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The entrepreneurial spirit of a small business owner can sometimes be at odds with rigorous business systems – Domini Stuart looks at various models to find out how business systems can enhance operations but still allow the business to change and evolve.

Active ImageHave you ever wondered about the fundamental difference between McDonald’s and your local hotel? Is there a creative middle ground between absolute control and complete chaos? Should business systems be applied to only mundane routines, or to everything?

Maggie Richardson, principal of the Small Business Centre and author of Starting and Surviving in Business in Australia, believes that systems can offer many benefits to the business and the customer. “You can go into McDonald’s anywhere in the world and each cashier will ask: Do you want fries with that?” she says. “You know you’re going to get the same experience every time. On the other hand, you could spend a wonderful night with great food at your local hotel then go back a couple of weeks later only to find everything’s changed.

“McDonald’s are systemised; they have a procedure manual that each employee refers to as they learn what is expected of them. The hotel is not. Chefs may have their own systems in the kitchen, but when they leave, a new chef would have to start again from scratch. There is no consistency and, chances are, the quality will drop.”

Jack Fraenkel is a consultant with Motivatories, a business and franchise development organisation. He describes systemisation as identifying all of the core processes of a business and writing policy and procedure manuals to automate these. “Effective business systems provide clear guidance to all employees and facilitate daily business operations, thereby freeing the business owner to concentrate on building the business to its maximum potential,” he says.

The principle applies to businesses of all sizes, according to Amanda Sarden, managing director of That Organising Place, and you can start working on your systems from day one. “Systems operate on two levels,” she says. “If you’re going to be working as efficiently and with as little stress as possible, you need ones that work for you personally—a functional filing system, strategies for keeping your work area clutter-free and ways of using storage space effectively. These will help to manage your time more effectively and increase your productivity.

“You also need to be thinking about broader systems—the ones that will help your business to keep running smoothly as it grows.”

Business Checklists

For this, all you need to start with is pen and paper. “In every business, there are five key areas in need of systems: administration, finance, human resources, production and marketing,” Sarden says. “A good start is to use these labels as headings. Then, every time you have a thought as to how something should be done, write it down in the appropriate place. This might be ideas on how the phone should be answered, what will your greeting be? Or what you will say when you go out to see clients? How will you follow up next time?”

As your jotted down procedures take shape, Sarden suggests using them to create checklists. “At first, you’ll be the person ticking these off. Then, as you start to employ people, you can pass the lists on. This way you can be sure that everything is being done exactly as you like it—that every client is getting the same experience. At the same time your staff will be secure in the knowledge that, as long as they can tick off all the boxes, they’re doing a good job.”

In his books about the E-Myth, Michael Gerber makes the point that a properly systemised business can even reduce your labour costs. When new staff simply have to follow clear instructions, you can employ less experienced—and less expensive—people.

“At a certain level, no one person in the business is an expert,” says Sarden. “Anyone can cover for the receptionist. Everyone can do the day-to-day stuff that keeps the business running.”

“Systems allow staff to proceed with their work with the least disruption,” says Richardson. “That’s why, along with the obvious information on what to do and how to process a customer request for information or an order, it is important to document procedures for ordering stock, maintaining vehicles, employing and managing staff, and so on.”

Richardson also recommends the management system includes checking intellectual property and website maintenance. “For instance, if someone isn’t watching, you could lose your domain name,” she says. “This is especially dangerous if you change your ISP (Internet Service Provider), the one which set up your domain name won’t know where you are to remind you when it’s about to expire.

“You also need systems for security, and to back up information. Around 85 percent of the small businesses affected by the 1989 Newcastle earthquake did not go back into business because they had lost too much information. They didn’t have systems in place to back it up off the site.”

Effective systems are detailed and precise, but that doesn’t mean they have to stifle creativity. As your business grows and changes, so should your systems—and who better than the people following the system to help in the refinement process?

“You may start out running your company a certain way, but five people down the track, they will hopefully be doing things better,” says Sarden. “But it is important to decide how these changes are going to be managed.”

“Large organisations will have someone dedicated to updating procedures. Smaller businesses might give the job to someone in admin, or the office manager. You might have a meeting every six or 12 months when everyone has a chance to talk about ideas they’ve had for improving the way things are done, then decide which changes should become part of the system.”

Business System Manual

In the late 1980s, hairdresser Denis McFadden had an idea. He ran a trial promotion for a no-appointment, fixed price haircut, and the response was outstanding. With the concept tested and proven, in 1990 McFadden began franchising under the brand name Just Cuts. Today, there are 129 Just Cuts salons in Australia and 20 in New Zealand. The company’s goal is to have 500 salons worldwide.

According to operations manager, Elizabeth Scheurer, a confidential operations manual lies at the heart of their success. “This covers all of the basic training and general principles driving the business,” she says. “That’s everything from the day-to-day running of the salon and OHS (Occupational Health and Safety) to security and retailing our own products.

“The manual gives us a way of monitoring and assessing how the business is working for our franchisees. It helps them to recruit fully qualified stylists, and to keep them. We find that our hairdressers really appreciate the systems, too—they enjoy working when they know they can deliver. For instance, we have developed a very rigorous greeting and departing system so that customers have that ‘wow’ feeling for the whole time they’re in the salon.

“The beauty of all this for our franchisees is that they buy a business they can work on, rather than in, right from the start. They simply follow the procedures to the letter. That’s also what makes it possible for them to have more than one franchise—it’s easy to put a team leader in position.”

Meticulous in detail, the manual is far from set in stone. “You have to go with the times,” says Scheurer. “We’re constantly evolving, training, asking what are the clients’ needs and wants. We have meetings with franchisees where they share their ideas for improvement. Even if an idea seems way out, we’ll give it a t
rial. If it works, it goes into the manual.”

If systems are good, are more systems better? Not necessarily, says Rana Pala, partner and head of growth services New South Wales with BDO Chartered Accountants and Advisers. BDO specialises in helping businesses to grow. And, to ensure their clients get the right help at the right time, they developed the DIAMOND Model of Business Growth. This describes growth stages as Dreaming, Initiating, Attacking, Maturing, Overhauling, Networking and Diversifying.

Pala believes that too much systemisation at the ‘dreaming’ and ‘initiating’ stages can actually be bad for business. “This is when you need to retain some of the entrepreneurial spirit that got the business started in the first place,” he says. “While systems are important, they need to be developed on a case by case basis and enhanced as the business grows.

“We were recently called in by a management consultancy business that had three stakeholders in three different states, and all were very keen to grow. The problem was that they had all come out of much larger organisations where the systems had been very defined. They copied these exactly right from the start, and this backfired. It was all too anal—the systems became a barrier to growth.”

Richardson agrees that enough is enough. “When you’re thinking about innovation, the prize goes to the person who both produces and manages change,” she says. “In this case, change means systemising to the point where you can enjoy your business, not to be a servant to the system. If you go that far you have missed the whole point of the exercise.”

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