I can see it coming. Maybe I’m developing a sixth sense for it. I run an operations management business and I regularly get calls from business owners saying; “I need your help. My business is taking off and I feel like I’m losing control”. The first question I ask always seems to be the toughest for them… When can we get together to talk? I’ve learned to anticipate that they will cancel one or two appointments before we’re actually able to meet. I plan for our first meeting to be away from their office so I am able to get their full attention.
Their business has typically been operating for three to five years, which means their business model is working for them and has begun gaining traction. They’ve passed the infant mortality point where many new businesses fail and have had some taste of success. They’re now at the point where they’re starting to think about taking their business to the next growth plateau.
The business operates in a mostly ad hoc mode. Up to this point they’ve managed to keep things on track by shear force. They’re beginning to realize that they can’t do everything themselves and they continue to hold things close because they feel they have to maintain control by personally making every decision. They’re not willing to delegate anything but the most trivial tasks. “My entire life is tied up in this business and it’s succeeding because of the energy I put into it.” They have in fact become the operations infrastructure of their business and they’re beginning to realize that they have now become the primary constraint on the growth of their business. Take a vacation, a sick day, a coffee break… Not likely!
Transforming these businesses requires an objective look at two areas: their organization and their operations. I start slowly by trying to find some activities the owner is willing to offload to others.
Businesses at this point in their development are usually organized on the “Conestoga Model”, meaning their organization chart looks like a wagon wheel. It’s a person centric organization model where the owner has become the hub of the wheel with all of the other functions circling around the hub. They may have made some attempt to change things themselves but I often find they were unsuccessful because they delegated responsibility without being willing to also delegate the authority to do the job.
The next step I take with clients in these situations is to begin transforming their organization to a more traditional hierarchical model. This is a difficult step for them because it means they have to be willing to delegate the authority to complete tasks along with the responsibility for completing them.
Completing the organizational change requires more than simply creating an organization chart. The new organization has to be designed to meet the businesses needs and to make best use of the resources at hand. Each block on the organization chart should have a defined mission statement and a set of goals. Owners who are already over burdened often revolt at the thought of doing all of this “useless paperwork”. “We have real work to do.” This a great place to recommend they bring in their new first line managers or supervisors to help and it also lets these people take ownership of their new roles. This is the point where I usually have to expand my role from working with the owner to working with their staff. Including the first level managers and supervisors in these activities has an amazing effect on the culture of most businesses once the staff realizes that the owner is saying I trust you and am relying on you to help grow my business. Kicking off the new organization can be difficult. “You mean I work for her now? But I used to work for the owner.” You have to plan to hold a lot of hands and mend some hurt feelings as you go through this exercise.
After the organization is in place you need to define a sustaining operations infrastructure for the business. You do this by assessing the businesses operations, identifying weak areas needing definition or improvement. I begin this by formalizing the workflows of the business. Remember, the operations infrastructure has to be able to support the restructured business in the future. I divide the operations infrastructure into the nine areas described below. Each area controls a major workflow through the business so, by definition, each infrastructure area crosses organizational boundaries. Don’t, for instance, limit the sales and marketing infrastructure to the sales and marketing department.
CUSTOMER SATISFACTION: The customer satisfaction infrastructure has to be designed as an integral part of the business operations and not simply included like a facade over the front door. Every employee needs to learn their customer satisfaction role. The customer satisfaction infrastructure defines the role of functions such as product support, requirements definition, and quality assurance.
PRODUCTION/SERVICES: The production/services infrastructure defines the methods that will be used for the delivery of all products and services and ensure that this is being done in a safe, compliant, and consistent manner capable of bringing all products and services fully to market.
INFORMATION MANAGEMENT: It would be a tremendous understatement to say that all businesses today are information intensive. The information management infrastructure includes the IT systems but can be much wider in scope.The information management infrastructure defines the methods for protecting all business data, the electronic tools that form the backbone of the business, printed material and all media that is used to support the business. All personal privacy and security controls need to be addresses here.
SALES AND MARKETING: The sales and marketing infrastructure supports the businesses primary goal; to sell products and make a profit. It defines the methods used for everything from pricing and lead flow needed to support the sales pipeline to the methods used to develop new products and markets including the use of competitive and strategic analysis as assessment tools.
ORGANIZATIONAL: The definition of the organizational infrastructure includes the formal and informal structure of the business. It includes the organization chart that forms the command and control structure plus the informal structure that becomes the culture of the business.
PERSONNEL: The personnel infrastructure defines the working relationship between the business and its employees and between employees including the roles and authority of the management team. It defines the benefit strategy and compensation plan plus the procedures for hiring, firing and everything in between.
FINANCIAL OPERATIONS: The financial operations infrastructure forms the framework for all financial operations of the business. It defines all financial authority and controls including AP/AR, payroll, cost account and project management, plus the definition of methods to be used for budgeting and projections.
LEGAL OPERATIONS: The legal operations infrastructure forms the framework for all legal operations of the business. It defines all legal authority, professional licensing and controls needed to support the business on a continuing basis. It defines all activities used to protect the business from legal risk and liabilities and to ensure the compliant operation of the business.
INSTITUTIONALIZED PROCESSES: The institutionalized processes infrastructure includes the definition of all formalized policies, procedures and methods that guide the businesses operations. Methods such as ISO, CMMI, Six Sigma, Enterprise Risk Management (ERM), Lean or Quality Management Systems (QMS) where the business needs certification to qualify for a market driven process are defined.
It is important that the infrastructure areas be documented but this doesn’t mean it has to be a voluminous set of policies and procedures or that it has to be completed overnight. The infrastructure needs to be formalized to be effective and repeatable but applying the “Keep It Simple” approach works well here. Complex procedures don’t get read so plan to start light and build as needed in the future. After base lining each of the infrastructure areas (and training employees on their use) the final step is to establish a continuous process improvement program so that the infrastructure will continue to evolve along with the business.
The actions described in this article can be intense for a small business because it strikes at its culture. The cost of transitioning the business to support its next level of growth will be offset by the improved efficiency and through the resulting decrease in operations risk. It may not be an immediate goal of the owner but these steps are an excellent way to position the business for a future M&A event or to raise investment funds to support the additional growth.