How to identify business problems?

Perhaps you are reading these lines because lately, your business receives more complaints from clients, your last project exceeded the budget or because you simply sense that something is wrong. The problems underlying these points may require an in-depth analysis.

Identifying business problems is the first step to find any potential solutions. In this article, we tell you how you can identify problems in your business so that you can approach them from another point of view.

What are the top 3 areas of improvement?

There are always things to improve in an organization. Many can be quite urgent and require immediate action. Others can be improved little by little every day, such as optimizing processes, looking for suppliers that offer better conditions or standardizing processes or protocols for action in the event of any unforeseen event or situation that may arise.

Although some must be controlled more frequently than others, it never hurts to make a list of the tasks to be reviewed and class them in order of priority. Here are the top 3 areas of improvement that every business should consider:

1. Employee involvement

People are likely to be more willing to embrace a performance development plan enthusiastically if they have participated in defining it or are taken into account. It is therefore important for businesses to take the time to have conversations with employees and listen to their concerns in order to understand what needs to be changed.

Ideally, it should be a dialogue in which all parties feel comfortable. Try to be open to the ideas that may be proposed to you and offer the opportunity for each one to express their opinion. In a firm but friendly tone, you should make them feel the will of the company to help and support them as much as possible. It is up to you to decide whether or not to involve the human resources team of the company in this phase of the process.

Although it does not involve them directly, it is recommended to inform the human resources department of the issues you are addressing and the problems to be solved, so that they are aligned for a joint intervention if necessary.

Implement a culture of continuous improvement in your company

2. Clear goal setting

Having a clear purpose and goal as a company should be the foundation of any strategy. There can be many areas of improvement to reach the objectives of the company. There must be as much transparency as possible about what is expected of employees, what needs to change and how progress towards the goal will be measured and evaluated.

Make sure the established goals are realistic and achievable on time. Employees will have a defeatist attitude from the start if you set goals that seem too challenging or too difficult to meet. Make sure that the goal to be achieved can be divided into many small steps or tasks so that you can see easily track the progress of the project. This will allow employees to feel more motivated, and have more frequent opportunities to discuss any problems or obstacles they may encounter along the way.

3. Identify problems

Before developing an action plan for your business, make sure you are clear about all the issues that could be behind lower than usual profitability. It could be that employees haven’t received adequate training to perform their roles, providers are not profitable enough, or some costs can be cut.

To generate problem-solving ideas, it is important to have a clear overview of the issues affecting your business. Otherwise, you will not be able to provide employees with adequate support or make the necessary adjustments on a logistical or organizational level.

8 ways identify problems in your business

1. Identify unmotivated employees

A disorganized company is one where management does not have a clear and complete perspective on the actions of its employees. If managers do not know exactly who has to do what, it is not possible to effectively carry out a leadership role within the team. If you see that employees are unmotivated or wasting a lot of time at work, it can be an indicator that this is happening to your team. To solve this, meet with your employees to get direct feedback.

This will allow you to have a greater overview of the functions that each one performs and better assess how to assign responsibilities to those who have less work, as well as alleviate work to those who have many functions in charge.

2. Conduct regular Gemba Walks

A Gemba Walk is a management technique used by different industries to streamline processes and foster a culture of continuous improvement. It consists in performing regular walks on the factory floor or place where value is created to identify issues and areas of improvement in different departments of an organization.

Our Gemba Walk app can help you:

  • Create custom checklists
  • Organize your gemba walk
  • Classify elements of your lists following the path of your walk
  • Efficiently document issues (images, text, etc.)
  • Generate actionable insights and ideas
  • Integrate insights into your preferred task management tools

Digitize your Gemba Walk

3. Verify the liquidity reserve that the company has

Not having liquidity is a big problem for any company. If one or more of these variables arises, the business may have financial problems:

  • The company has an imbalance between collection and payment times.
  • The company needs bank money to pay salaries and suppliers.
  • The business cannot keep a percentage of the money earned.
  • The company has a lot of standby income due to disputes or delinquent customers.

4. Identify if the company has a productivity crisis

A productivity crisis can occur for very different reasons, either due to inefficiency, overproduction or production decline. As the case may be, the following signs must be taken into account:

  • Increased costs that become excessive.
  • Need to postpone essential expenses such as maintenance.
  • Need to sacrifice strategic expenses, as well as investments in advertising or research and development.
  • Increase in stock.
  • Rapid slowdown of inlet and outlet rotation.
  • Increase in the working capital cycle.
  • If you identify any of these problems, your business may be facing a production efficiency problem.

If you identify any of these problems, your business may be facing a production efficiency problem.

5. Recognize a strategic crisis in your company

A strategic crisis can occur when a company, which has already passed the birth and growth phase, “settles” in a state of stagnation and inertia. Here, it is important to pay attention to two indicators:

  • Slow but inevitable decline in turnover.
  • Frequent complaint reactions from managers and employees, commenting that things no longer work the way they used to.

How often should your business conduct Gemba Walks?

6. Identify financial problems in a business

A financial crisis occurs when negative profitability continues over time, affecting the ability to generate financial resources, relegating the company to a situation of insolvency. Here are the signs to take into account to identify a financial crisis in a company:

  • Deferred payments due to difficulties in meeting deadlines.
  • Loans rejected and credit lines reduced by credit institutions.
  • Short-term debt prevalence.
  • Low liquidity.

If f a company has sufficient capital and reserves, it can easily absorb a certain degree of losses, without an imbalance between assets and liabilities. But those businesses that are already in financial distress quickly move from a phase of loss to a much worse phase of insolvency and bankruptcy.

In short, if a company does not address a strategic or productive crisis in time, it runs the risk of finding itself in a financial crisis, which is much more serious in terms of legal and economic implications and consequences. It is important to pay attention to the signs of financial distress even if the financial situation does not seem to report problems.

If the employees identify some root problems, a consultant can certify the presence of these and propose effective solutions. There are management control tools that, due to the constant monitoring of the financial statements, help detect the presence of indicators that help initiate corrective actions.

With proper management control, most bankruptcy situations can be diagnosed in earlier periods before the crisis breaks out and it is too late to intervene effectively. It is therefore recommended to hire a consultant who is familiar with business crisis consulting tools to boost business growth and avoid any type of crisis.

7. Analyze the market

The market changes at an extremely fast rate, and with it not only the needs and wishes of customers change. Tastes, preferences, habits and customs also change very quickly.

It is essential to be attentive to the changes that are taking place in the market since it will allow you to find opportunities for improvement through problems that you may be experiencing. For example, a change in consumer habits when it comes to buying products online could give you the idea to set up a delivery service.

8. Detect unsatisfied customers

In all businesses, there are always customers who are not satisfied with the products or services they purchase. It is very convenient to know how to detect these clients so that you can understand why they are unsatisfied and improve your value proposition. Detecting unsatisfied customers is the first step to design a strategy that allows you to solve key problems in your business.

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