A study of why small businesses fail is quite helpful for the entrepreneur to understand before he/she starts a business but it can also help an existing small business understand why their business is not as successful as he/she hoped for. A full investigation of why startups fail is reported in the CB Insights article “156 Startup Failure Post-Mortems”. One of the major reasons found was the owners did not understand the complexity of the business before they launched. When the real complexity of the business is not understood, the owners will experience all kinds of problems. Among the problems are missed deadlines, inefficient systems, financials issues and customer acquisition and retention.
Roger Sessions, author of “Simple Architectures for Complex Enterprises”, estimated that Information Technology company failures cost about $1 trillion dollars in loses for the U.S. economy. His report analyzed IT enterprises and their software projects only, but not being aware of the complexity of the business occurs in various types of startup enterprises across the board.
This situation can be avoided by basically doing your homework before you put too much effort and money into your business. Of course, there are many things that you can include in your pre- business homework, but I’ll highlight two here that will help you begin to understand the level of complexity you will be working with.
Prepare Benchmarking Targets – A benchmark is a reference for checking your business operations against your industries best practices or standards. You will be doing this before you design your systems or if you are already in business, you can use what you learn to make the necessary adjustments that can fortify your enterprise. In other words, check to see how the most successful enterprises in your field operate. This may be time consuming because all of your research may not be available on the internet; you will need to actually visit similar businesses to understand how they operate. This kind of study can help in so many ways. It might help you determine whether or not you really want to go forward with you venture; but it could also help you realize the uniqueness of your business idea and how your brand will be different form the others. Most of all, this study will help you realize the level of complexity that you will be dealing with.
Conduct Pilot Studies – Conducting studies to determine what your customers need and how you will deliver your product/service can serve various purposes. First, it will help you to see whether or not your product/service is something that customers want and will pay for. This is what is called “product market fit”. It’s determining if your offering is valuable to the customers or does it solve a problem for them. As entrepreneurs, we see the value of our business idea but sometimes the value of a new offering is not evident to potential customers. Second, the studies will let you know what procedures are needed to get your product/service to the customer quickly. It will also allow you to simplify and enhance the experience of your customers as you serve them. Customers want a system that is easy to use and hassle free when dealing with your company. The complexity of both of these processes will be revealed when you conduct tests or pilots.
Developing and simplifying your business systems will be one of your most important tasks. Learning about the inherent complexities of your industry systems will help you determine your readiness to work with and simplify the necessary systems for your successful business. Simplification could be your most important contribution to the industry!
“The first problem (for entrepreneurs) is not fully understanding what they are letting themselves in for. It’s important that you go into any new venture with your eyes wide open. In all honesty you cannot do enough research and homework before you start. The more unfamiliar the territory is to you, the higher the implementation risk.” David Mellor
Hiring new employees can be very successful if you follow some tested procedures for hiring, on boarding and coaching the people that join your organization. The Mission, Values, Vision and Systems are the established elements of your business core that will provide the structure for sustainability and growth. You must reinforce your business core every time you make important decisions. Hiring employees is an important decision that can sustain or tear down your business core. If you carefully plan your hiring, on boarding and coaching processes, you can help eliminate deviations from your business core and continue to grow. Consider the following guidelines.
1.Use state of the art hiring procedures. Using a good job description, you can design an application and hiring process that only draws the kind of employee that will work in your culture.
Develop an objective interviewing process. ( Hunches and first impressions can be misleading)
Develop questions that test, with a scoring system, for the knowledge, skills, abilities and talent you need now and for what you will need in the future.Remember, you want team members that can become committed and grow with your business. Include questions that test for value alignment. Does the applicant have personal values similar to your business values?
Carefully consider all legal requirements and conduct good background checks.
2.Develop and use a systematic on boarding plan. New hires will understand how important they are to the organization if they learn about the critical elements of your business core. Introduce them to the team and all important operations. Clearly explain all of your expectations and take plenty of time going over the position description. Basically, if you treat them like a new family member, you’ll be on the right track.
Prepare a list of things to do for the on boarding experience. Such as preparing the work area and providing supplies.
Engage all team members in the process.
3.Develop and use a systematic coaching plan. A new hire might have a tremendous amount of talent, but it is fundamentally important for him/her to learn your culture and systems as well as your objectives. This takes time. The new hire can only help improve your systems after he/she has learned them thoroughly. This is time consuming for the owner but your investment in a thorough coaching and evaluating process will pay for itself over and over. By all means, don’t leave the new hire to do the work as he or she wants to. People perceive things in drastically different ways sometimes. Your systems have been designed for growth and incremental, studied change, not change because of the new hires initial perception of things. Prepare a file or booklet of organizational goals, vision and operational procedures.
Discuss the file or booklet with the new hire to make sure she understands.
Carefully check for understanding. Asking questions works well.
Plan to commit at least two or three months (depending on the complexity of the job) to coaching in a few sessions each month. You will get to really know your new hire and they will learn what you expect from them.
When you have used efficient and effective hiring, on boarding, and coaching procedures, you will have a valuable and committed team member who can help you grow and continuously improve your business.
When you are in the first stages of your business development, there are so many things that you have to think about. You want to make sure that your technical expertise is strongly visible and you want to acquire as much business as possible. So, you are required to work in many roles and probably roles you don’t particularly like. However, if your Vision of the business is one that is fairly large and still growing, you must think of yourself as the technical expert, the manager, the administrator, the financial officer, the receptionist, the janitor and anyone else the business needs. Eventually, as you grow, these roles will be given to someone else, but which ones should you focus on most at this time? Obviously, your technical skill will draw in your first customers and you must perform it excellently at all times, in fact, this should be the first System that you design. This System will contain the standards for anyone that you hire to help you with the technical skill, the reason you are in business.
So, the second role that you will perform as long as your business exists, unless you sell it, is the role of a manager. In fact, you might delegate the technical skill to others in the future and you will perform primarily as the manager; so you might as well get ready for it now. A manager directs and controls all operations and all people involved. Therefore, it’s a good idea to understand how a good manager manages performance early in the process. Obviously, the way you manage performance will make or break your business.
Successful performance management must have a strong foundation. That foundation is formed by your Mission, Values and Vision. Your Vision will include your strategic management plan. This gives you guidance for your position descriptions, objectives, standards and measurements. The elements of this strong foundation makes performance management easier to execute, comprehensive and motivating for all involved. You can’t manage performance appropriately without this foundation.
“Selecting the right people with potential to excel and then developing those people through the coaching and mentoring process to achieve greatness is a primary responsibility of leadership. Effective leaders know precisely when to coach, when to mentor, and when to manage.”
−Dr. Rick Johnson, founder, CEO Strategist, LLC
Following are two important things that you can do to help manage performance:
1. Develop and perform by systems.
Even if you don’t have employees, design a system for your technical area, document the system and practice following this system with each customer. You will probably notice the need for improvement, make the changes and keep following the system. Why? When it’s time to make your first technical hire or assistant, you will have information for your position description, interviewing process and new employee orientation or on boarding as well as performance evaluation. You can then teach your new hire your tested and working system. Systems will make it easier to grow your business. Just consider the repeatable and extremely successful franchises, such as McDonalds and others. They have clearly established systems. Create and document systems for all of your business operations
2. Regard every employee as a valuable asset.
This perspective will make you look at employees differently. You will realize the need to nourish and develop each person to his/her highest ability. You can control for bad hires with a hiring process that tests for knowledge, skills, abilities, talents and potential. A Harvard Business School study has performed research on businesses such as QuikTrip and Trader Joe’s where the employees are highly valued. See, “The Trader Joe’s Lesson: How to Pay a Living Wage and Still Make Money in Retail.” Sophie Quinton. There is also a practice of promoting from within which works quite well when you test job applicants for potential along with the other requirements. However, when employees at all levels are regarded as assets with valuable skills, you will see a positive impact on your customers and that will promote the success and growth of your business.