Managing For Failure The Infection of Procedure, Process and Structure in Small Business

Development and implementation of process, procedure and structure is indeed an epidemic if not an obsession within the small business community. However, the process may very well strip a small company of its most valuable assets; entrepreneurial spirit and creativity, rapid time to market, swiftness in adjusting to market trends, cash (development and implementation is an expensive endeavor) and the ability to attract and retain the creative souls who are the very heart of small business.

While these Three Musketeers are a necessity in larger organizations where structural entropy rules the day, they are a ball and chain around the neck of the cash poor entrepreneur who needs to be quick on foot and swift to market.

To be successful small companies must use strategy, not structure to power their operations. It is the understanding of the power of strategy that is the difference between a technician and a true entrepreneur.

To be competitive small business, by necessity, starts out as a learn machine with a passion for solving customer problems and doing it better, cheaper or faster than their larger competitors. As the enterprise grows the founder recognizes weaknesses in the organization are taking a toll on customer satisfaction, profitability, company growth and cash flow. To solve the problem the decision is often to move the company directly from the technician stage, (where the owner owns his job) into the structured stage of business where procedure, process and structure are thought to be the answer to everything ailing the business. It is this leap from the technician stage directly to the structured stage (missing the strategic stage altogether) that keeps small companies small.

Successful entrepreneurs know that to be successful they must utilize processes and procedures to get things done, but only at an elementary level where certain principles and concepts are important to maintain order, such as cut off times for shipping, meeting delivery schedules and so on.

The Value of Strategy in Small Business

If structure goes before strategy, you will be dealing with a complex set of processes, procedures and policies that are created to address symptoms of the real problem. Strategy solves problems at the highest level, or the generic level because it addresses the real issues, when a symptom arises it shows up as just that, a symptom, and the strategy has already been established to deal with it, so it is not an issue.

When structure goes before strategy decisions are made based upon analysis of symptoms instead of getting at the real problem, or as Peter Drucker puts it, the generic problem. When my wife Theresa and I dated we argued about how we would discipline our children after we were married. However, discipline itself was not the real issue, in child rearing the real problem is how to discipline and for what. So we needed to establish a strategy, a set of guidelines, which would give us direction in our parenting roles. Once the guidelines were in place, (the strategy) we had a means of deciding what type of punishment was needed for the seriousness of the offence. We decided that when a child said no to us, it was direct defiance and was met harshly, and consistently. Mistakes such as spilling milk were not punishable but we to be dealt with through training. Poor judgment was to be dealt with through natural consequence. There you have it, our discipline strategy for raising our children, (I wish it were really that easy.)

Small companies need a focus on doing the right things

Undoubtedly the most dangerous effect the jump from strategy to procedure has is that it takes the companies focus off of producing results for its customers and puts it on becoming highly effective at operations. Small companies must have a strong external focus on customer results, which comes by way of the strategic business planning process, not structure. In other words, structure focuses attention on “doing things right” when the company should be focused on strategy, which is all about “doing the right things.” Doing things right is a necessity, but it is doing the right things that produce results for both your customers and your company.

Small companies draw the wrong type of people for the structured stage

There are several reasons why people are drawn to the companies they work at; 1) Creative people are driven to follow their passion, not policy; 2) The creative entrepreneurial types will not operate well in an environment of policy and procedure; in fact they often fight it because the structured stage tends to develop followers, not leaders; 3) People who have the types of skills and personal discipline to develop and execute policy and procedure don’t typically work for small companies; 4) A highly structured company without a strategic prospective drains drive and passion from the creative types when these types are what you need to empower the growth of a small company.

Small companies do not have the extensive capital resources for the structured stage

The nature of the structured stage is that it requires a higher level of disciplined people to execute properly in the more complex startups. The exceptions of course are franchises and businesses, which by the nature of their product require highly structured operating procedures and policies to be profitable, such as fast food and lube and oil businesses. These are the exception and not the norm .

Development of policy and procedure typically begins with the utilization of specialized outside consultants and the addition of expensive specialized staffing to develop it, maintain it and implement it. This process is not only expensive but it drains scarce capital resources out of the company when it needs it most.

If we had not set the strategy ahead of time, raising our children would have been a frustrating process of decision after decision, punctuated with disagreements along the way because we never established a sound set of guidelines for dealing with the problems ahead of time. Process, procedure and structure would have been worthless in addressing the larger issues; every decision would have to come in the context of addressing the symptoms rather than the real issues.

Strategy Leverages the Chief Executives Motivating Factors

A motivating factor is a reference to the factors motivating someone to do something; it describes why people do things. When it comes to building a business, it is very important that the motivating factors of the owner or entrepreneur are built into the very heart of the business. This is done through the development of a strategic objective that acts as a guideline in the development of a strategic business plan. When the strategic objective is established ahead of time, along with the other important strategies developed in strategic business planning, the business has a set of high-level guidelines, which guide its operations and growth while assuring you are working on the right things.

Strategic business planning must replace the technician stage and come before the structured stage if you are to take advantage of the benefits of organic growth and gravity marketing processes inherent in a strategically run business. Properly developed and implemented strategic planning will fuel a small business with entrepreneurial drive, adjust the company to a customer focus, encourage creative thinking, attract entrepreneurial talent, preserve precious working capital, leverage the Chief Executives passions (motivating factors) and most importantly strategic thinking establishes a culture of high level decision making and assures the entire company is about doing the right things, not just doing them right.

If you are in the technician stage or have ventured down the path of highly developing your businesses systems by developing complex structures, policies and procedures, the thesis offered in this paper will ring true as you evaluate your current business development process. The only way to get on the right track is to begin doing the right things; the only way to know what the right things are is to begin a strategic business planning process.

If this type of planning is one of your personal strengths you should already be operating under a strategic plan, if not, begin development of your strategic plan today with the help of a qualified collaborative business advisor or consultant. The strategic planning process usually takes a period of six to nine months to develop and implement; it is educational, encouraging, well received by employees and relatively inexpensive. The costs can be spread over the entire project and require about fifteen to twenty hours a month. There is not a piece of equipment, a person or a computer system more critical to your success than a well thought out strategic plan.

Remember, if you do not know what the right things are to be working on, you and many of the people who work for you are most likely doing lots of the wrong things, they are most likely being done very well, but they are still very expensive wrong things, which will keep you in a hold pattern within the technician stage.

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1 As an organization increases in size and complexity, it tends towards disorganization as the amount of energy required to maintain equilibrium increases. See wikibooks.org/wiki/Systems_Theory/Entropy

2 For the purposes of this paper a small company is defined as a 75 million dollar a year or smaller business.

3 In these types of operations entrepreneurs have gone through the strategy stage long before the doors are even opened.