Key Points

• In the world of process improvement, there is something to be said for not neglecting the proper steps. 
• Any instance of neglect can lead to a decline in employee morale and productivity. 
• If you neglect process improvement, your competitors are not likely to do the same, giving them a future advantage. 

Whenever we think about how much organizations spend every year on process improvement, it’s a whole lot of money. The efforts to improve engagement, business results, and employee performance can certainly lead to rewards, or they can lead to wasted spending. The hope is that every company’s good intentions pay off, but far too many companies neglect these efforts. 

As a result of ignoring the benefits of process improvement, there is a downside to potentially disrupting the business as a whole. Whether it’s working with agile, Lean, Six Sigma, Kanban, Theory of Constraints, or any other process management idea, there’s a real risk of not integrating one of these effectively at your company, and the result could be millions to billions in lost revenue. 

What Is Process Improvement? 

When you think about process improvement, it’s exactly what it sounds like. The goal of this process methodology is to identify, examine, and implement improvements to the processes outlined in your business plan. The goal is to optimize everything possible to streamline production, increase employee productivity, and reduce inefficiencies that can impact the bottom line. 

The Financial Costs

If you are in charge of a company that determines that process improvement isn’t a necessary expenditure this year, the financial implications of thinking this way can be extreme. 

Operational Costs

Let’s start with the most obvious place this decision can be problematic: operational costs. Any instance in which process improvement is neglected can lead to reduced revenue throughout the business. What’s worse is that inefficient workflows often contribute to additional labor costs, including overtime, which forces the business to spend unnecessary money. 

Lost Revenue

Alongside the increase in operational costs comes the realization that one of the most significant hidden costs of neglecting process improvement is the likelihood of lost revenue. Any inefficiencies that occur can lead to missed market opportunities and, more importantly, reduced customer satisfaction.

It should go without saying that if customers are less satisfied, they are less likely to make a purchase, which directly impacts the idea of lost revenue. Alternatively, a situation like a retail company with a slow inventory process is likely to lose sales if it is unable to quickly refill store shelves. 

Higher Error Count

The last final implication of neglecting process improvement is that it can increase the likelihood of errors. Whether this occurs on a manufacturing floor or at the retail level, either way, the damage will be done. Any instance in which a company must correct errors or refine its own practices will result in lost revenues. 

The Impact on Employees

Reduced Efficiency

While the financial implications of neglected process improvement are clear, the same can’t always be said about the impact on employees. A straightforward example is that any process that forces employees to spend more time on a task than necessary, or constantly repeats the same task, will reduce productivity. There is a direct link between lost productivity and lost revenue, as well as a negative reputation. 

Frustrated Employees

One of the most dangerous hidden costs of neglecting process improvement is employee frustration and or burnout. There is no question that employees who are frustrated and feeling burned out will reduce their own productivity, perhaps significantly so. Not only will productivity be lost, but turnover rates may also be higher, and the cost of bringing in and training new staff can be a significant impediment to a growing bottom line. 

Lack of Innovation

If there is a clear lack of a process improvement strategy, there will also be a lack of innovation. While not universally true, one of the greatest benefits of continuous improvement is focusing on how to innovate and create new and more efficient processes.

A stagnant company won’t consistently win over new customers as the competition innovates and further differentiates itself. This has happened time and time again across any number of industries, and it will keep happening without more change.

Customer and Market Consequences

For better or worse, neglecting process improvement has hidden costs that affect both customers and the overall market. 

Declining Customer Satisfaction 

Reiterating some of the points from above, a decline in customer satisfaction due to neglected process improvements will have an immediate impact on customer satisfaction. Whether it’s slower deliveries, reduced product quality, or inconsistent purchase experiences, customer trust will be eroded, and that can have a significant impact on sales almost immediately. 

No More Competitive Edge

Any instance in which a company loses its competitive edge poses a significant danger, and neglected process improvements can be one of the primary causes. In any business with close competition, differentiation is the key to success and often the reason customers choose one product over another. However, if a company stagnates and loses its competitive edge, it can say goodbye to customer loyalty in a very real way. 

Damaged Reputation 

The hidden cost of a damaged reputation is a serious one that cannot be ignored by any company, large or small. There is no question that even simple things like unresolved billing errors or, again, delayed deliveries can quickly impact a company’s reputation. In an era where social media messages spread like wildfire, a handful of customer complaints online can cause significant damage to a reputation, making it difficult to recover. 

The Barriers to Effective Process Improvement

As soon as a company identifies that barriers to change are in place and that process improvement is being neglected, the sooner changes can be made. 

Resistance to Change

Companies that are resistant to change are likely to lead the pack of those who fail to recognize the hidden costs of neglecting process improvement. Whether it’s due to an existing comfort level with current processes or simply a lack of awareness that change is possible, there’s something to be said about delayed improvements. The hope is that overcoming this resistance, whether through changes in management strategies or improved internal training, will lead to immediate benefits to the bottom line. 

Lack of Resources

Another potential barrier to making process improvement changes is a lack of budget, insufficient time, or insufficient skilled personnel to actually implement the desired changes. However, if a company can find a way to learn or gain expertise in process methodologies like Six Sigma or Lean, the resulting benefits will be invaluable to the future of any organization. 

Short-Term Focus

The third and often other significant barrier that exists for companies to initiate process improvement strategies is a focus on the short term rather than the long term. This is a terrible situation in which too many companies are participating, focusing on quick wins in the current quarter rather than thinking 1, 3, or 5 years ahead.

Thinking small is only focusing on results that might be temporary and ignoring the likelihood that not making changes might result in lost customers or a damaged reputation 12 months from now. 

Other Useful Tools and Concepts

Are you interested in learning more about process improvement? It’s a hot topic, and there’s so much more to learn, such as the ultimate guide to business process reengineering. This one is a scorcher as it helps you recognize the best way to transform your organization for the future. 

Better yet, you can also read more about other hidden costs of poor quality in service industries. For an industry built on reputation and service, the hidden costs of poor quality can be devastating. In fact, it would have a similarly dramatic effect on larger organizations that neglect process improvement as well. 

Conclusion

At the end of the day, there is little more that can be said about the devastating impact of neglected process improvement. The effects may not always be immediate, but a company will feel them, and there is a greater likelihood that the effects will be substantial, rather than just minor impacts.

The potential damage to reputation and bottom line is more than worth the investment in making even small improvements that can improve employee morale and productivity, reduce waste and inefficiencies, and help grow the bottom line.