This section deals with the nuts and bolts of operating a company. These are tips, things to look for to locate useless work or wasted expense, as well as excess staffing. A surprising amount of useless work and time wasting procedures are directly, and usually unintentionally, requested by management. The people doing the work often suspect that what they are doing doesn't make sense, but they keep on doing it, figuring there must be some obscure reason. There is usually a surprising amount of this in the financial and accounting areas, and it can be harder to identify what the purpose of much of the activity is. This section also discusses things that people do not do, but should. A prime example is reasonableness testing, discussed below.

Since this section tends to deal with people and the things people do, everything is ultimately a matter of opinion. Consider this a list of things to look into. It is surprising how the situations and conditions discussed here can be observed in company after company. Not each one in each company of course, but most in most.

Some of the procedures suggested here will require minor programming. Improvements that will require significant programming effort to implement are discussed under Systems. In the age of Sarbanes-Oxley, I should have a section on control, but for now, the discussion of suspense accounts hangs out here. I have avoided having a section on accounting. Underwriting was off putting enough.

Notes

Discussion

No matter how well you know the company, to visualize span of control you need an organization chart, and you need it on a single page. Unusual numbers of persons reporting, too many or too few, generally indicate a problem. The one on one reporting either indicates a staff person with significant non supervisory work, or someone not needed.

It is amazing how many companies do not have a current organization chart, or, in the other extreme, include so many levels or extraneous information that the chart is useless, at least for judging the structure of the organization. I have been offered a 15 page "chart" with anywhere from 3 or 4 to several dozen persons a page. Since it can't be used to visualize the structure, it is of unknown use. If it is current, and distributed, at least it would serve to let everyone know who they report to, since everyone looks for their own name first.

At one company, I was told the chart was "confidential". That seemed strange until I discovered that two former managers had been demoted but never been told of the change. The persons who replaced them were asked not to tell them for fear of hurting their feelings.

Staffing levels are difficult to judge. A department manager's focus is on getting the work done and avoiding complaints, not on operating with the fewest possible people, or on finding more efficient ways to do the work. If someone leaves, there is usually no special approval needed to "fill the opening", but adding staff requires jumping through hoops. As a result, the number of people in a unit tends to stay unchanged, whether the business load is increasing or decreasing.

An painless way to reduce the number of employees is the hiring freeze coupled with steady work elimination and system improvement. Attrition and improvements obviously occur at varied rates, but magically the staff will tend to stay in balance with the work. Partly this is due to the employees adjusting output to the amount of work there is (a universal tendency), and partly because any true shortage of workers tends to concentrate management attention and improvement efforts in that area. Usually the area is just plain overstaffed, and proceeding at the pace of attrition lets everyone gradually adjust to to a full work load. None of these happy adjustments have time to occur when there is a lay off, so that should be a last resort.

You can learn a lot by studying how far a department runs behind the current mail. Generally a department will stay a fixed number of days "behind", mainly because that is considered "current" or acceptable. If this has been four days, and you tell the manager you want it to be one day, you will be told that would take more staff. But does that make any sense? How can it take more people to run one day behind than it does to run four days behind? It is still the same amount of work done every day.

What is really happening is that the people and the manager are adjusting the pace to meet the standard. If the standard is three days, when you have finished the work of three days ago you are "caught up" and can relax.

Work flow can vary, of course. If Monday is the heavy day, not finishing it all on Monday (or Tuesday) is fine as long as all the work is finished by the light day in the cycle (which might be Friday). Make sure the backlog count is made for each unit at the end of the lightest day of the week for that unit, when the backlog should be zero. Then you know whether you are really behind. Be sure to avoid impractical standards, such as "every phone call must be answered by the third ring" or " all incoming mail must be handled by the end of the day". If you have enough staff to do that every call and every day, you have way too much staff (or your departments may be kidding you).

Another effective arrangement is sometimes referred to as a "deadly parallel". The idea is that if you have two or more units doing the same thing, you have a basis of comparing the results. Generally an effective span of control for a clerical manager is around 8. Dividing a department, e.g. claims, policy service, issue, into separate units of about that size not only creates a parallel, and a better span of control, but also gives you more training positions for growing managers.

Twenty Ways to Keep from Drowning in Detail By: Lee S. Evans www.leeevansgroup.com/Articles/Drowning.pdf 17. Use the Concept of Deadly Parallel in Organization Structure Whenever You Can. This means that you put two or more people or departments into direct competition with each other. Presumably each unit is identical and has equal opportunity and you can measure results. In theory, it motivates through competition. But, do not pit people against each other so much that they fail to build a team.

Overtime is a big loser. Work it on a regular basis and you will get about the same output as if you hadn't worked it at all. That is, until the people get tired, and then you get less. Overtime is a symptom of a problem, usually of management and seldom of inadequate staff. Mostly it is just a habit. If people know you will schedule overtime if they don't finish in the regular day, there will always be work left to require overtime.

My old friend J B Moss, the head of the OPEIU union at AIL, always marveled at management's affinity for overtime. He knew that when the official work day was reduced from 10 hours to 8, total output per person increased. So in his mind overtime was management looking to increase output again by taking the day back to 10 hours. The only instance I have ever found where overtime was effective was the shift of 4 hours on a Saturday once a month or so, to catch up a department hit by some special circumstance. The least effective are the hours scheduled at the last minute after a full work day. People are tired, and have to use a big chunk of the first hour to rearrange rides and babysitters, and a lot of the rest checking on the arrangements.

Commonly non-exempt workers are classified by labor grades. Experts believe all clerical work can be properly evaluated in just three or four grades. It is not uncommon for a company to have 8 or 10 different labor grades.If you have more than four, you have over complicated the administration of the salary system, but that is the least of your problems. The real cost is the constant transfer of employees in the scramble to gain a higher grade and the higher wage scale.

In a company with 10 clerical labor grades it is impossible to tell the difference between, for example, a grade 4 and a grade 5 in classifying a job, but all the 4s will believe they should be 5s (and their managers agree), and all will try to transfer to something classified as a 5, so they can begin to look for a 6. With only three or four grades you at least have a chance to manage the process. Also, unless you set a required percentage of people in each grade in each department, you will get grade creep, until at last most people will be at the top grade. If you use A,B,C, and D, something like 25% in each grade should be required. That alone will overweight the highest grade, but at least not everyone will be in it.

Job posting, where every clerical vacancy is posted and awarded to the most senior "qualified" person, is amazingly effective, particularly when you consider the almost universal opposition of management. The secret? I would argue that if you have reasonably effective hiring procedures, 90% of your non exempt personnel can do 90% of your clerical jobs. The jobs just aren't as hard as management makes out, and the clerks are a lot smarter and competent than management thinks. They do all sorts of complicated tasks once they leave work. At work they perform to the expectations of management.

A big hurdle in setting up a good job posting system is in the word "qualified". Often managers will attempt to establish a "time in the department" requirement which kills all transfers between departments, or to tailor requirements to a specific individual they prefer. It is better for the company to transfer the most senior person and rely on a probationary period to return the person to his former job if he is unable to perform satisfactorily after training. By that time the manager will have taken ownership of the person and will give a fair review.

An opposite behavior to watch for is the labor grade hog. If a manager can get more of the higher labor grades in his own department, then he can accrue the more experienced people from the other departments and avoid the effort of training new hires. Is the clerical work in some departments really "harder", such that it requires more of whatever a higher labor grade person is assumed to have? It seems that if you can tack the work "accounting" onto a job description it warrants at least one level higher in grade. If you observe the work, you will find that the "harder" jobs are those that don't have proper IT support.

Work elimination or systems improvement generally will not happen if left to the manager of the department. It is nearly impossible to see opportunity for improvement if you "have always done it that way", and especially if you are busy. For this you need a specific systems person. See the How To section for discussion of how to select systems persons.

To find unnecessary work or inefficient methods you have to stand back and look for it, and constantly ask why. Why are we doing this? To make systems progress, it is absolutely necessary to make that someone's job, exclusive of other responsibilities. If someone sits with a clerk for 30 minutes and is not able to suggest several time saving changes, that person does not have a knack for systems and you need to find someone else to be your systems person.

Work rules that may have once made sense but that have become obsolete can be big time wasters. These can be hard to find because no one thinks about the rules because "we have always done it that way". Occasionally you can dig these out by asking about rules that make no sense, but usually you just have to watch what people are doing.

A prime example was the internal mail delivery in a multistory operation. The first rule was that mail had to be picked up and delivered at every station in intervals of no more than 40 minutes. The second rule was the mail clerks could not use the elevators with mail carts. Limited to what they could carry on the stairs, it took 4 people to maintain the required delivery schedule. I only discovered this when I saw a girl almost fall on the stairs with the load she was carrying, and asked why she didn't use the elevator. It turned out that one person using a cart on the elevators could handle the entire route 4 or 5 times a day, a more than adequate schedule, particularly because all internal correspondence (probably the reason for the 40 minute rule) had long since gone to email.

Personnel rules that sound good can easily be counterproductive. Dress codes are a common headache that could use some cost-benefit analysis. Rules that permit some personal use of the telephone but not of email would seem to have it backwards. How about companies that pay hundreds of dollars a month to bring in Muzak, but prohibit workers from listening to their personal walkmans with earphones?

Experts argue that casual dress codes can increase productivity. When I read through the suggestions of how to implement and manage a dress code system to avoid legal problems, I wonder if the time and effort wouldn't be better spent on the company's business.

With respect to Muzak, if you really want music you can play CDs for a lot less than hundreds of dollars a month. You will find, however, that you have a multi-year contract that renews automatically, so to get rid of that expense you need to give notice precisely as the contract provides, and then wait.

Salary reviews for merit raises are difficult to do accurately and fairly if you do them on everyone's anniversary date. Reviews require the comparison of performance with that of others in similar positions, and there is usually an overall company limit on the percentage of people that can be rated "excellent" and in the other rankings. To be rigorous, you really have to review everyone at the same time, once a year on a given date.

If a manager is only reviewing one person in the unit, or 1/12 of the people if done monthly, then there can be no accurate force ranking. Even if it is attempted, the people not up for review will tend to be ranked lower than those in for the current raises. For example, if there are 5 performance levels and the manager can only place 20% in the "excellent" category, checking a 12 month period will show that most managers used up all the "excellent" slots somewhere around the middle of the cycle. One way to transition from an anniversary date review to a January 1 (for example) is to review everyone on January 1, determining what their raise would have been on their upcoming anniversary, and then reducing it based upon the number of months the raise was given early so that the income of the person for the year is the same as it would have been under the old system.

Walking around a company with the sole purpose of observing will produce leads for improvement. Do you see typewriters? Rubber stamps? Stacks of paper? At the end of the day, stacks of things like checks, mail, work? People filing things? People using hand staplers instead of electric staplers? People waiting in line? People walking to places away from their work station? Is the manager always in her office, or always talking to the same person? Or always on the phone? Of course, while walking you have to stop every time you see something and ask why.

Here are some good questions. When was the last time anyone went to the mail room to see what is being sent to the agents? Or looked at the in box in the file room to see what is being filed? Taken a look at the contents of the outgoing fed ex packages? Studied the latest post office regulations and then watched the postage put on in the mail room? How about looking at each item to be printed in the print shop? Walked through the computer room with the officer in charge pointing at things and asking "what does that do?"(you will find some equipment that hasn't been used in years, and if you are really lucky, on which you are still paying maintenance).

Be on the lookout for green bar. This is the expensive extra wide continuous feed paper that was designed for use in the chain printers that were in common use 20 years ago. There are still some old local printers that use it and some computer and accounting folk retain an affection for it.

Examine policies after they are assembled, or better yet, look over the desk of the person doing the assembly. Make sure there are no paper attachments or inserts being added to the policy after it has been machine produced. Items like that will prevent you from storing an accurate policy electronically, or reproducing it on the web site. It is also error prone, and not the effective way to add variations anyway.

You can't avoid those odd policy variations, the little warnings or notices required by state laws that are continually being created. The proper way to add them to the policy is by printing them as part of the policy run. The exact parameters that create each requirement can be programmed so that the computer knows what has to be added in each situation. You can ignore the out of date statutes that require things like "red type" and things that cannot be reproduced by your laser printer. Insurance departments are fully supportive of modern computer techniques and you will find that such requirements have been waived. Just print in bold, or something else that makes sense to make it noticeable.

Manual counting is a sure waste of time. Often what is being counted is not what ought to be counted, or if a count is needed, the computer systems can give you a more accurate count without someone wasting the time. Manual counts are usually the result of a specific request from a manager who phrases the request that way, but would actually prefer an accurate computer report if someone had mentioned it. Sometimes a count of what is done is requested when what is relevant is what is NOT done.

A favorite manual count is the number of new applications that came in today. The computer count of submits may not be available until tomorrow morning, so if the Chairman has to have a count by noon, or by the end of the day, it is manual. But what for? Wouldn't he prefer an accurate submit count tomorrow, along with a manual count of the incoming apps that didn't get submitted? If the count has to be had, ask IT to put a running total of submits on a page on the internal web site. Then he can look every minute.

Another category is counting "work done", with clerks keeping a mark for each piece, totaled at the end of the day. That count can be very helpful in setting informal standards, or giving recognition for performance, but is notoriously inaccurate if done manually instead of by computer. A "recognition" count used to go to the bulletin board, but now goes to the internal web site. But if the pier group lacks confidence in the reporting, it is demotivating.

There are limits to what "counts" you want to automate. Sometimes you ask for a number not because you need to know, but to make sure the manager knows, as in "how many apps didn't get on today" and "what is the oldest claim not worked". Other questions are important just because they were asked, as in "how much business did you write this week?" and the answer is important for its effect, not because you need the number.

You never want to know the facts in advance when you are "calling the board", i.e. asking each agent or agency to stand up and tell you how much premium they have this week. An agent who is blank may feel so much pressure that he "bulls the board". Accuracy and honesty is not the issue here, and the agent who bulls is powerfully motivated to cover the bull next week. If you already have the production figures the whole dynamic is ruined. I worked with a top manager who got so upset with exaggerated production reports that he lagged the oral reports a week so he would have a computer count to challenge what the agent reported. This of course was the opposite of motivation. Don't lose track of the purpose of the exercise.

There is a basic set of regular reports that are absolutely necessary to controlling the business. These include pay and expense reports, backlog and exception reports, and individual performance and recognition reports. Reports need to be by department, show the most recent period and year to date, and unless confidential, placed on the internal web site. Have the manager of the department do the updates herself. That way you know she has looked at them. If the computer guys haven't created a easy editor for updating the site, use the free web log utility from Blogger, or other freeware.

The list of reports should include anything that the manager should keep up with. If that is too detailed for top management, they don't have to look at that particular web page. That is another way a web page beats a piece of paper, you select what you look at. The manager will assume everyone is watching.
An example of a very detailed report would be the report from the various steps in the issue process, so you can spot particular bottlenecks. Some basic reports everyone should have:

• staff count

• overtime report

• exempt employee vacation and sick leave

• backlog by unit

• application count

• agent count

There is always a number of reports that are either useless to some of the people receiving them or useless to all of the people receiving them. The classic is the raw cash report. This reports the total dollar salaries, postage, fees and so on paid this month, compared with this month last year. A lot of makework management time can go into explaining the deviations, most of which are timing, like the number of pay periods in the month, or the number of Fridays.

Cash and budget reports should be minimal or eliminated altogether, not because of the paper cost, but because of the huge amount of meeting time they waste. But significant savings can be realized by not sending even useful reports to people who don't use them. In the old days this required going from person to person to get about half of the ones who never looked at it to give it up. This process has been simplified by email and/or the internal web site. Use email for the restricted distribution reports and the web site for the ones anyone can see. The report goes as an attachment to an email, and the manager that wants it on paper for some reason can print it, others can glance at parts on the screen, and the rest can ignore it. The web site is even better, as only those interested will go there, saving the time of messing with the email.

Checking something more than once, or at the wrong point in a procedure, is a common waste of time. It is debatable whether it reduces the number of errors getting through, since one person who knows he is the only safeguard will be a lot more careful someone who knows that a committee is looking. But even if you don't believe that, is the possibility that second check might find an error worth the cost?
One certainty: be sure errors go back to the person doing the original work for correction. And don't overlook giving web site recognition for low error reports.

Even managers who believe that having each person in a series of steps checking accuracy is wasteful can find it difficult to STOP people from going over it all one more time. It is common to ask the person assembling and mailing policies to check several items that can't as easily be checked before the policy is printed. It is a good idea to give that person a special printed sheet, separate from the policy, which show only the items you want checked. Otherwise you will find the clerk is rechecking everything against the policy. The separate sheet also allows you to vary the data that appears, depending on the type of policy or other circumstance.

A variation of the excessive checking problem is the "only in that department" rule. Policyholder service may have to send a reinstatement to issue to complete, or to agency to handle the commissions. Or to actuary to handle the reserve entries. You may find certain transactions moving through a number of departments before completion, causing delays, errors and excessive cost.

The best rule is that whoever receives the work finishes it. If a transaction is really so difficult or obscure that an experienced clerk in any department can't handle it, something is wrong with the screen that is used to handle it. If you don't have the rule, then managers that like to ship work to another department will cooperate with managers who like to protect their department's turf to make sure nothing ever gets handled the first place it lands, and maybe not the second. It may also be top management making the rule, but that is usually "only the agency department" rules on such things as codings, advances, commission trailers, you fill in the blank. Although I actually saw one in a large company where all address changes had to go to a single person. This rule was to make sure that the same change was made to every policy that person had. That can be a problem, but the real solution is to have the screen show when there are other policies at the same address.

Reasonableness testing is a special kind of checking, because it is rare to find that anyone is doing it. The worst thing that can happen to you is to have your numbers wrong, but the only way to avoid it over the long term is to consistently check the numbers to see if they make sense, given everything else you know or can track about the operation. You have to do this yourself. Programmers make sure programs run, but seldom have a feel for what the output should be. Accountants make sure things add up and balance, but seldom compare the numbers to facts not on the page. Actuaries are generally not seeing the day to day numbers. Only the top manager sees enough of the picture to see what makes sense, but often assumes someone else is doing that.

You really need to do your own reasonableness checking, and blaming a blow up on a program, or system, or a system interface will not restore credibility. People lose their jobs over this sort of thing. If you feel you really can't do it, the next best thing is to appoint one person to do it, and do it full time, and show you regularly what is being done. What about the controller? Normally the controller has his own department and is loath to poke around in the other vice presidents departments where the real stuff is done that has to match the numbers. "Not done, old boy, you know".

One trick that worked for me was to require the controller to prepare a complete set of financial statements the week BEFORE the trial balance was available. The controller first thought I was loony, until the first time caused him to find two potentially important errors. The key is that when estimating, the only numbers you can use are those that seem reasonable. Most are extrapolations, maybe influenced by factors like known production or unusual expenses. But when the actuals don't match the expected, you have the controller looking in the right places. It works best if you spend your time checking the projections, instead of the actuals.

Nobody looks at suspense accounts. In that exceptional case where someone at the executive level does look at a suspense report, it is usually just to see if the balance is "too high" or the number of items "too many", or if it is an aging report, whether item has been there "too long". But do you know how much SHOULD be in the account? Or even if it should be a debit or a credit? Most of your important functions, particularly those involving cash, make tracks through a suspense account. There are a few accounts where the balance should be zero, but they are rare and mostly are related to some automatic function the computers handle. For the rest, if you know the process behind the account, and what should be in it, debit or credit, you have one of the most effective early warning control devices available for measuring your processes.

You probably don't look at the suspense report because it is a bunch of meaningless numbers. That is understandable. But, do you know WHO in the company does look, and knows what the numbers mean? Has that person ever emailed you alerting you to a problem? Ask that person what the amount should be.

Managers, and even the accountants, sometimes comment that there are too many suspense accounts. If you want to keep an eye on your business, there are probably not enough. If unrelated functions generate entries to a single account, the balance will probably be rendered meaningless. This is even more obvious if one process makes debits and an unrelated one makes credits.

For example, look at your "cash account" as it relates to incoming premium payments. Some premiums cannot immediately be applied to a policy. The payments still need to go to the bank, and the total banked the first day makes a credit. The machine applies premium that night and makes a debit. Anything that cannot be applied in that cycle will leave a credit balance in that account. If your system debits unapplied premiums and credits another "unapplied" account, then that is where you find the credit balance. Suppose you see a debit balance. That should only happen if the money did not get to the bank that day, or if it did, if you failed to account for the deposit. Your system "applied" more money than your books show you received. You have a problem. Suppose you see a BIG debit balance, big in relation to the expected receipts for a day or two. You have a BIG problem.

Suppose you see a credit balance bigger than a percent or two of a day's receipts? How come you are not getting the premium payments applied to the policies? Better go see.

Of course, if that suspense account receives entries that have nothing to do with premium payments, you won't see anything.

I should clarify. A suspense account is not intended to hold any item permanently. There should be an entry coming that exactly offsets the first entry. That is probably why some assume the account should be "cleared", or be zero if handled properly. If that was true, if the offsetting entry was know at the same time, then the item probably should not be run through suspense in the first place. The difference of course is timing. And timing is everything.

It is fairly common to hold the CWA, the first premium payment received with an application, in a suspense account until the policy is issued and the premium can be applied. How many items should be in it? Well, how many applications do you have pending? This is a simple one. If you have one more than that, you have a problem. While you are at it, you probably ought to make sense of the total dollars also, but remember that the bigger cases have more CWA and stay in underwriting longer. So the total will skew to the large side. If you have a report or a database from your issue system that includes the CWA field, any problem should pop out immediately.

When something weird goes wrong in the computer, you may not stumble on it for a while, unless you are watching the suspense account, where it will show up first day. A bad piece of code can cause looping entries, sending the suspense account through the ceiling. Even duplicate entries from uncoordinated elements of your system can show up fast. If someone who knows about what the number should be looks every day, you have an early warning system. If the system goes nuts and you don't know about it for a while, it gets tough to fix.

Did you know that your accountants can make adjusting entries in bulk to suspense accounts? That doesn't solve the problem of course, but it sure solves the symptom. Whatever caused the growth in the account is now invisible, at least until it piles up again. Somebody has to have the power to make such adjustments, but where is your control? Shouldn't there be some accessible record of such entries? Shouldn't you be looking at it periodically? Under SOX, the CEO now signs off on the internal control report. I would want a list of those adjusting entries, and why they were necessary.

I have seen situations where duplicate entries have been generating for years, periodically canceled by an adjusting entry. There are really two problems here. The duplication of course, but also, how did the accountant figure out the correct amount of the adjustment? When you work backwards from the result you need, it is called a "plug".

This is what I have recommended to not only get control of suspense accounts, but also to turn them into an effective control:

1. Eliminate any “suspense accounts” currently being used for non-suspense purposes, substituting an appropriate mechanism,
2.Increase the number of suspense accounts so that a each account relates exclusively to a single process,
3. Eliminate any dormant accounts,
4. Assign the evaluation and housekeeping of each account to a single person (regardless of the number of people making entries),
5. Define the acceptable range of values for each account and cause every deviation to be immediately reported to management,
6. Create a written definition of the process by which debits and credits are created, and
7. Schedule a periodic review of the day-to-day administration of those accounts.

In summary, a suspense account is a place where you put amounts that cannot yet be put where they belong. You may be waiting for a process to be completed, for someone to complete the other side of the transaction, or simply not know at the moment what the ultimate entry should be. By definition, if an item doesn't clear out of the account in its normal cycle time, it is a problem which will affect your financial reporting.

It is also important to watch out for the improper use of suspense accounts. In one claims department, a suspense account was used to record amounts due minor beneficiaries pending their majority, amounts due beneficiaries pending receipt of requirements such as court papers and releases, and amounts held on deposit under the interest settlement option. The whole mess was tracked on an Excel spreadsheet, including the crediting of interest. Perhaps these amounts were getting to the financials accurately, but this is not going to qualify as a "control".

This story suggests another reason for the careful review of suspense accounts by management. They are often the tip of the iceberg. If you find things like that, what else is there you haven't found yet?

When you mail a check, to a policyholder, agent, vendor or employee, the cover letter can be printed on the check stub rather than on separate letterhead. That saves a print run, collating, and stuffing.

Better still to avoid sending checks whenever possible. A policyholder that pays premiums by ACH will certainly prefer payments or withdrawals from you to ACH into his bank account. The system for that is similar to the routine in the correspondence system that sends an email instead of printing a letter when you have an email address and the election button is "on". Here the payment system sends ACH when you have ACH bank information on the button is "on".

Rubber stamps are survivors. Stopping people from stamping the date on everything that hits their desk is hard, and a document is likely to pick up a new date in every department it goes through. Mostly this is to prove that delays were some other department's fault.

Hand stamping is from another era, but survives. Stamping the company endorsement on checks received instead of letting the machine do it is one example. One time I broadcast a request that everyone possessing a hand stamp email me what it was for. Apparently most people didn't see the email, or much much of the use is not conscious. There is no substitute for walking around and looking on the top of desks.

One of the old systems standbys before the age of computers was the use of color to help sort or distinguish things. The problem today is, of course, that color helps people, and people should not be doing the sorting or distinguishing. Color is almost always a tip off that something is outmoded. Plus, using color is always an extra expense. Color on envelopes coming into the company can help sort the mail to get it to the right department, but there are better ways to do that.

Sometimes color is vestigial, rendered irrelevant by automation, like the premium notice example in Stories, but still around because we have always done it that way. More often the color is used to assist a manual process that should be automated. For example, colored envelopes destined for different locations are eliminated by scanning incoming mail item by item, and distributing by email. Once you are scanning for storage, there is no reason to move paper around, and thus no reason for color.

Years ago Lincoln National had a great system for getting the post office to sort the mail for them. They used a large number of different PO boxes, at least one for each department, sometimes more it there were helpful additions. So every destination got its own mail bag coming in the door.

Time clocks have obvious advantages, and if they have gone away with the old punch card systems, they look modern when reintroduced as part of a PC based payroll system. Each employee "clocks" in and out on her own computer.

Non exempt time records are mandatory under the wage and hour laws, so the ideal alternative to unreliable paper self reporting is the clocking with the PC. PC payroll systems are cheaper to purchase than MF systems (and easier to develop) and inherently eliminate paper record keeping. Vacation and sick leave are available on line to the user and manager, and the "pay stub" becomes an email to the employee when the paycheck is ACHed to the bank.

The payroll should be handled with ACH and email. The paycheck is deposited to the employee's bank account by ACH, and the "pay stub" containing the pay period and YTD information is emailed to the employee. A password is required to open the email. The employee who has to have it on paper can always print the emailed form, at their own station or in personnel. What do you do about the employee who goes bananas because someone might see their stub over their shoulder or something? Let personnel only know the password, and print it for them. Nothing has to be perfect.

Most of the strange objections you will encounter to ACH of paychecks can be overcome by the facility to split the pay and ACH to separate accounts. You may have to arrange for bank accounts for some employees that do not have them, or can't get them. For problem accounts, you can arrange with the bank where you deposit the payroll for employee access to the bank's ATM to get the cash from the account you sponsor. The bank will usually allow one or two withdrawals at no charge. If that is a problem, the new payroll cards provide an alternative, albeit more expensively.

Is the company running a bank for the employees? Cashing checks wastes at least two persons' time, and usually more due to the social opportunity. Make sure the break room has a change machine, or the whole company becomes a bank.

Your check cashing facility has to have a cash box (it must be an impressed fund), which usually leads to expanded functions like ticket sales, making change, providing coffee and the latest gossip. Folks will stop by just to have a cup and see what is going on. It is no fun hanging out in the accounting department, so you will usually find the cash box in personnel.

How much time and effort is wasted by unnecessary or early cut off times? If you need a check, why should you have to order it by noon? You might have an ACH deposit cut off at 10 a.m. and a rule that says a new application has to be received by 2 pm to be submitted today. Just try to get a vacation check out of payroll without first giving 2 or 3 days notice. EDP will generally try to shut off access to the mainframe at about quitting time, preventing anyone from working later or having a later shift. That was necessary about 15 years ago when cycle took all night. Now it probably takes 3 or 4 hours. But the shut down time doesn't change until someone asks.

There are real cut off times. The Federal Reserve has them, as does the bank and the Federal Express pickup. But they are a lot later than the ones you hear about. Each department wants to have a cut off that allows them plenty of time before the next department cut off, so it won't be their fault if some real time limit passes. This classic CYA can stack up to where you can't get anything done today. What would happen if there were no cut off times at all, and everyone finished whatever they could today, and the rest tomorrow?

The mail room is usually one of the biggest cut off junkies. In one place the last pickup for completed policies was 2:45 pm, adding one full day of issue time on 1/4 of the total output. Picking up the last 2 hours of production and getting it to the post office was probably the least costly speed up of issue ever made.

Budget systems have a way of growing into a huge expenditure of time by a lot of people, when the tool should really involve very few top people. Budgets are a necessary means of maintaining control when spending authority has been delegated to an officer or manager. That means that manager can spend as he sees fit, without review by anyone else, as long as it is in the budget. It makes sense to work out the budget numbers between the person (or board of directors) delegating the authority and the person who will be doing the spending. The waste comes in when the budget concept is confused with a plan, a forecast, or even a goal, all of which have purposes different than does a budget. Then people to whom no spending authority has been delegated start spending time on the "budget", for either no purpose, or cross purposes.

With the exception of the really big companies, it is rare that there is any real delegation of authority on controllable or discretionary spending beyond the CEO or the COO, or perhaps the top agency officer. So those are the people who should create the budget, and the budget should not cover cost items that are not discretionary. Surely it makes no sense to "budget" items over which no one has control, like postage. What do you do when the postage budget is exhausted? OK, you over spent, so now who is responsible?

Continuing the postage example, a major expense item, it makes sense to forecast it, and include it in a financial plan, but you wouldn't "target" it, and "budgeting" it doesn't make any more sense than that. This is not a matter of nomenclature, as business plans and forecasts and targets all are important, but each involves different people, different purposes, and a different mode of thinking. Trying to make a budget cover all these disparate purposes means that none will be accomplished, at considerable expense.

A CEO actually told me once that when he received the budget after months of effort, the profit was too low. Outraged, he sent it back and sure enough, the profit came back higher. I always wondered why he didn't send it back again to get the "profit" even higher. He probably know he was working on a plan or target, but why was he involved only at the end of the process, and why were half the people in the company working on it? Probably because it was a "budget".

Closely related to the budget in potential for waste of time is the cost center. This involves identifying every department or unit on every expense, so at the end of the day you can see what the total expense of, say, the policyholder service unit was. The only question is, why would you want to know that? That is, unless you had already wasted time on a budget, and now need to match expenses to it.

If there is a true delegation of spending authority, you will want a budget. Likewise, if a unit has profit and loss responsibility, for example a separate business unit in a very large corporation, you will want it to be a cost center. But in a normal life company, there are no units below the company as a whole that has P&L responsibility, so why spend the effort to keep track of expenses by unit? Just the data entry time can be significant. I once walked through the mail room of a small company where 3 of the first 4 employees I saw were busy posting postage expense to the various departments. Since postage is not an expense that can be controlled by the manager, the activity was obviously useless, but it "was in the budget".

Check signing authorities are worth a look. Most lists are out of date, and contain too few individuals. The job of the check signer is to make sure the paperwork is in order and the check properly authorized, not to make the payment decision over again. A good rule is that the signer must be in a different department than the authorizer, or you will have people checking their own paperwork.

Within the list of authorized signers there should be a primary person assigned to sign, changed each month. If the clerks are free to take the checks needing signature to anyone on the authorized list, they will always take them to the person who signs the fastest, doesn't "waste time" reading the paperwork, asks no questions, and most importantly, isn't unpleasant about being interrupted to sign checks. This is so reliable that before you install rotation you will find most checks are being signed by one or two people. Those would be good individuals to keep off the rotation assignment list.

Just about everything that comes out of computers is sorted in policy number order, which is the one order that is almost always useless. It is worse than useless when the output has to be matched with something still sitting in the stack in the order in which it was handled. Sorting things before entry into the computer is also useless. There is always a field upon which the computer can do any sort necessary, so entry can be made in no particular order.

A lot of time can be saved by the imaginative use of the computer's sorting power. It knows the order in which the work was done from the time stamp, and which clerk did the work. If the output goes back to a particular clerk, it can be offset so each sub stack is for a different clerk, and the sub stacks placed in the delivery order. I have seen output, in policy number order, naturally, go in a single stack to one desk, when parts of it were destined for a different department, even when the department was in a separate floor, or building. People were doing the resorting and redelivery, simply because no one ever asked the computer to do it differently on the first pass.

It is worth while to try to stop filing useless material in policy files, agency files, and even personnel files. If you take any sample file, you will find that you can discard more than half the material in it. But once it is in the file it isn't cost effective to try to clean them out. That costs more than storing the useless material.

It is so much easier to send a piece of paper to be filed, or to be scanned if you use electronic files, than it is to think about whether it should be kept, and it fits the human instinct to keep everything. Something drastic is required. This worked in a policyholder service department: no clerk was allowed to file anything. Material they thought should be kept (scanned) went into a basket on the managers desk. This turned human nature against filing. The manager didn't want to look through all that paper, and so complained to the clerks when useless material went into the basket. This caused clear rules to be created on what needed to be filed, and the clerks avoided placing the rest in the basket.

Most lapses after the first year are not caused by buyer's remorse, but by the inability to locate a new address. Policyholders, particularly those on bank draft, get lost. They move, and by the time they switch banks and your draft bounces, their forwarding address has expired. Most of these can be found from information you have, but searching routines tend to be a low priority in the press of business, and will slide. One answer is to have one person to whom lost cases are sent, AFTER the service persons have "completed" the regular search. If you have the right person, more that 90% of these "hopeless" ones will be found. Returning the found cases to the person who couldn't find them before will keep your system functioning and get you a better first search.

A creative person can find almost anyone. An internet reverse directory will give you the former neighbors' phone numbers. The policy file will give you the employer. Most people move within the same town, and the telephone directory is on the Internet. Beneficiaries and trustees are named in the file. The worst thing to do is to keep sending letters that come back, wasting not only paper and postage, but creating a new search effort with each return. At the first search the file needs to be marked so that the letter system will not send and the sender notified the address is no good. And keep a record of the search steps. If you can prove a good search was made initially (when it can help you) then it will save you the expense of doing it if again when it is escheated (when it is a waste of time). And watch out for escheat efforts. For some psychological reason, clerks who would not try very hard when the case lapsed will spend lots of time hunting for someone before sending the $10 to the state.