Before your business can expand to multiple locations, you need to automate how it runs by establishing a department chart, KPIs and training manuals.
- The reward of entrepreneurship is freedom in time and decision-making, but if your business is not automated, you are an obligate full-time employee with little freedom.
- To be independent of your business, you must break down its processes to ensure the quality of its operations.
- You need a department chart, training manuals and key performance indicators as a bare minimum to automate your business.
You take on significant risks to start your business. The reward for these risks, in theory, is that you will have more freedom. However, when you set up a business as a hands-on system, you make yourself an obligate full-time employee within your organization. This obstacle comes in the way of the freedom you deserve. In this article, I will break down how you can automate a small to midsize business.
The essential components of an automated system
You automate a business by structuring it into a system where, through the help of compartmentalized training material, anyone can do anyone else's job (within reason). A great example of this is McDonald's, which is perhaps the first automated fast-food business. Ray Kroc systemized it to franchise the restaurant.
Here lies the key to systemizing your business. First, you must see if a business franchise exists within your industry. If there exists a franchise within its market, it is possible to systemize the business. The next step is to find out which management consultancy or franchising service worked on the project. If you hire the same agency, your business will be automated in no time because the experts already have the components of the system down.
What are these components that I speak of, you may be wondering? A system consists of the following components:
- A department chart – defines the chain of command and feedback.
- Key performance indicators (KPIs) – to benchmark and track the performance of every employee/department.
- Training manuals – break down every task down to a predictable, consistent system.
Why do you need a department chart?
"Who does the sales girl report to?" I asked the business owner I was working with. "Me," he replied calmly. "Wait, you have a sales manager," I couldn't understand. "Yea, she reports to the manager too." "And who does the manager report to?" I asked. "To me."
I have come across many businesses like this. The owner directly commands employees on all levels and has managers in place who are redundant. The managers report to him, but so do their subordinates. In other words, it's just a vague ball of organizational failure, and the only redeeming quality of this system is that it gives the owner an illusion of control.
The truth is that a system built for control is not ready for expansion, and what the owner has is control of a dwindling kingdom. The destiny of such a business is to be overtaken by upstarts and newcomers in the industry. A company with a strict department chart can beat a competing business five years senior to it.
How much control does an owner have if he cannot control the fact that his business is destined to buckle on its organization?
A department chart establishes the role of each department and the reporting chain of each employee. The owner is not involved in doing multiple managerial jobs full-time. Getting this right is pretty much the single most significant contributor to automating. But, of course, it is not easy to let go like that.
I came up with a mental exercise that can help you. To commit to an organization chart, start thinking of your business as the 20th branch of your business. This perspective shift makes you focus and organize in a way that leaves you room to run a company 20 times the size of your current one.
How pettily attached to each branch would you be if you had 20 branches? Run this mental exercise of picturing your business at 20 times its current size. Would you want just to be running around all day listening to every employee if your workforce was 20 times its current size? Exactly. So the system you would want in place then is what you have to map out now. This approach is how you must build your organization's department chart, and under no circumstances must you undermine this strategy. Surprise checks are all a business owner needs to account for possible corruption. Key performance indicators also help shed light on which failures are due to corruption and which ones due to incompetence.
Why do you need key performance indicators?
Our neighbor's kid, let's call him Ahmed, had weight issues. His doctor recommended exercise, so his dad enrolled him in the local sports camp. Ahmed's dad told him that what was important in his matches was that he ran and got his exercise. This Ahmed understood.
In his first game, he got picked by the blue team. The blue team was very excited to have him and thought of him as an asset. The game began, and the green team gave the blue boys a tough time. When all was said and done, the blue team had lost the game. But Ahmed was happy that he gave his best performance. On his way out, the captain called him.
"Hey Ahmed, what was that?" he looked mad. "I did great. I ran a lot! I covered the whole field," Ahmed replied. "But Ahmed, my brother, you were the goalkeeper!"
Similar is the case with too many businesses. Employees are busy and are executing tasks without precise results to measure performance. Keeping goals vague allows for ineffective employees to stay within the organization. This misjudgment fuels the owner's need to be watchful on every level and keeps the business from ever getting automated. HR must reverse engineer, by breaking down tasks, from an overall end goal for each position. Sample KPI sheets are readily available online for standard jobs, so there is no excuse for a strict KPI table not to be in place for every position.
Finally, if someone falls short on his or her KPIs, there is no solution but to fire the individual. Owners who make excuses or lower targets for employees they like are using their own time and money to sabotage their own business. Moreover, they are teaching other employees that it is okay to slack since no real consequence exists. Once other employees start believing that it is optional to meet standards, they will not meet their KPIs. A non-negotiable must be a non-negotiable all around.
Enough times have I heard owners say things like, "But he has been with me for five years" and, "He is very loyal, though." It turns out; loyalty is not a replacement for competence, and employees who are ineffective at their jobs might try to use loyalty and relationships to redeem themselves.
This orientation is toxic to the business as it sends out the message that friendships and feelings are an acceptable alternative to performance. The organizational model then shifts towards everyone trying to be likable to the boss instead of useful to the business. Once the company starts operating at a loss, and the boss is unable to meet the payroll, he realizes that all the loyal people are shopping around for new jobs. Just like your employees would not work for you in the absence of payment, you should not have them employed in the absence of performance. It is that simple.
Why do you need training manuals?
The final component of automating the business is training material. Manuals and videos are created for positions and arranged by departments. Every post on the organization's chart must have a corresponding training manual.
You must experience systemized performance before setting forth on your material building journey.
- When you order a coffee at Starbucks, notice how they process the order.
- When you stay at a hotel, look at how they arrange the bedsheets.
- When you sit in a plane, look at the emergency landing presentation they give.
These are examples of performance dictated by manuals. What is worth noticing is the consistency in the level of detail. The manuals capture, in the highest resolution, the operating protocols for client-facing roles. Nothing is left for the employees to figure out. There is nothing too obvious to be written down. Whatever one can put into the manual is put into the manual. Then the manual is given a test-run by having someone with zero prior knowledge independently study it and give a performance. If a newcomer can execute the job by independently learning from the manual, then you are good to go.
It worth noting that manuals must be created for every employee, even managers at the highest level. Manuals are not just for entry-level employees. I have had managers perform well with manuals, though the kind of manuals required for the higher-level executives are a bit different. You can contact a business consultant with automating expertise to do this for you.
Once you have the system in place, you must allow it to run while you gradually let go of the wheel. Of course, hiring the right person to replace yourself as the director is essential. Your replacement must handle every aspect that does not excite you so that you have freedom from the work that exhausts you. Being able to wake up to only do what excites you is the ultimate reward of automating your business.