Always Putting Out Fires

Company leaders, consider the following questions: How many surprises have you dealt with this week? How many customer relationships have had to be rescued or late orders escalated? How many apologies delivered, numbers explained, or presentations redone?

Every leader I know wrestles with these and other crises as a matter of routine. Yet leaders also recognize that running a business through constant firefighting puts them at risk of stressed-out employees, customer defections, a damaged brand, and safety or ethics catastrophes.

On closer inspection, the vast majority of fires are preventable. They are essentially “rework” — the added effort and cost required because something was not done right the first time. Unfortunately, firms can get stuck in a vicious cycle of rework, shortcuts, and more rework. I once worked with a workers compensation firm that discovered they could cut costly disputes and attorney involvement by contacting injured workers within 24 hours. Still, new claims would languish for a full five to seven days, because employees were dealing with all the prior claims that had gone to court. Unfortunately, this meant 80 percent of those new claims would also involve attorneys and disputes. In aggregate, rework costs can be huge. The Juran Institute estimated in 2010 that 15 to 20 percent of revenues for manufacturing companies went to rework; for service businesses, it estimated 30 to 35 percent.