Build a Business Operating System for Your Company
Want to increase your business's chance of being sold? Franchises are much more likely to survive than any other type of business, so here is what you can learn from them.
This article outlines how franchises have an superior rate of success compared to other Canadian businesses. Franchisers provide their franchisees with three advantages that most entrepreneurs do not have:
- An established business system
- A profitable plan
Of these three advantages, the critical differentiator is the established business system, what I call a Business Operating System.
The news is filled with stories of Canadian companies going out of business or reducing their workforces significantly. However, you might be hard pressed to find a Tim Horton's, McDonalds, Subway or any other franchise who has closed one of its locations in your neighborhood. So, what can we learn from the successes of the franchise business?
Business Operating System
A Business Operating System (BOS) is your company's unique way of doing things. It provides all of the minute details for — how it operates, goes to market, produces and deals with its customers. An effective BOS transcends the people who are doing and managing the work, and is more valuable as a result.
A business that effectively operates without you is always more attractive to perspective buyers.
In order to create an effective BOS it is key to view your product as the business itself rather than the commodity/service you produce.
This paradigm enables the business owner to think of the company as a model for a hundred others just like it. For example, McDonald's commodity - hamburgers and fries--are not claimed to be the best. However, McDonald's product--its business operating system--is undoubtedly one of the best.
Although many companies spend the time and resources needed to create their BOS, they are disappointed with the results. This is because the components of a BOS are held together by The 'G Element'. The G Element is the same thing that sets great companies apart from their competition.
I am often asked, "How do Canadian Tire and Canada Goose achieve outstanding results and create such a great place to work?" A closer inspection reveals that their success is less about incredibly innovative management practices and all about The G Element — discipline.
Great companies create and reinforce a rigorous discipline about the little things that affect their customers, employees and shareholders. They have instilled a discipline in their business (via a BOS) and reinforced discipline at a personal level (via their cultures). Personal and organizational discipline help breathe life into your BOS and enable you to sustain it over time, making it the way you do business rather than just a set of hollow procedures.
Components of Your Business Operating System
It is important to create each BOS component to be scalable, up or down, for future growth or contraction. The components are interrelated as with any living system. Therefore, the successful leaders address all components and understand how they affect each other.
A description of the five components is presented in priority order for effectively creating your BOS.
Lagging work processes are the most common risk element for growing companies, and are the first thing that will doom a company in tough economic times. In addition to traditional work processes, we include other processes like communication, decision-making and conflict resolution. It is easy to say, "We need a new system". However, effective business owners have the discipline to resist the illusion that a new system will solve their problems.
Streamline your manual processes before changing technical systems. Companies who jump into a new system typically automate their own inefficiencies. This is why Processes should be the first BOS component you create.
Effective processes are:
Supported by tools
This component addresses hard and soft systems including: technology, financial, marketing, operations and people. A hard people system is your payroll and human resources information system, whereas soft people systems include performance management, selection, compensation and development systems.
Well-designed and applied systems create predictable customer and employee experiences and also enhance your operational efficiency.
Defining clear roles is a big challenge that requires significant personal discipline. You should write a job description (even if a brief one) for all roles within your desired BOS. Remember to focus on the role itself, not the person. At the early stages of your BOS, one person may play multiple roles. By creating the roles first, you acknowledge this. As your company changes, predefined roles will enable you to make more effective decisions about which roles an employee should continue or discontinue doing and who you should add/delete from the payroll to effectively implement this change.
Resist jumping to the structure component when defining roles--again this requires personal discipline. This step is about defining the required roles to accomplish your company's mission, not how those roles relate to each other.
Once you have defined the roles that your business requires, you can match the necessary skills to each role. Effective processes and systems will ensure the highest and best use of your capabilities. Your systems and processes should be created for the lowest common denominator so they are not people-dependent.
When you fill your roles, it is important to match the role requirements with the employee's skills and natural style. Matching the role with the employee's natural style is most important. This can be achieved by a simple style assessment and helps the employee be successful. We can most likely all remember a time when we were in a role for which we were not ideally suited, resulting in greater stress and lower productivity than we (and the company) would prefer.
The key to an effective organizational structure is to design it before you need it. It takes great discipline for business owners to design the other four BOS components before they design their organizational structure. In fact, experimenting with structure is one of the great executive past-times. Unfortunately, this experimenting typically ignores the other, more substantial components.
Structure dictates process. That's why I have outlined the sequence of BOS components in this order. If you create a structure first, your business process will be constrained by your structure and may not reflect the needs of your business and customers. Defining your processes and systems first as described — results in an company structure that supports the way you do business rather than constraining it.
Winston Churchill said, "For the first 25 years of my life I wanted freedom. For the next 25 years I wanted order. For the next 25 years I realized that order is freedom". Your BOS will provide you and your business the order and freedom to work on your business rather than in it.
Although I suggest a particular sequence for creating your BOS, most companies have naturally created one or more of the five components. Since each component may be developed at different levels, it is helpful to prioritize the readiness of each component.
Create a Business That Can Thrive Without You
You have worked hard to build your business and make it what it is today. It is essential to seek professional advice and support to maximize your return when you sell your business.
Author - Joe Griffith
I've been consulting with clients since the 90's in various capacities. I launched my first start-up when I was 25. I've built and sold 4 start-ups since then. It's only been in the last 8 years that I've been developing systems and procedures that accelerate growth.