Don’t Operate Your Small Business Like It Is Small!
- by siteadmin
With 46% of small businesses failing within the first 5 years, they simply cannot afford to operate “small” any longer. Big businesses, aka Fortune 500 companies, understand the value of setting up a business with predictable, manageable systems and having the necessary framework in place to ensure profitable and productive results.
The 7 Big Business Tools:
There are 7 tools that all big businesses use within their organizations to ensure higher profits, higher quality, and increased customer satisfaction. Applying these tools to your small business will increase your chances of staying in business longer and give you more control of its operations, profitability, and get you out of a “small” business mentality.
1. Organizational Charts
Organizational charts outline the functions that are required for a business to run on a day-to-day basis, as well as the person responsible for that function. This tool determines the “Who” of the business. Organizational charts also drive accountability for each area of the business and outline clear responsibilities.
Big businesses have figured out that while it is important to have people lead each of the functions, it is even more important to make sure the skill level and competencies of that person match the role. As a majority of small businesses typically have a small staff, roles are often filled by whoever is available. This mistake could lead to inefficiency and prevent the business from operating at its peak level. Completing an organizational chart will help identify the gaps that exist in the skill set of current employees and should be developed even when there is only one person in the business. This activity will allow for future growth as the business is expanded to include more and more employees.
Remember: The more times one name appears in an organizational chart, the less productive and effective it will be!
2. Operations Manuals/ Procedures
Operations manuals and procedures document the tasks that are to be done within the business. Use this tool to capture the “What” of your business. This will serve as a step-by-step guide on how to complete each task and give clear expectations of how your business is to run. This documentation can also serve as a training aid for new employees, allowing them to ramp up faster, and reduce the amount of time you have to spend training. This tool will reduce the variability in output and quality that can occur when employees are allowed to do it their own way, in effect making it their business.
If there are no employees within your business, use procedures to help you become more efficient by performing tasks the same way, every time. You will also reduce wasted time remembering how you completed a task previously.
Be sure to review your operations manuals and procedures periodically for relevancy and areas of improvement. Have you found another way of doing things more efficiently? Does the task take a significant amount of time? Look for steps that may be duplicated, can be removed, or take a lot of time to complete. Conducting this review will lead to continuous improvement within your business.
3. Business Systems
Given the complexity in most big businesses, they always have systems in place to make sure their operations are set up to flow smoothly and reduce the chaos that can occur when there are so many functions and employees. Small businesses can take advantage of the benefits of having a systemized business as well. Systems are no more than how the tasks and functions interrelate to deliver a completed product or service. Having a system in place allows you to produce the same quality results every time, which in turn leads to increased customer satisfaction. You can describe this as the “How” of your business.
For businesses with only one person (the owner), set up business systems that automate some of the key tasks. This will give you more freedom to work your on business and strategize, rather than in your business doing a lot of the mundane tasks. You will find that you will have more time to grow your business when most tasks are systemized. Business systems produce a highly organized business and can also be used as an effective management tool for owners since feedback can be gained about your business performance when things don’t work as expected.
4. Process and System Audits
Auditing your processes and systems asks the question “Are we doing what we say we are going to do?”. When you have taken the time to document the key tasks in your business, it makes sense to periodically review whether or not the procedures are being followed. If they are not, then find out why. Auditing allows you to qualitatively measure how well your business is performing.
Take it one step further, and check for the effectiveness of the system, not only the compliance to it. An easy way to do this is to look at your customer satisfaction measures, the number of errors or defects you are getting, and how easy it is to follow your process. Often times, while all of the procedures are being followed, they may not be producing the results that are intended, so auditing can help you uncover these issues.
Use auditing within your organization to drive accountability, and make following the process a habit. Not only will you improve the efficiency of your business system, but you will continue to make your business better, meet your customer expectations, and consistently meet business goals.
5. Key Metrics and Reporting
Metrics are the key data that you need to make business decisions. As the old adage implies, “you cannot manage what does not get measured”. Your key metrics are a snapshot of how well you business is performing. Use these measures to quantitatively assess your output.
An easy way to determine what your key metrics should be is to ask: What do my customers want? What is important to them? The answers to these questions will be become the standards by which you measure your business. Other metrics can include weekly sales goals, revenue goals, or the number of calls made to prospective clients.
After key metrics are determined, institute a regular reporting of the results and look for trends upward or downward that need correction. Use dashboards that can be set up easily in an Excel spreadsheet program for quick access to the data and results. Also, be sure to tie the metrics to the functions in your business to increase accountability for the results.
In addition, consider using your metrics and reports as a communication tool to clients and prospective clients. Show how you differ from your competition, and what you can do for them relating to customer service levels, response time, or any other measure most important to that audience.
6. Six Sigma Process Improvement
A highly utilized efficiency tool used in Fortune 500 companies, Six Sigma is a data-driven methodology for reducing the number of defects within a business system. It will demonstrate quantitatively how well a process is performing and focus on variation (what the customer sees and feels) reduction.
Big businesses use Six Sigma to reduce lead time, excess labor costs, and processing times, saving them millions of dollars annually. Small businesses can also realize the benefits of applying this process improvement tool in the same way. Use of the tool increases customer and client loyalty as they know what they are going to get every time.
Find out more about Six Sigma and its benefits here at the iSixSigma website: http://www.isixsigma.com/.
7. Problem Solving Tools
There are different ways to address the issues that inevitably occur in businesses. Have a toolbox of problem-solving methodologies to solve the different problems that occur. This will allow for rational and data-driven decision-making, and help you get to the root cause of the issue. It is widely understood that if you solve the problem well, and eliminate the root cause of a problem, the problem will not re-occur.
Some commonly used problem-solving tools include:
- Root Cause Analysis
- 5 Whys
- Cause and Effect Analysis
- Flow Charting
- SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis
All businesses have problems, and that is actually a good thing! Look at problems as opportunities to improve, and as simply the difference between the current state and your business goals. Become familiar with the various tools available, and train your team to apply the tools as well. This will increase your confidence in the decisions being made in the business, and ultimately free a business owner from having to be involved in every business decision being made.
With 46% of small businesses failing within the first 5 years, they simply cannot afford to operate “small” any longer. Big businesses, aka Fortune 500 companies, understand the value of setting up a business with predictable, manageable systems and having the necessary framework in place to ensure profitable and productive results. The 7 Big Business…