Think about this for a minute: If you have people in your company that are doing the same job but each person is doing it differently, then only one person (at the most) is doing it the best way. Everyone else is doing it in a less-efficient and less-profitable manner.
Compounding that, when people do the same job in different ways, it is likely you’ll have a wide range of variation in your products or services. As we all know, variation can kill your brand and frustrate your customers.
A key in running efficient, profitable operations is to have “systems” that everyone follows in producing your product or delivering your services. The goal is to develop systems that promote the highest level of efficiency and profitability while producing predictability in outcomes. In other words, you need to determine the “best way” your products can be produced or your services delivered and make that the standard which everyone will follow.
Once your systems are created, they must be written down in a procedures manual. This is important for a couple reasons. First, by having them in writing, you can use the manual as a tool in training your team and for accountability purposes. Second, by having a procedures manual, or “operations manual,” your company value increases. Any time a new owner is provided a “cookie-cutter” approach to running your business, it is more valuable to that person than buying a company and then having to figure out how to operate the business.
Once your systems are documented, your team needs to be trained (or re-trained) so everyone knows what the procedures are and understands how to follow those procedures. Then, everyone needs to be held accountable to (1) following the procedures at all times and (2) continuously be on the lookout for opportunities to improve on the procedures.
Okay, so far this is all pretty obvious and you probably haven’t learned anything. It’s obvious that identifying the “best way” to do something is important to increase efficiency and profitability. It’s obvious that having those best practices (systems) in writing is important for training, accountability, and in increasing company value. It’s also obvious that customers want predictability when they purchase your product or service. Without a doubt, you have to develop procedures in order to accomplish this and those procedures need to be taught to your team members. And once trained, of course you have to ensure your team is actually following the procedures you developed and also to look for areas the current procedures can be improved upon to promote additional and ongoing efficiency, profitability, and predictability. There’s nothing earth-shattering in any of that. But let me ask you; do you have written procedures in every aspect of your business? Do you ever have problems that repeat themselves? Do all of your team members produce the same quality of work in the same amount of time? Are your procedures periodically reviewed and updated? Do you have formal training for new hires and refresher training for existing team members centered on “procedures?”
If you have a production department, does everyone in that department produce your products the same way? Do they all understand how to use the features on your equipment the same way? Do they all have the same level of speed and accuracy when producing your products? Do you track each person’s speed and accuracy? If you do track it, what do you do with that information? Do you have stated “standards” regarding speed of production? Does everyone know what those standards are? Are all of your team members meeting those standards?
Is your production area set up the way it is because you’ve just organically grown into the current set-up, or have you thoughtfully planned the layout of your production floor to support maximum efficiency? Do people have easy (and fast) access to production supplies, or do they have to leave their work stations to go get supplies from the other side of the production floor?
What about product returns? Do you have a standard of acceptability and are you meeting it? Why are your customers returning products? Do you have to re-run projects due to either not following the customer specs or due to shabby workmanship?
What about your scheduling department? Do they have procedures? How do they determine that deadlines can be met? Do you ever miss deadlines? If so, do you know why? If you know why, have you created a procedure to make sure that you never miss deadlines again? Is it written down? Is everyone trained in it? Are they doing it?
How about your sales department? Do you have a standard sales model that each of your sales reps follows? Are the standards measured and tracked? Are people held accountable to meeting those standards?
Has one of your customers ever complained of making a repeat order and not getting the same thing they ordered the first time around? For example, price variation, delivery variation, quality variation, invoicing variation, or any other variation? Why did this happen? Most importantly, what can you do (specifically) to make sure that never happens again?
If you’re in the service business, does every customer encounter have the same “feel” to it? Do you offer the same level of service to every customer, every day? What service failures seem to happen repeatedly? Are there any “typical” customer complaints?
I could go on and on (and I suggest you do) asking these types of questions for each department within your company. In most privately held businesses, we have procedures in several areas of our business, but not all. Some systems may be written; some may not be. Most of our people follow the procedures most of the time but perhaps not all the people all of the time. It is also common to see systems developed, but not formally improved upon even as your company grows. Your old systems may have actually become inefficient as your business has changed.
So how do you go about either creating systems in your business or updating your current systems? The best way to do that is by involving the people who are expected to follow each system in the creation or the updating of those systems. Have each department-head get his/her entire team together to answer the following questions:
- Are we all doing things the same way?
- Are we all operating the best way?
- How can we improve our efficiency?
- How can we eliminate waste?
- How can we eliminate variation?
- How can we improve our profitability?
- What are we doing that we shouldn’t be doing?
- What aren’t we doing what we should be doing?
- What errors occur in this department?
- When an error occurs is it because we don’t have a system, or because the system wasn’t followed, or was it because we have the wrong system in place?
- If you were in charge of creating the best systems in this department, what would be the first thing you’d fix?
- Are all of our systems in writing?
- Are people held accountable to following our systems?
- How often are our systems improved upon?
- What’s the procedure for updating a system?
- Are the updates in writing?
- Is everyone being trained on the updates?
- Is everyone held accountable to following the new, updated systems?
- Who would like the job of creating an operations manual for the entire department? (Maybe this is your department leader, or maybe it’s someone else in that department who is better at writing.)
You may be very surprised of the answers you hear in these meetings. You may also be very pleased with the ideas for improving your efficiency, reducing or eliminating variation, and ultimately, increasing the profitability and value of your company.
As the business owner, it is not your job to create the systems yourself. It is not your responsibility to document the systems and create a procedural manual. But it is ultimately your responsibility to make sure that those things get done appropriately.
One final point: Don’t be overwhelmed if you currently don’t have any written systems in your business or if your systems are stale. Just work with your team to create a list of systems that need to be created or updated and then prioritize the list. Once that’s done, start knocking them out one by one. It won’t happen overnight, but that’s okay. Remember the question: “How do you eat an elephant?” Answer: “One bite at a time.” The same is true with creating your company’s operations manual. “How do you create your company’s operations manual?” Answer: “One system at a time.”
Please just get going on it and stay on it until it is done. The results will be well worth your effort.
Review / Action Steps
- Meet with each of your department heads individually and ask them about the procedures in their departments. You may even want to ask them to read this chapter and then have a discussion about the importance of either developing systems, documenting them, training them, or improving on the systems you currently have in place.
- Have your department heads lead departmental meetings and to ask the questions that are bullet-pointed in this chapter. Please be sure you attend these meetings, even if your department leaders run the meetings.
- Have each department make a list of every system they need to either create or update and put in writing. Then, ask them to prioritize the list. And finally, ask them to start working it and give them deadlines for completing each of the new or improved systems.
- As each system is created and written, please be sure that every team member is properly trained in executing the procedures.
- As each system is written, please be sure to include them in the correct section of your company’s Operations Manual. The Op’s Manual is a compilation of all of the systems tabbed by each department within your company.
When everyone is doing things the same way –the best way- your efficiencies and profitability will be greatly enhanced. Variation in your products or services will be greatly reduced or totally eliminated. The result will be happy customers who will continue to buy from you, thereby further increasing your profitability.
By having written systems in every department within your company, you will significantly increase the value of your company. A company “operations manual” is tremendously valuable to potential successors of your business.
If you want to operate as efficiently as possible, if you want to eliminate variation and strengthen your brand, if you want to dramatically increase the value of your company, then you must have systems and these systems must be documented and continuously updated.
You also have to make sure your team is trained and are following the systems. Strongly encourage them to follow the systems to the letter, but at the same time to be on the lookout to make the systems even better.
Every time a mistake happens in your company, be sure you determine if the mistake was caused by not having a system, or because someone was not following the system, or because your existing system needs to be reworked. And once you know the reason for the mistake, you have to ensure that appropriate measures are taken to prevent that mistake from happening again.
Please remember to include your team in the development of your systems and in maintaining the different sections in your company’s operating manual. Your job isn’t necessarily to do all the work, but it is your job to make sure the work gets done!
It’s not easy and it’s endless process. But with your continued commitment to systemizing your business, documenting your systems, and improving your systems, you’ll be doing much to improve the profitability and value of your business. It’s well worth the hard work!
© Copyright 2013 by Jon Denney