Operations is about getting stuff done.
Simply: it’s everything a business does to keep itself going and earning money. When you’re hoping to scale your business – producing more, earning more, but maintaining efficiency – your operations will need to grow and change to achieve that sustainable increased output.
In this article, I will explore some of the pain points in operations when scaling a business, and how they can be best addressed.
As a lone entrepreneur setting up your own business, you often don’t pay much attention to the structure of your organisation – you focus on getting the job done and earning enough money to keep afloat. And there can be no sense of hierarchy in a business with one member! However, it’s likely that this way of running a business seems a distant memory to many of us now.
A business becomes increasingly complex as it grows, with new communication channels, personnel, and systems being added all the time. The only way to keep track of all the aspects of your business, keeping it running efficiently and profitably, is to establish a solid, well-thought-out structure.
You may already have a structure that is working well for your organisation at its current size, but is it optimised to scale with the company? In order to ensure your structure can survive scaling your business, it’s important to implement BPM (business process management). Below, I consider how we can organise our business processes and test them for scalability.
I will also discuss the issue of hierarchy in a business and whether a traditional “top-down” hierarchy has any advantages over a more contemporary “flat” structure in organising the workforce.
Generally, if you ask a company director about the structure of their business, they will answer in terms of function: sales and marketing, operations, HR, finance, etc.
However, I believe that it is more effective to take a BPM approach and divide a business into its three main types of process: core processes, support processes, and management processes.
BPM can help you analyse and optimise these three categories of processes. If you identify a particular process – for example, product delivery – that is weak, you can then work on designing, implementing, and monitoring a more effective process. This will ensure your business processes are able to cope with the increased pressures put on them when scaling the business.
Once you’ve identified your business’s core and support processes, the key is to structure these into business units; each overseen by one manager. This avoids the danger of functional divisions, which can create independent silos – where each silo can forget that it is part of a larger whole and needs to work collaboratively with other teams.
With business units, on the other hand, team members recognise the cross-functional nature of their processes and how they interact with all the others in the business. Effective communication between the different units will help ensure that their processes join together smoothly, contributing to the smooth running of the company as a whole.
Hierarchies have become somewhat unfashionable in our egalitarian 21st century society, and ever more businesses are turning to a “flat” structure for the workforce. Evidence in favour of an egalitarian approach includes a study carried out by Stanford University, which found that non-hierarchical teams collaborated better, while hierarchical teams had problems with infighting.
Nonetheless, hierarchies do still provide some distinct advantages for businesses – when handled correctly. Mark Templeton (quoted in Forbes) warns: “…that’s where a lot of organizations go off track, confusing respect and hierarchy, and thinking that low on hierarchy means low respect; high on the hierarchy means high respect.”
As long as employees are respected and valued at every level, a business can benefit from a well-defined hierarchy where: it’s clear who’s responsible for what task, creating more efficient processes; there’s a clear promotional pathway to motivate each member of the workforce; and employees are given as much decision-making power as they can realistically cope with at their level.
A well-organised business can face the challenge of scaling without chaos breaking out. If you make use of BPM to optimise your essential processes, coordinate business units to take charge of those processes, and employ respect and wisdom in ordering your business hierarchy, you should be able to scale with confidence.
When you first start up a business you can get away with a certain amount of disorganisation. Indeed, a creative spontaneous approach – not bogged down by too many rules – can be just what a fledgling business requires to get it going.
In contrast, with an established company we must be more methodical if we are to ensure reliable operations. Documenting processes, defining a way of working, and setting clear goals are absolutely necessary; otherwise we risk disappointing the customer and jeopardising our business reputation.
In the following section I’ll share five important principles for improving the reliability of your operations.
As a business leader, it’s your job to help get processes up and running, while delegating the finer details of service delivery to those in charge of these specific roles. Your eye should always be on the desired outcome of the process, rather than exactly how it should be achieved.
It’s crucial to bear in mind this emphasis on outcome when you are building documentation to support reliable, consistent operations. As technology is constantly changing, the step-by-step processes used in your operations are liable to change – but the desired outcome remains the same.
If you clearly document what each process needs to achieve, your team members with the required expertise can update them as necessary. The customer will still receive the same high-quality product.
You won’t know the impact of any operational decisions you make, unless you institute a practice of measuring it. The tiniest changes can have a disproportionately large effect on efficiency, customer satisfaction, or the perception of your brand.
Here’s a true story. Some years ago I used to manage training centres with 500 attendees per day. Each person gave us feedback, and this provided enough data for a quantifiable average score for each centre. Watching how these scores changed after certain operational decisions were made gave us a good idea of the impact of those decisions.
For example, one day we identified a potential cost-saving opportunity: removing luxury toiletries, which we didn’t feel were appreciated by the centre attendees. We removed the toiletries from one centre as a test – and suddenly the quality score of the centre went down. It turned out that the presence of the toiletries conveyed a sense of quality that was noticed by the attendees, even if they weren’t using the products. By measuring the outcome of our operational decision, we were able to understand more about our customers and continue to provide the experience they were looking for.
You could consider appointing an “Operations Reliability Champion” (or more than one, depending on the size of your business). This is an employee closely acquainted with a particular aspect of your business operations, who is responsible for optimising its reliability.
An ORC is particularly useful if your business uses mechanical equipment or automated processes, especially when these operations take place in a different location to the head office. The ORC can ensure that operations reliability is monitored in line with company policy, and that standards are maintained.
While responsibility for implementing and reviewing SOPs is usually delegated to individual Operations Supervisors or Managers, as the overall leader of the business you should make sure best practice is being followed in this regard. Regularly-updated SOPs will not only improve the reliability of the process but will also make sure that relevant legislation is adhered to and employee wellbeing is safeguarded.
Advanced predictive maintenance (PdM) software, and other digital tools, is increasingly used by businesses looking to improve their operational reliability as they expand. It’s a good idea to seek expert advice to find out the advantages and disadvantages of such technologies, and how they might work for your specific set of business operations.
Use the term “outsourcing” in conversation with a business leader and it’s likely to provoke a worried response. They immediately think of worst case scenarios such as “missed deadlines” and “reduced quality”. When we’ve built up a business from scratch, it can be hard to stomach the idea of entrusting operations to another company.
Nonetheless, if you want to scale your business it may be that certain operations cannot be expanded in a cost-effective manner if you keep them in-house. And if you have to expend a large amount of extra money or resources to achieve growth, your business is simply not scalable. Responsible outsourcing could achieve the results you need.
Let’s take a look at two aspects of operations that could, potentially, be outsourced:
This is a matter of choosing between outsourcing and hiring internally. As always, there are advantages and disadvantages to both options. Some back-office capabilities you might consider outsourcing are:
Letting another company take care of these tasks will free up your management team to focus their energies on delivering essential products or services for the customer. Outsourcing a particular role could also be much more cost-effective than hiring a new employee, with all the responsibilities that entails. Furthermore, external providers have superior skills, infrastructure, and support within their own organisations and networks, which could all benefit you when you make use of their services.
When a business is very small, it might make sense to outsource, for example, accounting to another firm, but as you grow you might find it more of an advantage to have your own in-house accounting team. You would have more direct oversight of their work and they would feel more invested in the success of the company.
It’s also a good idea to keep core (customer-facing) processes in-house, so you can ensure the customer is receiving the high-quality service you intend the business to provide. In addition, building HR capabilities internally will allow you to nurture a strong team with a clear sense of your company culture.
There is generally more at stake when you outsource work that directly affects the customer. If that work is carried out in your name, despite it being undertaken by a different business, the customer will judge your company based on the results. Thus, this type of outsourcing must be handled with great care, using trusted partners who understand the customer and their goals. This kind of activity is often white-labelled with strategic guidance from your team.
If your business is expanding rapidly, outsourcing work for the client could remove a burden from your core team, while they get to grips with procedural changes related to the business growth. This situation might be temporary, to smooth the transition during the expansion period; alternatively, it could be part of your long-term structural plan.
Regardless of whether this outsourcing is temporary or long-term, the process of transferring responsibility to an external service provider should never be rushed. It’s essential to exercise due diligence, even when outsourcing relatively low-value tasks. This will safeguard your company’s reputation and help you achieve consistent customer satisfaction.
Partnerships are valuable when scaling a business. Forbes contributor Tamara Schwarting asserts: “Creating a company that sustains the test of time requires a network of allies, advisors, and partners. Learning to select the right partners and, in turn, trusting them is vital for success.”
Of course, you will have been involved in plenty of different partnerships during your career. Service swaps, lead referrals, and perhaps others. For the purposes of this discussion, I am referring to working with another company as a result of complementary value in the marketplace. Essentially: as partners you are selling each other’s products or services.
Let’s say you manufacture and sell crafted wooden doors. Your customers might be interested in custom steel door-handles. You don’t have the infrastructure to build them, so it makes sense to partner with a custom steel door-handle manufacturer.
Perhaps you can sell each other’s products directly, form a network of merchants, or partner to combine advertising or marketing budgets. Naturally, the nature of this deal depends on many factors – but the key is to search for win-win scenarios.
So what factors contribute to a positive business partnership?
Trust and friendship: Ideally you should have a good personal relationship with your business partner; if you like, respect, and trust them as a person then it will be much easier to work with them.
Partnership agreements: Don’t be blinded by initial enthusiasm – you must allow for the possibility that the partnership will not work out, and a partnership agreement will protect both partners and their businesses in that situation.
Consideration of your clients: When thinking about entering a new partnership, consider how the arrangement would benefit your clients or customers. What new product or service could you offer them as a result of the partnership?
Complementary strengths: As we saw in the door example above, your partner should fill a gap or solve a weakness in your current business offer, and vice versa.
Good communication: Partners should commit to regular communication each week and be willing to talk about all aspects of their businesses, even if that sometimes involves difficult conversations.
Shared values: Particularly if you are looking for a long-term partnership, it’s important that the core values and aims of your business should be consistent with those of your partner’s business. This will help to avoid conflict further down the line.
Good partnerships could be essential to scaling your business, allowing you to develop it in ways that might never have been possible alone. A strong sense of collaboration is key: you are no longer rivals fighting for survival in the market; instead each business’s successes will benefit the other.
As you grow, the supply chain will also change. You might be ordering extra goods from a particular supplier, or you might be working with different suppliers. When you get a big order, you need to be sure that you can deliver it.
A trustworthy supply chain is essential, as Logistics service providers understand: “Supply chain reliability is essential in implementing an operative supply chain management strategy since it enhances productivity and cuts costs.” If you can’t get the raw materials to make your products, or if the products you sell aren’t delivered on time, you’ll be looking at disappointed customers.
When managing a supply chain, it’s clearly important to choose suppliers with a good record for reliability, whom you can depend on to meet your requirements. However, the ball is not only in the supplier’s court: they can only provide their service effectively if your own operations processes are in order.
Here are my top recommendations for effective supply chain management:
Make sure you develop and maintain positive relationships with your suppliers. Communicate regularly, establish your requirements clearly, and avoid constantly changing your order at the last minute. Neglect to invest in a good relationship and you risk losing the supplier, jeopardising your supply chain.
It’s also crucial to train your management team appropriately so they understand the processes and technologies involved in the supply chain, and make decisions accordingly. Good interdepartmental communication between, for example, procurement, manufacturing, and logistics departments will help keep the supply chain running smoothly.
Businesses will be best prepared to cope with vacillations in demand for products if they continually fine-tune operations, developing methods to predict demand and plan alterations to the supply chain in advance. You could also seek to optimise your product designs so that products can be made with alternative parts or materials if one supply line fails.
The key is to constantly look ahead and be prepared for multiple eventualities.
New digital technologies are available to help you manage your inventory and predict demand and risk, leading to a reliable supply chain. For example, cloud collaboration tools allow you to manage all the processes, decisions, and people involved in producing a product through its entire lifecycle. Making use of some of these tools has the potential to greatly increase your operational efficiency and improve the service you provide to the customer.
When planning to scale your business, remember that your supply chain has to grow with you. Your big ideas need to be complemented by solid planning: can my existing supply chains cope with increased demand? If not, how can I find and integrate new suppliers with the minimum amount of disruption to my customers? These are questions that need answers early on in any business growth planning process.
A business is inseparable from its operations: if the operations are working smoothly and effectively the business should thrive; if they are badly organised and inconsistent it might not survive. Scaling your business requires a fresh look at the business operations to make sure they can take the strain of growth.
A well-ordered structure and hierarchy, operational reliability, effective outsourcing, strong partnerships, and a smooth supply chain are all good indications that your business is well prepared for scaling. A practice of regularly measuring and monitoring how your operations are running will help the business achieve success through this expansion period and long beyond.
MD2MD will help you grow and develop as a business leader. Get in touch today to request a guest invite to an MD2MD meeting in your area.