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Building Blocks Of
When an organization is small, the business owner is directly in charge of staff and in addition to their own duties, generally oversees all the firm’s activities.
As an organization grows though, more people are required and they specialize in tasks they must repeat constantly, efficiently, and as error free as possible. From this perspective, business can be seen as people and methods, a group of people doing things. Central to this is communication of ideas, possibilities, requirements, capabilities and constraints and the provision of goods and services among the various business units.
In actually designing an operation, Peter Drucker still said it best. A business looks like what it does.
This means the way it looks depends on what they do, how much of it they do, what else they do, who they do it for, what those people want and how and when they want it.
How much, for example, drives the creation of assembly lines and high task specialization for high volumes and less systemization in the case of low volumes. If there is a high variety in outputs, you need to introduce flexibility and customize output for customers. If there are periodic variations in demand, planning processes need to be robust.
He also said the purpose of the business is to create and serve a customer, so the development of the value proposition and marketing and sales are key activities.
Operations is about actually getting the product\service bundle into the hands of the customer. It is the people engaging in activities and deploying resources according to some strategy that delivers its raison d'etre.
So a design of procedures begins by envisioning and breaking down a business into its key processes. This is a critical phase since this task actually defines the size, scope and broad requirements of the system. Throughout the design phase, all processes and supporting activities must be examined and evaluated to make sure they meet specific business requirements. Process owners are clearly defined and the relevant steps and means to perform each process should be documented in full.
Key processes include
1. Marketing design. What is our value proposition and how do we communicate this to our target customers?
2. Product design. How exactly is the product or service created?
3 Process design. How does the work flow?
4. Job design. What do the steps in the work flow look like and what resources does it require?
5. Supply chain design. How exactly do our goods and services get into the hands of our customers?
6. Quality management. How do we ensure quality from end to end?
7. Facilities maintenance. What does our plant look like and how do we keep it safe and clean?
8. Human resources. How are people recruited, trained, paid?
9. Accounting, finance, performance measures. What financial and performance reporting is required, by whom, when?
10. Information systems. What technology, software, support is required by whom?
What is created is the Operations Management System. In its ideal, this sets out how employees do their work and how management monitors quantitative and qualitative aspects of the firm’s performance.
Some important problems arise though because too often systems grow ad hoc in response to growth pressures, and they change over time as employees leave and take their experience with them. Other issues arise because of the people element. Culture, politics, and day to day decisions all play a part in making things work and in making things break down. Then of course too there is the element of chance that can work for or against the best intentions formalized processes were meant to standardize.
So every now and again management must step back and re evaluate the “whole picture”.
Over the years, companies have used a variety of tools and methods to help them manage their business processes. Continuous improvement, change management, reengineering, six sigma, and total quality management are but a few examples. And it is funny to see how some concepts are recycled under new names. Re engineering for example was a complete concept long before it became a management fad.
But there is really no real cookie cutter approach that is a panacea because organizations are affected by firm goals, who wields the power, size and complexity, technology, the corporate culture, and its environment to name but a few key factors.
All we can really do is focus on the common elements to all Operations Management Systems, “learn“ what works best, and focus on executing well.
Use these basic building blocks and tailor them. I guarantee that even with expert help you will not get it right the first time. But learn and focus on executing well and you will move ahead. Ideally you will build an organization whose diverse working elements will all work well together to achieve the firm’s raison d’etre. Because in the end, that’s what its all about.
© 2015 John B Voorpostel CPA, CA, CMB
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