Today’s problems were yesterday’s solutions.
Many of the things you do every day in your business, assumptions you make and decisions you evaluate positively, are legacies of the past. You are doing them the way you do because on day one you had a problem you had to solve, and that is how you solved it. They have now become the status quo.
Could you change them? Maybe. Should you change them? That depends. In this first part we are exploring past structures that continue to influence how you do things now and not necessarily for the best, and what you could do to change. In the second part we will explore legacy clients, so stay tuned.
What is a structure?
Are you familiar with the canoe with outrigger in the photo above? This floating structure helped people travel around in the Pacific and colonise New Zealand. It was an ingenious way of maintaining balance in the ocean and it was quite advanced for its time.
It can only support a small number of people travelling through mainly calm waters over small distances. You cannot attach an engine to it as the speed may crack the outrigger. Basically, its structure solved a past problem – navigation – but it has become a current obstacle for faster and better travel.
All small businesses started out as a dugout canoe that worked with just a couple of people onboard. With an outrigger – maybe a new employee or an innovative product – it managed to go quite far away from its origins. But then it stopped, limited by its own structure.
Structures influence the systems you implement, the flow of processes, information and decisions. You can easily become reliant on them without realising what impact they have on the outcomes.
Functions in structures
A classic example of a legacy structure in small businesses is how you currently organise sales, customer service and delivery functions. Usually, in the company’s first years, employees managed the entire process from sales to customer service to delivery, and the flow was organised around the client. As set up by the business owner(s).
This integrated model is very easy to follow when you have a couple of clients and the activity has not been standardised yet. You are not even aware that what you do is ‘customer service’, it is just what you do. Everything is customised and aimed towards keeping the clients happy.
Information flows in structures
Another example of the legacy structure is how the flow of information is organised. The way orders are generated, then fulfilled and invoiced, reflects what worked for you in the past. The way those functions were originally set up tends to stick, shaping your information management.
When the number of clients increases employees start skipping details in their data entry, within your centralised records, in order to speed up the actual client work. As a coping mechanism, they rely on ‘locally’ held details to make sense of what is happening in their area. As a result, you may end up with one of the two undesirable situations: 1) incomplete information about the processes in the company, or 2) overlapping and overly detailed information in different systems (usually spreadsheets) that no one has the energy or the time to pull together.
In either situation proper data analysis is impossible, hampering effective reviews of these processes. Both have a devastating effect on how you calculate your margins per project and per account. In fact, in most companies we found that managers were unable to calculate these, but relied on estimates, and usually generalised ones.
People in structures
Finally, legacy structures usually require adding people at the bottom rather than at the top. There is an implicit seniority-based promotion. Owners feel they must reward the loyalty of the people who took the risk with them at the beginning by putting them in positions of management when possible. Some businesses consequently grow like pyramids of weaknesses in which the top tells the bottom what to do, but the top has not changed or learned anything new in the meantime.
This problem usually goes hand in hand with a one-person decision management. There is no team structure at the top and no specific responsibilities for functions.
What is your business structure?
First, do you actually have a structure that makes sense and that you could explain with a strong rationale, or are you relying on ‘how we’ve always done things, no need to write it down’? Start questioning what you do and how you decide on things – are you doing it because you fear implosion of the functions, if you tried to change?
Clarify functions
When the company grows and it has a bigger number of clients, it’s time to separate and reorganise functions and responsibilities for efficiency. You can still keep an account-oriented organisation of the customer service team, but you might discover that a more specialised team in delivery is better for the client. If your business model requires that customer service is a post-delivery process and ongoing, it may be overlooked or ignored by those who are too involved with the service delivery. What you gain in the sales you lose in the post-sale customer service.
Check data collection systems
Are you using your data to make decisions, or would you not even dare to try to mine it as you already know that it is incomplete or unusable? A lot of entrepreneurs we know go through pains to create systems to collect centralised information and have no idea that their employees diligently collect the same information in multiple ‘shadow’ copies for local use.
Review your structure
Chances are you may discover you need functions today that you don’t have the skills for internally and you need to recruit externally a.s.a.p. Better still, get someone to review it for you, you might not even realise that your structure hinders your growth. After all, you have been relying on this structure to cross waters for such a long time, it’s hard to imagine a different one.
If you need a chat on how to look at your structures, information and decision-making processes, get in touch.