Mar 17, 2004



from the BusinessPundit's Blog

The Problem of Value-Added Operations

In business school I was taught to examine the operations of a company, figure out which ones added value, and try to get rid of as much of the rest as possible. That is a very simple idea. If you make widgets, then the more time your people spend actually making widgets, the more profitable you will be. But it ignores one huge fact - sometimes the value added by an action is not quantifiable.

If I owned a carpet cleaning company, I will probably get more business if my cleaning trucks are... well, clean of course. But how clean? B-school theory says that the carpet cleaners should spend as much time cleaning carpet as possible - that is how we make money. But truck cleanlinesss, cleaner training, and all that stuff really does affect the bottom line. Unfortunately, it isn't always measureable. What they won't tell you in business school is that you sometimes just use trial and error. In theory, if spending some time training makes you a better sales rep or carpet cleaner or cashier, you should spend more time training. But is that 10%, 40%, 80% of your time? When do you hit the point of diminishing returns?

This is something I am struggling with now. I think staffing and HR is going to be my achilles heel. Being an introvert doesn't help because training wears me out. It's just another example of things they don't teach you in business school.

Which is why if you ever want to run a business, the best way to learn to do it is to...run a business.