How many employees does your company need? What type of corporate systems, policies, procedures, etc. do you need to support your business structure? This is sometimes difficult to assess and is often a moving target. Nearly all companies of all sizes struggle with this issue. Some companies have the right number and type of employees but have out of date systems in place. Others have pristine systems but creates havoc because the systems are too burdensome for the organization.
There are numerous factors that influence right-sizing your company. What is your revenue? How many and what type of resources are required to sustain that revenue? What are your profit margins? According to a recent article from Medical Product Outsourcing, here some helpful insights:
The right-size is a continual balance of a company’s total costs, asset investment and usage, debt, working capital requirements and other related inputs required to profitably serve customers based on the revenue being generated. The operative word in this definition is profitably—meaning, you don’t jeopardize your profit margin.Â
Right-sizing requires the determination of the amount of each the company should maintain to support the current revenue base, generate growth, support reinvestment and deliver the products and services at the least total landed cost. Anything other than the minimum amount is excess and thereby needs to be right-sized and used better. There is a tendency to underuse and undermanage these assets, which results in lower cash flow, higher working capital needs, excess inventory and underused plant property and equipment.
But what if your company is pre-revenue? Based on our experience, right-sizing is just as big of a concern for these companies. Here are a couple of examples:
Case 1 – Medical device start-up
Background: The start-up is 100% virtual, aside from the company founder. The team is comprised of project management, regulatory, quality, and product design service providers. The company is on the verge of a FDA investigational device exemption (IDE) submission to initiate a clinical trial. The company’s systems are minimal and have relied on systems in place with service providers. The lack of actual employees leaves the company is a lurch, as there is no “go to” resource to bring all the pieces together or to address concerns. The company has no physical office. While attempts have been made to centralize the design history file (DHF), documentation is in flux and much still resides at each of the service providers. Once the IDE goes to FDA, the company is technically on the FDA “radar” and could be subject to an audit.
Summary (in my opinion): The company is wrong-sized regarding the full-time resources, office space, and quality system.
Creo Quality Recommendations: Hire at least two full-time employees: a management representative responsible for the company’s quality system, audits, documentation, etc. and a senior-level technical lead to manage the product development issues and any modifications required once the clinical trial begins. Continue to rely on service providers, as needed but funnel all activities, documentation, etc. through the full-time resources. Establish a physical location and address. Bring all documentation into this site. Get the company audit ready, just in case.
Case 2 – Medical device start-up
Background: The start-up has two full-time employees: the founder and an office manager. The company does have susbstantial office space. The company is at least six months away from a FDA 510(k) submission and is currently conducting human clinical feasibility studies to support software development. The company’s quality system is mostly complete but overly burdensome for its size. The company relies on service providers for product development, pilot manufacturing, and regulatory services.
Summary (in my opinion): The company is right-sized regarding employees but wrong-sized regarding office space (too big) and quality system (overly burdensome).
Creo Quality Recommendations: Don’t hire another employee until the 510(k) submission goes to FDA. Continue to rely on service providers for product development and support. Consider reducing the size of the office space to a fraction of the current size. The current quality system feels like a big company quality system. Consider revising this or starting over in order to minimize the burden and strain that it sometimes brings to the organization.
Is your business faced with right-sizing challenges? Do you know how to keep everything in proper balance? If not, contact us. We’re happy to talk with you about your issues and see if there are ways Creo Quality can help.
