasks that they can get started with, adding value to your team and company.”
Nick: “So, the last part of CPR is all about resources. This means it’s about digitizing your company knowledge. You have proprietary knowledge, processes, SOPs, assets; this is all information that helps you to run your company. It helps you to be more productive, but also if you ever have an exit, this is something that will increase the value of your exit.
Imagine who the number one person is on your team; think about what they do daily, weekly, monthly.
Now imagine they tell you that they’re leaving, and not only that, they’re leaving in five minutes. Are you prepared for that?
Well, that happened to me about four years ago and it felt like this.
Revenue was down 40%, I had to drain my 401k, and we were really on the verge of bankruptcy. The only thing that saved us was that I had the foresight about six months before to roll out an initiative to document all the core processes and knowledge. Had I not done that, I definitely wouldn’t be here today speaking to you.
So, with that being said, what we realized is there’s two types of knowledge in a company: static knowledge and dynamic knowledge.”
Static knowledge vs. dynamic knowledge
- Static knowledge: Who, what, when, where, & why?
- Dynamic knowledge: How? (Process-related knowledge)
Nick: “Static knowledge answers the question of who, what, when, where, why.
So, who’s the CEO? When is the monthly town hall? What are the company values? What are the key objectives for the quarter? etc.
And for all of this, there’s knowledge bases and wikis where this information should be accessible.”
Nick: “Dynamic knowledge answers the question how.
How do you run payroll? How do you onboard a team member? How do you do your quarterly planning?
This is dynamic. This would require a checklist with which has steps that have to be
done in some type of conditional order. And it’s really impossible to scale your company if you’re not documenting your SOPs and your processes.
Aside from the time savings, there’s also risk reduction involved. It’s kind of like buying an insurance policy on different parts of your business that you wouldn’t be able to go to an insurance broker to get.
It mitigates the error of executing a process and sometimes fixing an error takes ten times longer than just getting it done right the first time. It also reduces the error of someone leaving with a whole bunch of knowledge in their head.
When you properly take this seriously and document your processes, it’s like cloning yourself.
If you can’t be replaced, you can’t be promoted and the documenting process is one of the key ways that you’re going to be able to get out of the weeds and onto higher level work.”
Pro-tips for optimizing company processes
- Process Street is a great tool for documenting team knowledge & workflow management.
- Tip 1: Build a culture of pointing to company documentationFF instead of providing bespoke or direct answers whenever anyone asks for specific information.
- Tip 2: Try to do role rotations.
- Look out for Nick’s book, Come Up For Air: How your team can leverage systems & tools to stop drowning in work, coming out next year.
Nick: “Process Street [is] our recommended tool. We’re huge fans of Process Street for the process side, that dynamic side.
Process optimization tip #1: Build a culture of process documentation
If someone asks you how to do something, try not to answer them directly.
One of the hardest things about maintaining a knowledge base or processes is people get busy and then things get stale.
So, if you try to roll out into your culture that people don’t directly answer questions, rather they provide a link to the answer to that question, whether that link is the SOP article or the process in Process Street, that’s going to enforce it into your company, into the culture, that people should be looking in those places.
It’s also going to naturally help people to maintain the accuracy of the information.
Process optimization tip #2: Try to do role rotations
Try to do a quarterly rotation. It doesn’t have to be a full swap for the whole quarter; it could just be for a week. Say, a core process is your payroll process; well, maybe make someone else do payroll for a week and they could swap and do new hire onboarding. Whatever it is, role rotation is going to force people to stress test the status quo of how a process is done and it’s going to give you a backup.
I learned this in my previous life. I was a high frequency trader and as a high frequency trader, we used to have to take a two week block leave every year. Even though I might be the world expert at that algorithm that I had, I would always come back every year, for eight years, and there was always some improvement to my algorithm.
That’s because fresh eyes spark innovation and it’s hard to see the label when you’re inside the jar.”
What did you think of our first Highway? Let us know in the comments below!