By Charles Blakeman
An Operations Manual (small, simple!) is a necessity for every small business. If businesses spent a few hours putting one of these together instead of spending weeks on Business Plans that never see the light of day again, they would be much more successful.
Edward Deming, the father of modern quality and customer satisfaction had an 85/15 rule "85% of a worker's effectiveness is determined by the system he works within,only 15% by his own skill."
This is just as applicable to a one person company as to a 50-500 person company. If I'm operating without systems, I'm being as ineffective as possible.
Why Don't We Create Systems for Ourselves
Only big businesses need systems —
My company is small enough to not need all that "organization". See Deming's statement above: we couldn't be more wrong. Operating without systems makes us reactive, but most importantly,when we're "winging it", we create inconsistent experiences for our customers, ourselves, and our family. Inconsistency is one of the keys to failure. Operate without systems and you are putting your business, your family, and yourself at great risk.
Creating systems sounds too complicated — I don't have the expertise. If the system you create is not simply a reflection of what you do every day to create the best result, your system is not a system, it's just a manual sitting on a shelf.
Keep it Simple! The simpler the better. One page of written step-by-step procedures for each process (Business Development, Operations, Purchasing, Accounting, etc.) should be good enough for most businesses to start with. You can add things you are doing as you find them missing from the System. Simple, Simple,Simple it has to be usable on a daily basis.
Example: It shouldn't take more than 30 minutes to 3 hours to develop a good Accounting/Invoicing system. You are already doing most of it just write it down, look at it, and decide whether what you wrote is really what you want to see happen every time. If so, you have a system. If not, you have a piece of paper that will go in a drawer.
I don't have time — Again, 30 minutes to 3 hours should get you most systems. If you have 5-8 systems in your business, it shouldn't take you more than 4 to 20 hours total to get them all in written and working for you. If you dedicated four hours a week to this, you would be done in 1-4 weeks. You don't have time NOT to do this. You likely waste more time each month "winging it" than you would spend in one month completing your Systems Manual.
Why should we create systems for ourselves?
Effectiveness/Profitability — Deming's 85/15 rule — My natural talent is not a good way to run a business. All of us (customers, employees, family, self) will be much better off if I take the time to systemize what I'm doing. I will make more money if I run my business with systems vs. ad hoc talent.
Consistency — If every time I work with a regular customer,they have a different experience, I have created issues. The same is true for vendors and employees. Why not ensure they have the same good quality experience every time? McDonald's is successful not because they have the best food, but because you know exactly what you're going to get at every location, everywhere in the U.S. Consistency builds loyalty. Inconsistency builds confusion and disappointment.
Transferability — which is really the same as consistency.
If each process in your company is flowing from someone's personal preferences or talents, when they go on vacation, take a day off, or worse yet, leave the company, that "process" no longer exists. Now the next person creates their own process based on their own preferences or talents, and the customers experience changes again. And while they are making up their new "process" in their head, the customer experiences significant gaps in service that can result in them leaving. A good, simple, written system can be carried out by the next person without dropping a beat, especially if you have done cross-training on each process to ensure more than one person already knows how to do it.
Very few companies get a good start on systems until long after they are needed, which really puts us behind the 8-ball. The best systems will be easy to expand/develop as your company grows and more processes and procedures are required. If you have to throw out the systems you started with instead of just tweaking/expanding on them, they likely were not good systems or weren't even being used.
Developing a System
There are three layers I like to use in developing an Ops Manual. Each section should start with the top layer and go from there. A System is the big picture telling us what the end result should be. Processes talk about how to live out the system, and Procedures give us the actual step-by-step actions we take to complete the processes.
Top Layer — System Title and Aim: 1-2 sentences. The big framework for accomplishing a specific aim.
Example: Quoting System
To ensure we respond within 2 days to each request for quote and achieve a 40% average margin on all completed jobs.
This is specific, measurable, and attainable. If your system does not have a clear AIM, it is not a system. Describe clearly the aim of the system. What are you trying to accomplish the measurable result?
Middle Layer — Process: 1 sentence to a couple paragraphs. The general plan for how that system works.
Example: Sub-Contractor Management System Process
Describe the type of subs you are looking for, characteristics (cleanliness, reliability, etc.).
Bottom Layer — Procedures: Step-by-step actions to reach the aim of the system. 1-10 steps (Use the fewest possible; keep it simple and, combine intuitive steps). Some processes may not have step-by-step procedures under them, but wherever possible, procedures should be spelled out. This creates a consistent experience for your customers, your subs, your employees and yourself.
Example: Business Development Procedures
- Make 10 calls Mondays and Wednesdays from 9am-10am.
- Obtain 2 appointments per week.
- Make one offer per week including price and timeline for Y/N push to closure.
- Have one relationship event with clients every week(lunch, coffee, golf, etc.) Call all clients once a month (call X each Tuesday 8:30am-9:30am), check on satisfaction, make recommendations, give referrals, connect them with others who can help their business, ask for referrals.
- Update sales pipeline every Monday at 8am, including specific action items and timelines for moving people through the pipeline.
Example: Invoicing
- Send invoice within 24 hours of signing contract obtain 20% before starting project.
- Send 2nd invoice for 50% at halfway point in project (contract should specify what is "halfway".
- Send 3rd invoice for20% before completion.
- Obtain all payment on above invoices (90% of total invoice) prior to completing punch list.
- Present final 10% invoice personally with customer satisfaction survey upon completing punch list.
- Make Receivables calls on the 30th day (all invoices are payable in net 30). Obtain payment before starting new projects.
- Make weekly Receivables calls for remaining 10% through 45 days.
- Make specific time to come and personally obtain check. Show up 1 hour prior to that time if you think there is any chance they will "hide".
- Weekly calls or visits to obtain check through 75 days.
- Send warning letter ten days later turn over to collections. Note: check with management before taking this step.
Some typical Systems you might need
(Total 5-20 pages for the whole "manual")
- Vision/Mission/Principles
- Lifetime and annual goals bandwagons with specific plans on how to get there. Include principles by which we run our business things that differentiate us, values we express — 1 page max.
- Business Development
- Sales, marketing processes and procedures — Maybe 1 page on each.
- Operations
- Manufacture and delivery of our product and/or service — 1-6 pages (1 each on specific steps in the process)
- Administration
- How we run our company internally office management procedures, supply procurement, who covers for whom when out, etc. — 1-4 pages, fewer if possible.
- Finance
- Accounting, Quoting, Invoicing, Collections — maybe a page on each
- Employee Relations
- Dress code, HR policies, 401k, insurance, etc. — 1-2 pages.
- Community, Family, Self, Employees
- What impact we want to have on our community, ourselves, our family, our employees. Why are we doing this? Not just to make money.
- What is the "significance" we are reaching for beyond just"success"? 1 page if possible.
- Other possible systems
- Vendor Management, Procurement (contractors who buy a lot of materials should have both of these), Subcontractor Management. Only create a system for existing activities.
How to make your systems work for you
- Write down each step in a process and use that to develop a simple procedure to express that process. Combine steps whenever possible without losing clarity of the process.
- Have your employees write their own procedures — avoid changing it much if you can. They own it. If it's missing some things, ask them questions: Where is x in this procedure? Should it be it's own step? Sometimes you'll have to add or change. Keep changes to a minimum and it will create ownership of the procedure.
- Take 30 minutes once a month — put it on your calendar — and review your systems. If any of them aren't being followed, or aren't practical, make an appointment with yourself to fix that within a week right then and there is the best time.
Keep Using it — Change it to make sure you do (see #3 above). We get "bored" with consistency, so without even thinking about it, we stop using the procedures we knew were so effective and go back to `ad hoc talent'. It worked so well we stopped doing it.
Small businesses that use systems create a winning environment that puts them in a different class than their competition. And they are more likely to survive and be profitable.
Rules That Don't Work For You
Many of us mistake rules for systems. Putting ours rules and/or our employees' rules where we should actually have systems can be non-productive. Rules are necessary in areas of Employee Relations (appropriate clothing, timeliness, productivity, etc.), but Systems should be the norm in operations, sales, accounting, etc. And even in the area of Employee Relations, the more you can give people a system to live within instead of rules to live under, the more they will own their job and be productive.
Some differences between companies based on rules vs.
those based on systems:
| System (guidelines) |
Rules (laws) |
| Frame work |
Box to live in |
| Gives you a floor— minimum |
Gives you a ceiling —maximum |
| Free up employees to win |
Creates robots who fear losing |
| Emphasis on result |
Emphasis on process/procedure |
| Emphasis on employee ownership |
Emphasis on we/they |
| Encourage participation/innovation |
Encourage hiding/work arounds |
| Examples: |
|
| Apple Computers |
U.S. Government |
Companies and systems that are heavy on rules are generally very bureaucratic and low on productivity (i.e. government). Having as few rules as possible creates systems within which people can express their individual talents within reason. Give people room to think and create, and they will feel more ownership of the results. Now that's a good system.
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