Scaling and the 3 Pillars of Execution Capability – Part 2 – Process.
Last week I introduced the topic of creating execution capability for businesses what want to scale. I talked about how people are one of the 3 critical ingredients needed to scale a business and I introduced some ideas about developing roles and responsibilities, effective recruiting of employees, and leadership and management styles that work. This week, I will be talking about building effective processes in your business.
Process is all about defining and refining how tasks are carried out in your business. Frequently, processes simply evolve over time and you may hear people claim they carry out a task in a particular way, simply because they always did it that way. This is not good enough if you want to scale your business.
From a purely practical point of view, how does one define and refine business processes? Well the place to start might involve making it someone’s responsibility in each functional area of your business to document every process in that function. So if you have a traditional company structure with, functions for Human Resources, Finance, Operations, Sales, Marketing, Administration – then you should have a defined lists of processes that reflect every activity in each of these areas.
For example, in the HR function, you will probably identify processes for the following activities:
- Sick Leave
- Performance Management
- Disciplinary Action
This is just a sample and there may be many more processes in your own HR function. Continue this documenting of processes in each of the other functional areas of your business until you are sure you have captured every task carried out right across your business. If there is nobody in your business who can do this for you, you can always get outside help from a business consultant.
Different organizations favor different ways of capturing their processes. My own preference is to use a visual workflow format. A simple way to start documenting processes in workflow maps is to use Microsoft Visio, which allows you to easily capture existing processes in a visual way, where each step in every process can be quickly examined, discussed, revised and refined. Here is a sample of a workflow map that deals with how the credit control function works in a sample business.
Unlike a linear process captured in a Word document over several pages, you can instantly see the value in crafting a visual workflow of the entire process on a single page. Every activity and every action/decision point is obvious. This makes it easy to spot redundant or repetitive tasks that are unnecessary and to change the way you work.
Let’s now move on from the practical application of creating business processes and focus on the high level reasons for developing them.
If your business is to scale successfully, it firstly needs to be predictable, repeatable and replenish-able. So what does this mean? In simple terms, your inputs need to deliver outputs that are consistent every time. The business model and all of the processes should be capable of replication in other geographic locations and the inputs should generate the same results. The business model and processes should be flexible enough to allow refinements to be made that allow for improved results, without damaging the core model.
Secondly, the business execution and the underlying processes should be capable of being delegated, automated and outsourced. This means that you cannot scale if your execution is tied to specific individuals that are critical to your success, including you. As a business owner, you must be able to delegate responsibilities, activities and processes and to step out of the business without it having any material impact on the results. You need to be able to automate repetitive tasks to create efficiencies and deliver consistent results, particularly profit. And, you must be able to outsource activities that do not add value to the bottom line.
Needless to say, profit should be growing at a faster rate than the growth in expenses/costs as you scale the business. You can delve into a little more detail on the steps to scaling a business in another of my blog articles http://growthoracle.com/how-to-help-entrepreneurial-businesses-to-scale/.
Building effective business processes starts with an examination of your processes and the identification of the value added activities in your business that sets you above the competition. It means also identifying the activities that do not create value or which may be redundant. It demands that you learn to do things efficiently and effectively. I talk about a dozen of the right processes that can make a difference to a business, in the process section of the following article and it might be worth taking the time to look at it. http://growthoracle.com/your-clients-have-they-got-the-right-stuff/. I call this the “right stuff”.
Some areas where you need the right stuff include the following:
- Right Strategy
- Right Capital Structure
- Right Financing Partners
- Right Execution
- Right Design
- Right Manufacturing Processes
- Right Products
- Right Marketing
- Right Policies & Procedures
- Evolving Best Practices, Standards & Tools
- Right Sales Force doing the Right Things
- Reaching the Right Customers in the Right Way at the Right Cost
- Delivering the Right Value
In simple terms, you might look at your business as if you intended to franchise it out to investors that would like to replicate your brand, your know-how and your business processes. To be able to do this, you firstly need to document every aspect of the business. This is preferably done in a workflow format that makes it easy for people to understand, to follow and to replicate. Visual workflows make it easier to identify redundant steps as well as to see where value is created.
Venre Harnish, author of Mastering The Rockefeller Habits, suggests that there are between 4 and 9 key processes that define and drive every business. These are different for individual businesses but it is incumbent on you to identify what they are for your own business. It is likely that they are the processes that deliver sustainable competitive advantage. Being sustainable, it must be difficult or impossible for competitors or new entrants to replicate them.
A copy of Verne Harnish’s Process Accountability Chart © is shown below. It prompts you to identify your key processes, whom in your organization is accountable for each one, and a Key Performance Indicator is assigned to reflect the impact of the process – Better Faster or Cheaper.
This concludes the discussion on Process. Once you have built the 3 pillars to support your business, you are only then in a position to attempt to seriously scale it. The third installment in this blog series will deal with Infrastructure, and will be published next week.