Chapter 4 Develop Systems By Evan Keller Definition A system is a specified way of doing things. It shows your employees how we do it here. You can develop systems by finding the best way to do things and repeating the process the same way each time to improve efficiency and accountability. Systems work best when you record them step-by-step so employees can implement them without a drop in quality or efficiency. Doing things in a predictable, uniform way produces more reliable results. Expert Quote Good documentation designates the purpose of the work, specifies the steps needed to be taken while doing that work and summarizes the standards associated with both the process and the result (Michael Gerber E-Myth Mastery).
40 LEADERSHIP Assessment Questions 1. Do you work for your business or does your business work for you? 2. Which aspects of your business depend entirely on you? 3. What keeps you from documenting your systems and using them in your daily operations? Benefits to Employees: Structure. Systems contribute to order which builds confidence in employees. Documentation says, This is how we do it here. It provides your people with the structure they need and with a written account of how to get the job done in the most efficient and effective way (Michael Gerber E-Myth Revisited p.104). Clear Expectations. Having clear job expectations is an important need for employees, and documented systems help fulfill that need. Knowing what is expected of them provides a sense of security as they do their job well. Safety. Systems can improve safety by including precautionary steps and making outcomes more predictable.
DEVELOP SYSTEMS 41 Benefits to Production: Quality. Quality will increase as a system is adhered to and continuously refined. Increased Capacity. Systems pave the way for growth. But if you insist on doing everything yourself, your business will remain small. If you delegate work without proper systems in place, your business will be too inefficient to grow. But if you continually develop more systems and train employees to use them, you can successfully delegate more functions of your business. This is what working on your business, instead of in your business, is all about. Less People-dependent. Is your business people-dependent or systems-dependent? McDonald s has 28,000 stores and has the same food in each amazing! Their system runs the business and their people run the system. McDonald s isn t known for having the most talented people; they don t have to have the best and brightest because they have an awesome system which breaks complex tasks down into manageable steps. Michael Gerber says that systems help ordinary people produce extraordinary results. Benefits to Customers: Predictability. Systems increase predictability which builds trust with clients. A good system guarantees the customer that her expectations will be fulfilled in exactly the same way every time (Michael Gerber). Trust. Doing what you say you ll do demonstrates your integrity which makes people want to do business with you. Delivering consistent results creates happy customers.
42 LEADERSHIP Benefits to entrepreneur: Profit. As systems help every part of your business improve in productivity, increased profits should result. Training Tools. When written, explained and modeled, systems can be used to train employees. Compile them into an operations manual. Consistent Supervision. If two employees are consistently late to work, but they are not treated equally, it will cause dissention among them. If you have a tardiness policy and enforce it consistently with all employees, they ll know they are treated equally. You also may have less tardiness and they ll know you mean what you say. Virtual Managers. When you re running a small company, you often wish you had another you! Good systems are probably the next best thing. Systems act as managers for you since they help enforce how you want things done especially when you re not around. You can keep employees accountable to following systems by requiring a signature each time they go through the process, as well as discussing adherence to systems in supervisory conversations. Time Savings. Systems save you time when doing occasional tasks. You don t have to reinvent the wheel when doing something you haven t done in a while. For example, if you haven t hired anyone for a year, but wrote down good interview questions last time, then you can begin the process quickly. If you have written down items to train new employees in, it gives you a head start the next time you hire someone. Free Your Mind. Systems free your mind to do creative thinking
DEVELOP SYSTEMS 43 in other aspects of your business. Free Your Time. Good systems can also free you for time with your family and time to serve in your community. Business Valuation. No one wants to buy a business that they ll have to run on their own. If there are clear, effective systems in place implemented by great people, you have a gold mine if you ever decide to sell it. Barriers Lack of time. Putting your systems down in writing is hard work because it requires thinking, focus, creativity, and time. Resistance to change. It s natural for employees and entrepreneurs to resist change, even when it s clearly necessary. New way of thinking. It can be hard to identify the steps in a familiar process you do all the time. You can make an audio recording of how you run a particular process in your business, then write down the steps as you listen to it. Underlying Values Efficiency. Employees don t care about your business as much as you do, but your systems can help them produce efficiently without putting as much thought into it as you have. Quality. If used correctly, systems can maintain your standard of excellence. Order. Employees and customers value this.
44 LEADERSHIP Reliability. Customers want a predictable experience. Innovation. It s easier to analyze and improve it when a system is in steps on paper. Discipline. Defining repeatable processes is painstaking work. Steps to Implement Identify your existing systems. Everyone relies on systems in their daily lives, such as any routine you do automatically in roughly the same way on a regular basis, like getting dressed or driving a car. I could do that in my sleep refers to systems embedded in your routine. You already have such systems in your business as well, even if you just get things done without seeing the unspecified systems you use. I encourage you to identify them, write them down, improve them, and use them to train and supervise your employees to do their work properly. Choose the right type of system. The process you re designing may be better suited as a recipe, schedule, database, policy, how-to guide, contract, diagram, chart, table, checklist or form. Break into steps. Identify something that should be done over and over in your business. Break the task into steps and write them down as a guide. Identify the what, where, when, why, how. Specify standards to achieve the level of quality you desire.
DEVELOP SYSTEMS 45 Try it. Test a trial version of your system for a short period of time with a limited audience. Some improvements will become obvious. Improve your systems. Just having systems isn t good enough. There are lots of systems that don t work. Can we be honest? Because they can tax instead of having to please customers, governments all over the world have poor systems. Inefficient systems can actually slow processes down and make them harder the red tape of your local government has likely already come painfully to mind, complete with it many hoops to jump through. On the other hand, good systems are efficient, completing processes in as few simple steps as possible while treating people with dignity. They are implemented by the right people at the correct interval, and are used to increase quality and efficiency. Use your systems to train employees and keep them accountable. Get ongoing input on their effectiveness from the people implementing your systems and the people your systems are serving. Use feedback from both employees and customers to improve systems on a regular basis, perhaps four times a year. Establish a timeframe for each step. A well-designed system that is carried out too slowly is still a failure. Set goals for speeding up your sluggish systems. Train and supervise their use. Give copies of the written system to your employees, communicating why and how. You may want them to chart their completion of the steps, such as cleaning of a bathroom, pre-trip inspection of a truck, or dispensing of medicine to a pharmacy customer. Using the step-by-step guide you ve created, train your employees to put it into practice. Show them how, then supervise them as they follow the steps to ensure it is producing the results you want.
46 LEADERSHIP Consider what systems you need to build in these categories: 1. Lead generation and sales process to follow up leads, program to increase recurring sales program, cross-selling process, referral program, lead source tracking, and lead conversion tracking. 2. Customers product catalog, process for clear communication before and during sale, timeline/script to thank and ensure satisfaction after the sale, process to address problems and complaints, and regular follow up with major clients. 3. Employees job application, hiring process, job descriptions, training procedures, substance abuse policy, attendance policy, and employee handbook. Having standard operating procedures at their fingertips or posted where they use them are good steps to putting them into practice. 4. Maintenance of facilities and machinery checklists for: cleaning of bathrooms, opening and closing a retail location, lubrication of equipment. Make a chart and have employees initial when complete. 5. Production division of labor, workflow design, assembly instructions, recipes, safety procedures, purchasing and inventory management, production guide for each product, and shipping process. For more, see chapter 10. 6. Finance profit and loss statement, balance sheet, tracking efficiency ratios important to your business, process for collecting and storing records and tax documents. 7. Time use a calendar to mark weekly, monthly, quarterly and yearly tasks that you need to do but may forget to do.
DEVELOP SYSTEMS 47 This won t help unless you make the habit of looking at the calendar every day. Case Study Because good people and good systems are in place in my business, I ve been able to devote 2/3 of my time to running my nonprofit, Creating Jobs Inc. While I love my company, my true passion is helping others leverage business for global good. If there weren t good processes in my business, there s no way I could ve written this book, which is a system in itself. Here s an example of one of our systems at Tree Work Now, our Collections Plan: 1. Those who ve not paid their invoice within 15 days will receive a call and email every two days until payment is made, varying the times of day that communication is made. Credit card payments will be taken by phone, if possible. 2. At 30 days after invoice is issued, non-paying customers will receive 1 st collection letter and Notice to Owner Letter. Attempt to set up payment plan if they cannot pay in full. 3. At 45 days after invoice is issued, non-paying customers will receive send 2 nd collection letter. 4. At 60 days after invoice is issued, non-paying customers will receive send 3 rd collection letter. 5. At 75 days after invoice is issued, non-paying customers will receive send 4 th collection letter, invoice by certified mail and Claim of Lien on their property (must be filed within 90 days).
48 LEADERSHIP 6. At 90 days after invoice is issued, non-paying customers will be outsourced to the collections agency unless the CEO would rather file a lawsuit in small claims court (for amounts over $2,000).
DEVELOP SYSTEMS 49 Leading Self, Employees, Systems SELF Creating systems is a very smart use of your time. There s something about creating words that help you recreate the physical realities they refer to. Amazing. EMPLOYEES Ask those who know certain processes to document them for review with you. Be sure you frame systems as dynamic tools that they can help you refine. Far from boxing them in, systems can free them to focus creative energy on new challenges. SYSTEMS How to lead systems on systems? Redundant! But seriously, you may want to put a timeline together to prioritize your development of systems over the next two years. Summary A system is a step-by-step process that you follow to complete a particular task so that you get a specific outcome. Instead of reinventing the wheel each time you must do something, you have a written checklist of steps that you or your employees can follow to complete the task your way. By creating systems, you can easily teach someone else how to do what you do, then delegate the tasks so you have more time to focus on things only you can do. This increases efficiency in your production and provides a more
50 LEADERSHIP consistent experience for your customers. Given the multitude of above-cited benefits to employees, customers, production, and entrepreneurs, it s a wonder that many still run their businesses by the seat of their pants, never getting out of crisis mode. It certainly isn t easy, but defining repeatable processes is essential to scaling your business when expanding your workforce, opening a new location, or franchising. So, I encourage you to identify the systems you already have, create new ones, then compile, use, and refine them. Application Questions 1. What systems do you have already? How have they helped your business? How good are they? Do you need to improve them or train your employees to use them? 2. What systems do you need to add? Which one will you develop first? 3. Which of the follow categories do you need to build systems in: lead generation, sales, production, employee management, finance, time, maintenance of facilities and equipment? Recommended Reading E-Myth Mastery by Michael Gerber