How Putting the Right Systems in Place Can Help Drive Business Value

Eric Bosveld, B&A Corporate Advisors

May 7, 2020

Everyone knows that the management skills to run a small but successful, entrepreneurial company, with a few employees, are starkly different from those skills required to run a larger company with more employees, locations, products, product lines, etc. As a business grows, its overall management becomes exponentially more complex. This necessitates the need to develop and implement more robust systems such as reporting structures, strategy communication tools, work processes/operating procedures, information technology, and financial controls, amongst others. Growing your top-line sales and customer base without simultaneously building the structure and systems required to support your growing business is a recipe for failure.

When a business is small, it is not uncommon to have a very loose organizational structure. Everyone can speak directly to the boss to get the answers they need, as he/she makes all the major decisions. As the employee number increases, many roles in the company become comparatively narrower, and the boss starts to share decision-making with key managers. It now becomes increasingly important that everyone has a clear understanding of what is expected of them, their role, and how it fits within the organization’s goals. They also need to know how they will be evaluated and by whom. The boss can’t interact with everyone to the same degree anymore and therefore needs a more formalized organizational reporting and accountability structure, performance evaluation system, and compensation structure.

Furthermore, as a company grows and individual employee roles change, responsibility gaps and overlaps surface that need to be addressed before they become problematic. This requires systematic training programs as employees’ responsibilities are adjusted. It requires a clearer definition of individual roles and responsibilities as the business moves towards a “matrix” organizational structure across locations, business units, product lines, and corporate functions. Managers need to have backup systems in place to ensure the business operates without interruption, as people leave, go on vacation, or deal with absenteeism. This requires the development and communication of company-wide, consistent policies that were perhaps “understood” when the team was a lot smaller.

Some entrepreneurs can successfully transition the business to a much larger organization by learning how to effectively delegate key day-to-day responsibilities and decision-making to an ever-growing team. They recognize the need to incorporate the right organizational systems to ensure that the business can grow without their involvement in every decision. They manage to transform their role from a General Manager, with their finger on the pulse of every aspect of the business, to a Chief Strategy Officer, who is steering and guiding the ship in the right direction.

All too often, however, I see entrepreneurs getting stuck in a pattern where they work hard on the wrong things and can’t get breakthrough company performance. That can lead to high levels of anxiety and frustration. What they really need is some honest self-assessment to determine the best path they should take to ensure the business value doesn’t stagnate, or worse, recede. They can 1) stay the course by focusing on maintaining a well-run small business with a sustainable cash flow, 2) consider their transition/succession/exit options, or 3) put in place what it takes to attain breakthrough performance.

If breakthrough performance is the ultimate goal, it starts with deliberately building the right structure and systems to manage the organization’s ever-increasing complexity and by nurturing a team that is engaged, motivated, and clearly understands its role in achieving the company’s growth strategy.