Your Organization Is a Funnel

We all know that organizations are composed of processes. And a process converts an input into an output. And the greater the output in relation to the input, the more efficient the process is. But have you ever looked at an organization this way? About 30 years ago, while working with a large bank, I was reviewing one of its sales processes. The process was your typical funnel – at the beginning there were a lot of cold calls, which resulted in fewer interested prospects, which in turn became fewer one-on-one meetings, which then became fewer proposals, which finally became even fewer signed contracts. What started out as 1,000 cold calls became only 5 signed contracts at the end. In other words, this process was only .5% efficient – less than 1%. When you think about it, however, all organizations are also like the sales process – they convert opportunities into realized products and services delivered to the satisfaction of their customers – but not at 100% efficiency.

An Important Concept

The funnel concept has been an important concept for me as I work with clients to improve profitability and efficiency, whether private companies, government agencies, or not-for-profits. Every organization can be boiled down into about 10 sequential mission-related steps which convert the opportunity into a final outcome. Each step feeds the next step, or customer, and must provide its outputs exactly the way its “customer” needs it, otherwise, there will be waste, rework, and idle time. I call this runoff – opportunities that runoff the funnel, kind of like too much rainwater spilling over a gutter. The objective is to minimize the runoff so you can convert the funnel into more of a cylinder. If you can effectively manage each step of the process, you can minimize runoff which increases the opportunity for the next step, and overall efficiency.

Funnels, Funnels Everywhere

We discussed the sales process in which many cold call opportunities become just a few signed contracts. But school districts don’t convert all kindergartners into high school graduates, and not-for-profits don’t convert all donations into services for needy families. But have you ever thought about the runoff within their processes, where it goes, and what the overall efficiencies might be? And if they wanted to maximize the conversion process, where are the greatest opportunities?

Managing the Funnel

The process begins with the definition of success. This is your desired, ultimate process outcomes, or goals, which should be defined as customer-centric measures, such as “the percentage of clients achieving a living wage”, “the % of client accounts that produce an ROI Ratio of 5:1 or better”, or “the % of new hires that are retained for 12 months”. These measures are then deployed to each step in reverse order starting with the one closest to the final outcome. For these outcomes, I always start with Quality, Timeliness, and Cost. Once a process develops outcome measures aligned with its customer’s measures, these are deployed to the preceding step in the flow until you get to the first step of the process, thus creating an integrated measurement system. Each step of the funnel produces runoff, mostly  because it’s not meeting the requirements of the following step – its customer. For example, if we wanted 8 new hires to stay with us for at least 12 months (the ultimate outcome), we might need 15 to start the job (the preceding step). This means that 20 had to accept the offer, 30 had to pass the security background investigation, 40 had to pass the interview process, 80 had to submit applications with resumes, we had to make contact with 150 at the job fair, and we had to send out 2,000 notices to attract candidates to the job fair. With this approach, we can now see how effectively each step is meeting the needs of the next step in the process, and where the largest opportunities for improvement are. For example, if we had a better approach at job fairs, perhaps we would only need to contact 75 candidates instead of 150 and reduce the number of job fairs we host. Or if we were better able to screen candidates during interviews, we might need to interview only 60 candidates instead of 80, or if we were able to onboard and mentor new hires more effectively during the first 12 months, perhaps we would only need 10 to start the job instead of 15. You can now begin to appreciate the financial impact of runoff throughout the process. 


All processes produce waste. But by defining your funnel and setting up an integrated measurement system, you can quantify the runoff, prioritize your improvement efforts, and approach the cylinder state.