Saturday, June 7, 2008

Does Your Approval Process Work For You Or Against You?

"Computers" courtesy of coolpix

I know that many of you have seen the drill before, the forth quarter comes and all of a sudden it is time to cut costs, so the approval levels are clamped down air tight so that no money is frivolously spent and your balance sheet looks better. Now all of a sudden procurement approvals go all the way to corporate vice presidents, travel requests need to be approved at high levels of a geography, region, or even higher, and classroom style trainings are all but eliminated. This is a reactionary device that seems to happen all too often. What is generally given little (if no thought) is the effect that this has on your overall approval processes as these short-term solutions tend to become the defacto policy and become harder to change (for the better anyways). This leads to the question, is your department’s or company’s approval process working for you, or against you?

In this bottom line and reactionary focus some other items that contribute to the true cost of these things are often neglected or not given enough consideration. Buying that server now doesn’t truly cost you the $5,000 listed in the purchase scenario, nor does the plane ticket cost you the $2000 that the travel agency or airline wished to charge you. The true cost is now the time of all the people involved in the approval work flows. The person raising the request must now keep track of “where” their request is in the approval process, this can be very time consuming and costly as surely this is not what most people were hired to do. Because of the use of various workflow management software programs and offshoring of many back-office functions, it isn’t always clear with which approver the request is now sitting. It is now very likely that you have to originate your request via email to a group mailbox or a web form before the request actually gets into your workflow management program, so you are not the originator (in that system anyways) and don’t have visibility of what approver your request is with and more than likely if you can see who the current approver is, you don’t see all the approvers that are needed. These vice presidents and other high-level managers are often not available and have other things to do beside approve our petty requests. Add to this, that these upper level managers will often decide that they will approve such request only once or twice a week, making the approval process that much longer. Because these managers need to quickly make decisions, they now require some sort of clarification about the request when it is their designated decision time, this often means an email is required from the original requestor or perhaps there is a nice excel or word template that now needs to be filled out, requiring more time from some employee (be it the original requestor or someone working in the back office). Very often these forms are not easy to understand and it is not very apparent how to fill them out. Because the manager doesn’t see the information they “need to see” the either reject the request or delay approving it, this might mean that request’s approval now needs to wait for that manager’s next approval cycle, which might be a whole week later. If the process is even documented, it is buried in an email somewhere or lost in the bowels of your company’s intranet, which means that you’ll now probably have to spend some quality time searching for it. I think that you get the picture, you now need to really calculate the time of everyone involved in the process. Factoring in all these people and their time could easily mean that the server is now actually costing your company over $100,000 or worse! Now imagine that the request got all the way to the top and that vice president said that this item was too expensive and not justifiable, rejecting the request. Your company might have just spent $95,000 to save $5000! The expression about being pennywise but pound foolish seems to apply here. The corporate world seems to have taken a page from the playbook of many national governments is buying ridiculously expensive/inexpensive items (remember all those stories about the military spending ludicrous amounts on hammers and so on?)

Another cost that is harder to quantify is your department or company’s loss of flexibility and its affect on your projects, operations, customer relationships, and employee morale and motivation. It could very well be that “the process” does have a provision for emergency situations. If a server breaks and your warranty won’t cover the immediate replacement of it, you probably can not wait a few weeks for all the approvals needed (service level agreements could be broken resulting in penalty payments due a customer(s) far in excess of the $5000 server). Even the fast track process is still probably not flexible enough to give you the speed needed. There are also those impromptu or emergency customer or project meetings that require travel but lining up the pre-approvals can require time that means the bargain rate you saw on the internet is no longer available when you can finally book it, making hotel stays and airline tickets more expensive than they need to be. There are many visits and meetings that had to be canceled because the travel couldn’t be arranged in time. The relationship with your customer could be impacted because you’re very restricted in your ability to travel. Having face to face meetings can strengthen relationships and raise the level of cooperation that is not possible with a million emails and telephone conferences, not to mention that level of understanding that can be reached when all parties are in the same room. When the approval processes become so inflexible, complicated, and bureaucratic, employee morale is affected, often adding further to the productivity loss, some of your more talented and valuable employees may decide to leave your company in part because of such short-sighted policies and procedures!

What is the solution? First of all the process should be reviewed from end to end, not just bitts and pieces of it. Maybe some of the management approval levels can be removed. If you truly want the final approval to come from a vice president, why not route it to the v.p. earlier in the process and eliminate some of the middle management? The request would still get review by the v.p., but some of the time and expense can be cut out. Also, is the v.p., in all honesty, going to give the request the review that was originally intended? They might look at it for all of 5 minutes before making their decision and there is all the expense of getting the request to them for this 5 minute review. How about raising the authorization or empowerment levels? Chances are that your v.p doesn’t need to be involved in all those approvals; this demotivates the other managers in the process, that they have such little authority. There could be periodic reviews of approval decisions that are made and these levels can be modified as necessary. The simpler the process, the less costly it will be to actually use it, so the process should be only as complex as it needs to be and not more. Looking at the situation a little deeper, you’ll probably find that the budget crisis faced in Quarter 4 is only a symptom of the problem. Travel, procurement, and training should all be covered within respective budgets for departments, business units, and regions; as long as the items requested are within the proper plans and are truly allowed and planned for, they shouldn’t be the problem, but they do need to be budgeted for, so when that budget is used for other things the problems occur. This can often be the result of some systemic problems that need to be uncovered and dealt with. Such complicated procedures and processes, often give employees the sign that they aren’t trusted, probably not a signal your department or company wants to send. Lastly, in reviewing the process, you should try to look at things from the outside in. Can you explain the logic to someone with little knowledge of your department or company? You just might find that logic needs review and adjustment.

Have you given any thought to how your company or department manages these approvals? Has your department or company come up with some creative solutions to these problems? If you have any other comments, I would love to hear them. If you liked this article, please consider subscribing to the blog via RSS or email, share it on or on Digg and pass it on to anyone that you think might appreciate it. Thank you. :)

On Deck…

I’ll be publishing posts about…

  • The next in my series of weight loss strategies
  • My next Spotlight on the web.
  • More on productivity, web 2.0, social networking, family, parenting, health, and other things that you can use.

Other Posts That You Might Also Like to Read…

blog comments powered by Disqus