Understanding the Perils of Manual Operations for Small and Medium-Sized Organizations
By Lane F. Cooper, Editorial Director, BizTechReports
Leaders at small and medium organizations (SMOs) may not match their larger counterparts in terms of scale and budget for technology investments. That said, modernization, automation, and business transformation are increasingly recognized as the keys to remaining competitive and meeting the evolving expectations of customers and other stakeholders. The good news is that new developments in technology and the emergence of new services have democratized SMO access to a growing array of business process automation capabilities.
A growing body of research confirms that automation represents an existential imperative for all organizations. It is increasingly clear that those who fail to embrace emerging technologies in general—and business automation in particular—risk falling behind in efficiency, cost management, and customer satisfaction. Avoiding modernization, if not outright transformation, has many consequences.
Manual tasks take longer to complete than those that are automated. This extra time translates into more expense and results in opportunity costs by diverting talent from more important activities that could add greater value to the business.
These direct labor costs are compounded by indirect costs, such as increased supervision, training, possibly overtime, and—importantly—human error, which can lead to extra work, delays, and potential damage to a company's reputation. On this point, compliance risks are a concern, as mistakes in manual data entry can result in fines and legal issues as well as bad press.
Resource utilization is another area where manual processes fall short. Unautomated operations often require physical documents, leading to higher paper, printing, and storage costs. Storing physical documents takes up space that could be used more productively.
Finally, manual processes often lead to poor data integration, a serious handicap in today's real-time business environment. This hinders decision-making and introduces friction in the customer experience. SMBs may miss out on new technology that could improve their competitive edge.
Quantifying these costs can vary widely depending on the specific business and industry. However, studies have shown that automating tasks can lead to significant savings. For example, McKinsey reports that about 60% of all jobs have at least 30% of activities that could be automated. This, researchers note, can lead to 20-50% in labor cost reductions for certain tasks.
Cases in Point
Several use cases highlight the negative impact of manual processes and automation's benefits across different sectors.
Many mid-sized law firms struggle with manual document management, including contracts, case files, and client correspondence. This is especially true in today's labor-constrained environment. Time-consuming document retrieval, high error rates, and increased administrative costs are significant challenges. Implementing document management systems (DMS) with automation features has been shown to reduce document retrieval time by 70%, decrease error rates by 50%, and cut administrative costs by 30%.
In the financial services sector, small community and regional banks are under pressure to abandon manually managed compliance processes, which are labor-intensive and, again, prone to errors. Institutions that have implemented compliance automation report improving compliance accuracy by 40% while reducing the time spent on processes by 60% and cutting labor costs by 35%.
While small to mid-sized healthcare clinics face compliance challenges similar to those in the highly regulated financial industry, they also struggle with patient satisfaction. Manual patient scheduling, for instance, is widely seen as unacceptably inefficient, leading to high no-show rates and increased administrative burdens. Automated patient scheduling systems can improve accuracy—reducing double bookings by 80% and decreasing no-show rates by 50%—while freeing up 40% of staff time for patient care.
In logistics, mid-sized companies that manually manage inventory face frequent discrepancies and delayed shipments. [DISCLOSURE: I started my career in the 1980s covering electronic data interchange (EDI) and logistics automation. It is amazing to me that this remains a major industry issue.] That said, significant progress has been made by small and mid-sized participants that have adopted the latest technologies. Automated inventory management systems have reduced discrepancies by 70%, improved shipment processing times by 50%, and lowered labor costs by 40%.
These vertical use cases illustrate the significant impact that automation can have on SMBs across various sectors. As the market continues to evolve – especially with the advent of generative AI, it will become increasingly clear that technology modernization and business transformation rooted in automation will be essential for the success and growth of SMBs through the midpoint of the decade...and certainly beyond.