How To Spot And Clean Up Organizational Sludge

Have you ever seen a sea lion on a dock or a rock? They’re not the speediest, most flexible, or most agile of creatures, are they? And although they have sharp teeth and tusks, they’re not about to outrun any serious predator. To put it delicately, it’s because they have a lot of – er – “Organizational Sludge” around their mid-section. And you’ve got sludge in your business that’s keeping you from leveraging the speed, flexibility, and agility you need to thrive in a constantly changing competitive environment.

Maybe you have the equivalent of sharp teeth and big tusks – competitive advantages that make you indomitable. But if not, your organizational sludge makes you vulnerable to fast-moving predators – your competition, and even disruptive challengers that you haven’t even spotted yet. (Uber, Airbnb, anyone?)

How Do You Spot Organizational Sludge?

It’s easier than you think, but it’s not where you’ll usually look. When I ask CEOs in my speaking engagements where the sludge is in their business, they usually say “manufacturing inefficiencies” or “discretionary costs”. Yes, there may be some sludge hiding in there, but you want to get at elimination sludge to a degree that would put Jenny Craig to shame.

In the last blog post, I brought up the outrageous notion of going out and talking to your customers. They know EXACTLY where the sludge is in your business because it’s causing them grief every time they do business with you! Ask, and ye shall receive far more insights than you ever may have wanted, but guess what – get that sludge out of there for good rather than putting a Band-Aid on a recurring problem over and over again, and your ability to tackle the more meaningful issues and opportunities will skyrocket. You’ll have more managerial and executive time to focus on building muscle in your business rather than being slowed down by sludge.

Two client examples will help drive this home.

A $5M manufacturer had been losing money for 5 years… he uncovered a $1M of sludge in a band-aiding situation that had just grown and grown and grown over the years. It took him less than 6 Value Creation Conversations with customers to spot the unassailable truth of what was going on. When he fixed it for good, sales soared, costs were eliminated, and he returned to profitability for the first time in 5 years.
A $40M manufacturer was profitable… but had a $4M band-aiding problem that once again, had ballooned slowly and insidiously over a matter of months. A simple diagnostic that identified which of the 5 areas of sludge cause 80% of the unnecessary costs in business pinpointed the issue. When it was resolved for good (in less than a week, with almost no cost) that sludge melted off the P&L and revealed a much healthier bottom line.

As we close out the month of June with our focus on how to build Speed, Flexibility, and Adaptability into your organization, taking action might seem like a ‘nice to do’ and who’s got time for that? You do. Every day that your organization carries extra sludge or stiffens up with business bureaucracy as usual is a lost opportunity for profit and prowth. As you know with personal fitness, the longer you let it go,the harder it is to get back in shape. Meanwhile, the business world is going at an ever-increasing pace that will eventually render you irrelevant. It’s not about keeping up. It’s about leading the way with ease as you systematically build competitive advantage by having processes in place to accelerate your speed, flexibility, and agilit. Two services I offer do just that: The P.R.O.F.I+T Roadmap, with its focus on finding hidden customer value, and the G.R.O.W.T+H GPS, with its focus on strategic thinking and planning for the future. If either or both of those would serve you well in your search to build an organization that can quickly and easily pivot in a fast-changing market, let’s have a chat about where you’re at and where you want to be. You can’t afford not to create those competencies and expect to stay in the game…