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Got Leverage?

Written by Corey Chambas, President & CEO, First Business Financial Services, Inc.
First Business Financial Services, Inc. Board Member
First Business Bank Board Member

I needed my next blog idea, and as I frequently do, I talked to our head of marketing about an idea I had to get her opinion as to whether it was “blog-worthy.” After hearing my concept, she responded with a definite…“maybe.” Later in the day we were in a meeting together going through an upcoming presentation. When she saw the agenda, and a topic I was going to present on, she chuckled. It was the same concept that I had proposed to her earlier in the day for my next blog. She was not surprised that I was trying to use the same work twice, as I like to leverage the same work two or even three times, as in my mind, leverage equals efficiency.

Leverage and efficiency reminded me of the concepts demonstrated by the assembly line. Developing the assemble line to produce the Model T, Henry Ford used automation, standardization, and specialization to create leverage and efficiency, ultimately revolutionizing the manufacturing and automobile industries. Through these same concepts, you can find leverage in your own job or business.

In a manual process, you automate to change variable costs into fixed costs, therefore creating leverage as volume increases. For example, in a situation where there is a manual process, equipment can be used to automate a repeated movement or series of steps (i.e., the conveyor system of the assembly line at Ford). Similarly, in an administrative process, technology can be applied to create efficiency. For example, at our company we found by the time we on-boarded a new client, we had entered their name into our systems over two dozen times. Obviously, utilizing technology would enable us to gain efficiency (as well as accuracy) for a fixed cost of creating an automated process.

As far as standardization, or maybe a better term, prioritization, you really need to decide what you do well. Instead of building custom vehicles, Ford decided to build a single model. Determining how you add value ultimately dictates what you can get paid for. If you don’t do something regularly and efficiently enough to be very good at it, then you can’t add value or get paid appropriately. Understanding your core competencies and your target clients is critical and you need to stick to those. Be sure to target these competencies when you are looking for new business and be diligent about not accepting business and/or clients outside of these prioritized or standardized areas.

Finally, there is the concept of specialization, as with the Model T assembly line workers. You can create specialization in your services, products, and employees. An easy way to think about this is a law firm. At a typical law firm, they’ll do estate work, litigation, patent work, etc. If all the attorneys at the firm tried to practice in all of these areas, they wouldn’t develop expertise and the firm wouldn’t be as efficient. So even within your core business, you need to look for ways to specialize by your product types, your client types, or some other way that creates expertise because expertise creates efficiency, thus the need for specialization.

As your business grows, if you keep doing things the same way, there will be no leverage and therefore no real gain in efficiency. Take a look at a process that you are currently doing in your business and compare it to how you did the same process a year ago. This can give you insight on whether you are employing the key concepts of automation, standardization/prioritization, and specialization. If you don’t see process improvement in these areas, then you may be lacking leverage, and in turn working harder, not smarter.

If you ask yourself as a worker or employer, “Do I really need to worry about these things?” consider the following quote from Henry Ford: The competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time.”

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