08 May 2019
The term “broken windows” relates to a sociological theory developed by James Wilson and George Kelling that correlates the status of a neighborhood in terms of upkeep to the level of crime one can expect for the neighborhood.
For instance, if there are delipidated buildings with lots of “broken windows” and trash on the streets, it will signal to the criminal element that is active in every neighborhood that the residents do not care and no one is paying attention, therefore, they have a lower probability of getting caught. Mayor Rudy Giuliani and Commissioner of the NYPD William Bratton used the concept of broken windows to clean up NYC in the mid 1990’s.
So how does broken windows apply to businesses? Think back to that nasty gas station bathroom you had to use while on a road trip. What did it say to you about the overall state of the business? Would you have purchased food that was not pre-packaged? I sure wouldn’t. What if you own a coffee shop? And your bathrooms consistently have trash on the floor and are dirty? What will your customers think of the rest of your operations? To prevent broken windows from happening in your organization, there are five standards.
Throughout each of your business’s key functions, there will be 3-5 items that will drive profits to increase or decrease. The easiest example is that one above about the bathrooms, but what about your company’s expense reimbursement policy? Is everyone attaching their receipts per the policy? No. Well how do you know 100% of the expenses coming through are legitimate business expenses? How much of your EBITDA is being eroded from employees burying personal expenses in their reports? 1%, 2%, 5%? The numbers could be staggering.
Once you’ve identified the list of key items it’s time to figure which ones will have the greatest impact and prioritize those ones first. It would be great to create an entire list of standards and implement them all at once, but alas, that’s not realistic. It’s important here to remember the tenants of organization change that author John Kotter lays out in his writings. I recommend picking 3-5 items from each business function or a maximum total of 15-20 to start with. As the company’s culture changes and the standards become the norm, then start the process over and add additional standards.
With standards it’s important to have minimums, but equally important to have the perceived maximums as well. Individuals and teams need to understand what is the minimum level of performance that will be tolerated, but should also be incentivized to strive for greatness. As an example, the maximum lead time for a customer order placed on your website to the time a shipping label is created may be five days. So that’s the minimum. But an analysis of your supply chain has determined that given optimal conditions with no variations, that lead COULD be 2 days. So the range for your standard surrounding order fulfillment is a maximum of 5 days with minimum of 2 days.
It’s vital that once you and your leadership team have created the standards, they must be communicated to your entire team. Because they are so vital to the prevention of broken windows and thus potential loss in profits, it is imperative that every person from the CEO to the person that cleans the bathroom, knows and understands not only the standards, but the repercussions for not adhering to them.
Standards are just that: Standards. They are black and white. There is no gray. I’m an Army guy and the best example I have is the Army Physical Fitness Test (APFT). For me, I’m in the 37-41 age group so my time in a two-mile run has to be a maximum of 18 minutes and 18 seconds. Period. If I come in at 18 minutes and 18 seconds, I fail. There is no argument. You do not pass go, you do not collect your $200. And this failure has repercussions. An APFT failure means your record will be flagged, meaning no promotions, no additional schooling, no training opportunities, and if not corrected within a set amount of time, dismal from the Army. It should be no different in your organization.
Adhering to standards is difficult. It forces very difficult conversations with both individuals and teams. It can place leaders in bad situations if they don’t adhere to the standards. I’ve had to relieve junior leaders for AFPT failures. However, over time, not only will you eliminate your broken windows, but your EBITDA will grow, and your team will also grow because it’s cystral clear what is expected of them. Instead of wasting valuable time and effort on trying to figure out what right looks like, there will be standards to reference.
