Maturing cannabis firms are drowning in organizational waste…
And if they don’t address it, they will be stuck with rising costs, reduced agility and a degraded execution ability. Often unseen to the casual observer, organizational waste is the unintended and unproductive work or delay that occurs during normal business activities. This phenomenon is a natural consequence of quick operational scale out, weak management and poor cultural norms - a common situation in the cannabis sector.
Waste is everywhere and at all levels but is often concentrated in certain functions such as HR, IT and sales & marketing, where there are no clear operating rules and metrics (unlike say, cultivation or manufacturing). Three kinds of waste are pervasive in cannabis companies: People (e.g., high turnover, ineffective meetings, overlapping roles & responsibilities), Processes (e.g., excessive complexity, poor communications, approval bottlenecks) and Information (e.g, data entry, inaccurate/lost data, irrelevant analysis).
Waste is an insidious problem that masquerades as productive and collaborative activity. Indeed, some of the most harmonious cultures are often the most wasteful from a labour productivity perspective. From what I have seen, up to 80% of some tasks & roles in certain cannabis firms would be considered wasteful and non-value adding.
More worryingly, this unseen inertia will act as a drag on new investments pushing out the time to value, adding risk (through higher complexity) and inflating the total implementation cost.
Smart cannabis companies will look to get ahead of the problem by tackling waste at its root causes. I recommend-
1. Quantifying the problem – one simple way to measure overall waste is to consider total revenue per employee. A suitable goal for private (non IT) firms is $250k of revenue per employee;
2. Finding and fixing the root causes - analyze all processes and practices to see what can be streamlined, eliminated or combined (to avoid duplication). Push down decision making to the right person and then trust their decisions. Standardize and optimize management systems like reporting, budgets, meetings and planning documents;
3. Pruning headcount - Automate and outsource non-core activities where there is a clear ROI and no loss of capability;
4. Consider adopting new management and executional approaches such as Lean operations or Sprints.
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