By Steve Cuthbert, Director of Operational Excellence
What happens when we have unplanned expenses that exceed our monthly budget?
In the ideal situation, we have extra savings in our bank account to cover these instances. Many times, however, we don’t have the necessary savings and need to use credit to cover the expenses. Using credit, especially a high amount, can put us in a difficult situation as our past expense starts to compete with current expense for our monthly income.
The risk of falling further into debt increases if we experience additional unplanned expenses–we can also experience the undesirable consequences of higher interest rates, less flexibility in our budget, and other factors that tend to compound the problem and cause high amounts of personal stress.
From an operational perspective, a backlog is just like going into debt. A backlog occurs when an organization is unable to consistently meet the demand or need for services. Instead of incurring debt, however, organizations typically “borrow” more and more time to deliver services while staff are forced to multi-task between current and past work. This situation also compounds over time as customers request more status updates, pulling staff away from their critical functions.
This often leads to the characterization that government is slow–however the more correct assertion is that government is often just behind, working diligently to catch up. Backlogs have a tendency to make operations and processes look much worse than they actually are. Even worse, chronic backlogs can lead to reactive, high stress work environments where it can be difficult to maintain focus.
In the personal finance scenario, the principled solution is to always spend less than you earn. In operations, the principled solution to avoiding backlogs is to consistently meet the demand or need for service (including periodic spikes in demand). The principle is simple but not always easy to accomplish. However, by asking and developing solutions to the following questions, organizations can be placed in a much better position to meet ongoing demand.
- Do we know what our demand is? Are we tracking it on a frequent basis?
- Can we anticipate when there may be peaks in demand?
- Do we have a resource buffer to handle periodic spikes in demand?
- Do we have a trigger mechanism to know if we are building a backlog?
- Are escalation pathways and plans in place to handle unpredictable spikes in demand?
- Are we working to maximize and protect our critical functions?
- Are we eliminating backlogs prior to considering changing or automating processes?
There are several practical solutions to the above questions depending on the type of environment we work in. One is to build a resource buffer by cross-training staff to do more than one function. While this is not always possible, reducing complexity and specialization while creating standard processes and work instructions typically always have positive side effects. Another solution is to constantly compare the amount of work coming into a system against the amount of work that is being completed. A cumulative flow diagram is a simple management tool to monitor demand and avoid backlogs. More information on cumulative flow diagrams can be accessed here.
Similar to avoiding personal debt, organizations should avoid backlogs. For more information on the dangers and issues surrounding backlogs, see the in-depth case study located here.