At LEVERAGEDWISDOM we work on our Member CEO’s choke points often leading to unusual action steps.
In military strategy, choke points are geographical features; such as bridge, valley, or strait which an army or navy is forced to pass through. The choke point increases vulnerability, decreases combat power and compromises the ability of a unit to reach their objective.
In business a choke point is a person, position or process that decreases the company’s operational excellence when delivering products or services to customers; thereby, compromising growth and/or profitability.
Process Choke Point: Case Study
A staffing company was faced with a rare downturn when an important customer instituted major cutbacks in their requests for temporary staffing. The consequent 18% drop in revenue translated to a 2/3 drop in profits. The CEO thought it obvious that he needed to replace the lost revenue.
But, his fellow LEVERAGEDWISDOM CEO Members (working our process) drilled down to discover that the company had many more opportunities than were being filled even at the reduced sales level. Historically they had filled 12 to 13% of customer requirements.
The insight was that they were leaving “money on the table.
Company statistics confirmed that when requests fell off with the downturn, their recruiter’s performance declined, too, even though they had plenty of requests and more time to execute. Without the prior pipeline pressure their fulfillment rate fell off by 3-4%. Each percent was worth 1.5 million in profit.
Clearly, as our Member CEO stated, added sales would increase customer requests, fill the pipeline and potentially regain the prior rate of fulfillment; but the sales cycle is very long and loss of profit was dangerous.
On the other hand, as the LEVERAGEDWISDOM Member’s discovered, if the CEO focused on the process “choke point” of recruiter performance there would be significant improvement to the bottom line.
The CEO’s action steps were to immediately establish new performance criteria for the recruiters, create a daily scorecard for fulfillment and establish a cadence of accountability.
You might want to watch for our next post on Position Choke Points. LEVERAGEDWISDOM helps CEOs build wealth. To join a group, please call us at 917.405.6987.