The best companies achieve success through consistency, which is why they build business value through systemized internal operations, says Bob O’Hara.
File this under the “so basic it’s often overlooked category,” but a common denominator of top companies lies in their ability to perform tasks in the same way, every day. In other words they systemize each and every internal operation and in so doing build a business that enjoys success today and also develops the core value qualities that potential future buyers will find appealing.
To some business owners, the number of operations that can be classified as internal may seem mind-boggling; management can become overwhelmed and fail to address any at all. But having systemized internal operations in place is not as daunting as it appears; in fact, by breaking it apart and taking a step-by-step approach you can stabilize your business, and build its value for the future.
It’s all about consistency for the “best of the best” companies and consistency is the exact definition of a business system—a repeatable process that is understood throughout the organization and used to achieve a desired purpose. That desired purpose is to create a successful business that functions to highest performance both today and tomorrow…and independently of who is running it.
The philosophy of systemized internal operations is basic—a grouping of various systems that when integrated form a business that functions successfully as a whole. To go the distance, these systems must be vetted. Quick-fix solutions to problems may work once or even twice, but in the absence of a tried and true system, the same problems will rear their ugly heads time and again.
In order for a business system to operate successfully, it must possess four prime characteristics:
1. Clear purpose: Define the desired result, such as marketing, sales or lead generation—and this cannot be overemphasized—communicate your systems intentions to employees. Systems may run a business, but people run the systems.
2. Accountability: Determine who within your organization will be responsible for executing each step of the system; this determination should be based not only on individual abilities, but also on where those skills will be put to best use. The end result should be employees who find satisfaction in performing their duties.
3. Documentation: A system must be written down if it is to succeed; otherwise it may become nebulous in the minds of employees and open to an endless variety of interpretations. If it’s not “on paper”, employees can’t be expected to follow a system, nor will a future buyer know it actually exists.
4. Repeatability: If a business system works only if the business owner is there to execute it, the standard of repeatability has not been achieved. Some owners may need to remind themselves that they have created a business, not a job for themselves.
To illustrate how best to achieve systemized internal operations, let’s focus on a couple of specific areas—creating systems to collect/use customer feedback and to diversify vendor and supplier relationships.
Customer feedback is pivotal to the success of a business; in the absence of an internal system that collects and uses it appropriately, you may be in the dark about what customers like and/or dislike about your organization.
How customer complaints are addressed can speak volumes about your company. Is there a well-thought out protocol or are complaints responded to on a case-by-case basis? Let’s not be disingenuous; it is well understood that at times certain customers will be higher on your priority list than others, based on the overall percentage of revenue they may bring to your organization, their willingness to recommend your services to others or any number of other legitimate reasons.
That said, praise or criticism (whether from your largest or smallest account) should be addressed consistently and instantly. Do not overlook the age of instant communication in which we live. Should a customer have a problem that is not swiftly addressed by your team, his vitriol could go viral!
This underscores the importance of having an internal system in place that directly speaks to customer complaints or concerns. Keep in mind, if your company uses customer feedback effectively, it can create competitive advantage. If not, your organization may be pulled in too many directions, causing you and your entire team to lose focus. Strategic use of customers’ ideas, suggestions, requests and expectations generates and builds strength, stability and inherent value in your business.
Creating a system to diversify vendor and supplier relationships is also at the heart of a successful business operation. Can you name the vendors or suppliers who are essential to your ability to provide your most important products or services? If one or more of your primary vendors or suppliers switches its relationship from you to a competitor, goes out of business, changes its payment requirements, alters its quality standards or ceases to offer the products or services that your business depends on, would your company experience either a short-term or long-term negative impact? Do you have a plan to mitigate that impact? A business can be stabilized and its value built by reducing the risk associated with unpredictable vendors and suppliers.
If you’re unsure whether installing these systems within your company is worth the time or effort, then consider the view from the perspective of a future buyer. If he/she compares your company to another that actively and consistently uses internal systems, chances are that the competing company will be purchased…and likely at a higher price.
A company owner may have creatively and effectively built a business with intuition and intelligence, but should he/she be out of the picture once a buyer takes over the reins, that long road toward prosperity may stop short. However, a company that relies on systems that are written and communicated clearly, are adhered to by all employees, produce consistent results and will be in place long after the owner departs has the legs to go the distance.
Systemizing internal operations is a critical value driver. As a business owner, creating systems that work for your company should be the foundation of each and every day. If not, your company may never achieve the success it’s capable of…and you will work much harder and longer than you wish.
Bob O’Hara is president/CEO of O’Hara & Company, founded in 1995 to address the growing need for entrepreneurs to create a comprehensive exit strategy for their businesses. Based in Chelmsford, Massachusetts, the company hosts an educational website for business owners at www.exitplanning-edu.com. See also www.oharaco.com.