Implementing Standard Systems Increases Company Value

Jeff ChaffinUncategorized

Credit approval, shipment receiving and new employee sign-up are common processes that most of us would quickly identify within a company’s daily operations.  These are essential at small companies out of necessity as they involve cash flow, inventory and employee pay and benefit administration.  Larger corporations have these and many more standardized systems – do the systems promote growth or are they mandated by the size of the organization?  Both, actually.  Standardized steps allow for consistency and predictability needed in larger organizations; good systems mixed with a commitment to constant improvement make growth easier.

Given the prevalence and importance of a systematic approach at larger companies, why, then, don’t smaller, growth oriented firms commit to process development?  A number of excuses with some common themes that we often hear:

We’ve made it this far without them.  That’s great, but statistics say that where you are is probably about as far as your company will go.

We have an experienced group and we know what needs to be done.  If you plan on growing, then you will need to be able to quickly train new employees and set identifiable standards of quality.  Without standard procedures all knowledge is anecdotal and subject to personal interpretation.

It’s a huge task – I don’t know where to start or if I will have the time!  Translation: you think you have to do it all yourself and don’t have the experience to do so.  Standardizing practices is a great opportunity to include your staff, get feedback on current procedures (this almost always brings surprises) and agree as a team on how to go forward.  Mutual understanding on company processes creates a strong foundation to build on.  Companies that have made the effort will tell others that it is invaluable and an ongoing process!

We’ve tried in the past, but our people just don’t follow it.  Setting standards is great conversation – implementation and strict adherence is hard (at first).  Owners and leadership must be committed to the “new reality” and lead the change.  Allowing “one time exemptions” or one employee to continue in the previous status quo will quickly derail your program.  Follow-up sessions to implementation, which include affected employee feedback, will keep the team engaged, allow for tweaks and send a clear message that the company leadership team is dedicated to the new standards of operation.

Without a doubt, the company and its customers will benefit tremendously from standardization.  Predictable outcomes increase reliability and consistency.  Customers and employees crave predictability and will exhibit higher levels of satisfaction resulting in increased loyalty.  Throw in an atmosphere of constant improvement and the owners will establish a platform to grow on.

If a company is going to be sold in the future, then establishing standard operating procedures will add tremendously to the value of the firm.  Given the choice (and means) to buy a local hamburger joint or a McDonald’s franchise, the overwhelming majority of investors would choose McDonald’s and the reason is simple: McDonald’s has a proven system of the profitable operation of a franchise not just a system of making hamburgers.  We’re not singling out local hamburger spots (we love them!), just making a point on the importance of systems within organizations.

We at The Executive Influence work with organizations that experience the pains of growth – including designing and implementing standardized processes and quality systems – every week.  For a free and discreet conversation about your business contact us today.  Expect results.