August 2008 - Posts

Org Charts: The Blueprint for Your Organization's Growth

Published 28 August 8 5:39 AM | Aaron | 3 comment(s)

As Paul pointed out in his article, “Why the Organization Chart is Not Obsolete,” the real purpose of org charts—the most common method for expressing roles—is to build a blueprint for your organization’s future growth.

Using SmartDraw.com itself as an example, here is what our organization chart looked like back in 1994, when Paul founded the company:

Paul was the lone employee, responsible for:

• Product Development
• Marketing
• Sales
• Finance
• Customer Support
• Operations
• IT
• Vision and its implementation (CEO stuff)

Here’s what his org chart would look like if we annotated it with the names of all employees filling those roles:

So what’s the point of having an org chart with Paul’s name on it, in nine different places?

The point is that Paul used an org chart like the one pictured above to lay out how he wanted to expand his human resources as his organization grew—the first person he hired was someone to help fulfill the roles of CFO and the Shipping Manager. Specifically, Paul needed someone to process and ship incoming orders. Here’s what our org chart looked like after Bob Jones, the new hire, was added to SmartDraw’s organization:

You can see where I’m going with this—the next person that Paul hired was someone to manage the website (CIO) and to answer incoming support phone calls. So we added Carl Stevens to the org chart.

Think of your org chart as a skeleton for your organization—it defines your organization’s human resource structure based upon your activities and needs. This is exactly what we have done as we’ve grown from a one-man show to a larger organization.

The Steps

So how do you do it? How do you start with a blank org chart and eventually turn it into a guide for making hiring decisions? Here’s a broad way of doing it:

1. Write down your organization’s current needs. What COGS do you need in order to get the wheels of your organization to turn tomorrow?
2. Consider your organization’s future needs. What COGS do you need in order to get the wheels of your organization to turn in five years? Back in 1994, SmartDraw did not need a VP of Engineering as all of the development was in the hands of one employee. However, as SmartDraw’s customer base grew and its needs changed, SmartDraw eventually hired a full-time person to manage the development of our software. The role was on the org chart for a long time though, before we hired someone to tackle the VP of Engineering responsibilities!
3. Define roles responsible for satisfying those needs. That’s what a role is—a responsibility to fulfill a business need. Encapsulate a number of related needs under a single role and define your roles using written job descriptions.
4. Organize your roles into a reporting structure using an org chart. As soon as your organization expands beyond one person, you’re going to have to establish a reporting structure. The employees who fulfill the roles you’ve defined have to be held accountable by someone—and a reporting structure is a simple, formal means of expressing that accountability.
5. Prioritize your hires according to the magnitude of your needs. Paul hired a shipping manager / CFO within a few months of selling the first copy of SmartDraw because the sales volume increased to a point where Paul was spending too much of his own time filling orders; ditto for answering customer service calls and maintaining the website. So he made those two hires first because the needs were greatest in those areas of SmartDraw’s organization. Do the same for your own business: determine which needs are the most pressing and make hires to fill out the roles that satisfy those needs first.
6. Adjust your roles and your org chart as your needs change. An org chart is not an inflexible definition of your organization’s structure, folks—it should be treated as an organic document that evolves in accordance with your organization’s changing needs. Update it accordingly.

This six-step process is simple, straightforward and suitable for most small organizations. Really, all this process does is help you transform your business needs into actionable hires; however, there are a multitude of other nuances to take into account, such as how to group appropriate responsibilities into roles. This process won’t help you answer all of those questions, but if you’re starting with an entirely clean slate, this process will be enough to get you started. And it will help you layout a blueprint for your organization’s growth plan.

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Filed under: Human Resources, Org Charts

Why Businesses Need Roles

Published 26 August 8 11:29 AM | Aaron | 6 comment(s)

In the course of our conversation about growing a business without growing pains, I’ve raised two central topics: processes and roles. I’ve already beaten all of you over the head with article after article on processes so far this month, but if you want a refresher please read “Why Businesses Need Processes.”

I have not talked about the purpose of roles in much detail thus far, so that’s what we’re going to talk about today.

The Need for Roles

Let me put a hypothetical question out there as a preface:

“If my business consists of only myself, do I still need roles in my organization?”

The answer: every organization that intends to grow needs roles. If you do not plan to grow your business beyond being a one-person organization, then you probably do not need roles; however, if you have any intention of growing your business, then roles are a must.

The Dual Purpose of Roles

Most people think of “roles” as job descriptions and responsibilities. This is the human resources half of roles—roles are a means to apportion and assign responsibility for different parts of an organization’s operations. Roles are formally declared in a job description and published in an organization chart in order to allow everyone in an organization to know who is responsible for what.

This capacity of roles (and org charts) is so well understood that the point is almost taken for granted; most employers dutifully roll out job descriptions and update them as job functions evolve. Employers who don’t have a formal method for defining their employees' job functions do not last long.

The second purpose of roles—the one that is less understood—is that roles are a blueprint for the expansion of human resources within your organization. This is why the one-man organization needs roles: because properly defined roles help those employers make better decisions about whom to hire and what sort of candidates to look for.

Over the next two weeks, we’re going to take a closer look at roles and some of the best practices for implementing them. Feel free to leave comments!

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Filed under: Human Resources, Org Charts, Grow Your Business

Three Examples of How Processes Improved Our Operations

Published 21 August 8 4:32 AM | Aaron | 1 comment(s)

In this screencast I quickly review what we've covered in August with respect to business processes, i.e. why businesses need processes, the key employee problem, and so forth. But the real core of this presentation are the three examples of how we've been able to use business processes to improve our own operations here at SmartDraw.com; in these examples I explain what the problems in our organization were and how we were able to largely solve those problems with processes.

For those of you who have been hungry for some real examples this should satisfy your appetite.

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Filed under: Flowcharts, Screencast, Business Processes

What Happens if Brian Leaves? The Key Employee Problem.

Published 19 August 8 9:0 AM | Aaron | 8 comment(s)

Brian is great at what he does. Brian is your controller—he manages all of the accounting for your small business. He keeps all of the company's expenses properly documented, finds all of the tax deductions, manages payroll, pays all the bills, negotiates for better rates on the company's health plans, and keeps a sharp eye on all of your accounts receivable. He's an all-star employee.

So what would you do if Brian was in a car accident and couldn't come to work any longer? What if Brian jumps ship and leaves for greener pastures without giving you any prior notice? How would you get someone to fill his shoes in his absence?

Succession planning for pre-determined vacancies is difficult enough, but getting someone to fill-in with no prior warning is a much more challenging assignment. Realistically, you're not going to run out and hire someone right away. You're going to have to make do with handing Brian's responsibilities over to other employees in your organization—but how on Earth are they ever going to be able to match Brian's productivity and quality of results?

This is the essence of the key employee problem.

Strategies for Mitigating the Key Employee Problem

The answer is that it's tough. It's unlikely that you're going to get your other employees to create the same level of output that you had when Brian was still active in your organization, so it's not an entirely solvable problem—but you can mitigate the impact of the loss of a key employee.

Here are a few strategies that you can implement to help mitigate the losses in productivity and output from the departures of key employees:

1. Build a company knowledge base - have a centralized system where you can store, protect and share key documents with other members of your organization. You don't want to have to dig through Brian's hard drive just to find all of his financial filings—these should be stored in an ordered, secure system.

2. Don't reinvent the wheel - before any of your employees leave, have them document how they did their jobs, and have them document those jobs as processes. This is a great way to populate your knowledge base with useful information, but it does require some time investment. Capturing a business process is usually pretty easy, but having your employees capture all of their core business processes can take some time and you have to be willing to let them invest that time into building the company's knowledge base. The benefits of this step are obvious after Brian leaves—having all of Brian's routines documented as structured processes enables other employees to pick up where Brian left off, without spending a whole lot of time rediscovering how he did his work.

3. Have a “worst case” succession plan - think of this as preparing a will for a role in your organization. Responsibilities of that role must be filled—it's pretty unlikely to replace Brian with someone who can hit the ground running. Thus, you should have a plan for what you'd do if any of your key employees left—if Brian, your controller, was unable to work due to a car accident, or if he left on short notice, who would pick up his slack? Perhaps you yourself would take up some of the work with the tax filings, your sales manager might have his team take up some of the accounts payable, you'd handle payroll, and so forth. These worst-case succession plans are meant to be a band-aid on your organization—they're designed to hold you over until you can get someone else to fill in and get up to speed.

Think of these strategies as human resource disaster planning—they're designed to help mitigate the damage done by the sudden departure of a key employee. But they can't eliminate the entire impact of Brian's departure. On the bright side, the first two strategies—building a knowledge base and documenting business processes—can make it a lot more efficient to train Brian's permanent replacement.

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Filed under: Human Resources, Business Processes

Stop Reinventing the Wheel

Published 15 August 8 6:2 AM | Aaron | 5 comment(s)

Imagine this scenario: It’s 2008, you're a multinational coffee conglomerate named Starbucks; your business is in a crunch and you have to start closing stores.

You can't just close down any store—you have to close down the stores that are in close proximity to another Starbucks or stores that were never great performers to begin with. If you close down the wrong store you can end up losing a lot more business than you anticipated, so each closure has to be carefully considered. What do you do?

• Have your regional managers act by the seat of their pants without any direction (chaos)?
• Develop a standard way to close suitable store locations / sell off assets and subsequently train your regional managers to follow this process (order)?

The decision is not hard—you're going to want to develop a standard way, a process, to handle this routine. Your work should always be a process!

"Reinventing the Wheel" Happens Every Day

A big multinational company like Starbucks doesn't reinvent the wheel—a business can't reach that kind of scale if every employee has to do everything by the seat of his or her pants. But what about smaller organizations?

A lot of private individuals and small organizations suffer from the "reinventing the wheel" problem - every time someone has to handle a new task, he or she does it by the seat of his or her pants a few times and sticks with whatever kind of, sort of worked best. Most people aren't given any processes or any context to work from—instead they're thrown a bunch of old documents and told to make it happen.

All of the specialized knowledge used by former occupants of that position, their cumulative specialized knowledge being "the wheel," has to be reinvented every time there's a personnel change in many organizations.

Most people don't even consider the possibility of formally defining a process, and as a result, a lot of man-hours are wasted engaging in low value "invent the wheel, again" activities. This wastes money, wastes time, creates frustration, and ultimately hinders you from being as efficient as possible.

An Example: New PR Guy

Let's say you have only one PR person and he leaves your company, so you move a person in your organization away from sales and put them into a public relations role—you believe they can do it based on how well they've represented the company to potential customers, so you hand them over some materials from the last PR person, run them through a cursory training course, and send them off. Did you tell your new PR person how to write a news release? How about how to send the news release over a press wire? Most managers would answer "No - they can figure it out." And that's a problem.

Most managers figure that the new PR person will take a few days to figure things out but after that, he or she will start trucking along with his or her new PR responsibilities. What the managers don't take into account are the costs of letting all of the previous PR person’s experience go to waste!

All of the specialized knowledge needed to conduct PR for the organization takes years and years to master, but it all goes to waste as soon as one person leaves and another steps in because no one bothered to build a blueprint using process - and that's the essence of "reinventing the wheel."

All of that time your new PR person has to spend perfecting and mastering his or her new responsibilities is wasted time—the last person already figured that stuff out. By not taking the time to document and define actual business processes for your company's PR, you've doomed them to spend a lot of their time figuring everything out from scratch again.

How to Stop Reinventing the Wheel

Every organization that's ever wanted to scale has already figured out how to step reinventing the wheel: invent it once and show everyone else how to use it! You stop inventing the wheel by defining business processes—that's how it's done!

Flowcharts are an obvious, intuitive tool for defining processes. As long as you do ANYTHING to try and capture your organization's routines into processes, you'll be better off when it comes time to assign new responsibilities or hire new people. I'll be posting more about using capturing and formalizing business processes when we return from the weekend.

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Filed under: Process Design, Flowcharts

How to Capture Business Processes

Published 12 August 8 4:30 AM | Aaron | 5 comment(s)

Last week I wrote about what businesses need in order to grow without the growing pains. In those posts, I talked about the benefits of using processes to avoid unnecessary overhead (reinventing the wheel) and to accommodate growth.

Business processes can be harder to capture for some industries than for others. There's an entire science dedicated to developing solid business processes for the IT and software sectors, so my advice can't possibly do justice to every single business need imaginable—I can certainly try though.

This may seem like recursive logic, but there's actually a process to capturing a process:

• Ask the veteran employees, the people who've been performing the business routine in question, what the first step of the process is.
• With that answer in hand, ask them about the next step.
• With each new step, determine if there are any "branches" in the process and follow those branches out into their entirety (we call these "decisions" in the language of flowcharting).
• Repeat this process until you have recorded all of the steps of the business process in question.
• Document the business process in an electronic document (typically, a flowchart is used).
• Store the document into your organization's knowledge repository.
• Refer to the document whenever someone needs to learn the business process in question.

Let's go ahead and review an example of how to achieve this.

Example: Expanding the Shipping Department

You manage the shipping department for a company that warehouses and distributes consumer electronics to local retailers. The holiday season is coming up soon and your company is going to start moving more inventories at a faster pace. Your boss asks you to add some new employees to the shipping department to take on the increased workload. However, you don't have any training materials prepared—what do you do?

In the scenario that I've described, your boss is really asking you to capture all of the processes required to do the work of your shipping department. So how do you do it? The simple answer is that capturing business processes consists of asking your veteran employees some pointed questions about their work routines and recording the answers. Let's explore that first before we step into some of the nuances.

Asking the Right Questions

The first thing you'd want to do in this scenario is approach your veterans, your existing employees, and simply ask some questions. Here's how it might play out:

Manager (You): When you need to fill an order, what's the first thing that you do?

Shipping Clerk: First, I get the highest priority order number out of the queue via our terminal, and then I double-check to make sure that the order is not a duplicate.

Therefore, the first step of your process is getting the order out of the terminal. The second step is checking to see if it's a duplicate.

Manager (You): What do you do if an order is a duplicate?

Shipping Clerk: I check to see if one of the duplicates has already been filled, and...

You can see where I'm going with this. You probably already know the answers to your own questions, but you need to hear how he does it. Even if you trained him a few years back, it may turn out that things have changed or that the employee himself has found more efficient ways of doing his job—ways that you were not aware of. It's important to document your employee's answers in order to compile them into a universal process.

Documenting the Answers

A flowchart is the best way to go for mapping a process—it's a natural method for mapping a process and it's easy to draw. Here's what a flowchart for the start of this process would look like (obviously, this is not the entire flowchart):

If you want a full explanation for how to draw process maps (flowcharts), read our PDF, "Working Smarter with Process Maps."

If it were I in this scenario, I'd stand there with a clipboard, a pad and a pen and draw a flowchart by hand, as the shipping clerk gave me his answers to my questions regarding his order-filling routine. Needless to say, my hand-drawn flowchart would probably be insufficient to use as training material—I'd redo it in a drawing program and commit it to our company's knowledge repository.

Really? It’s that simple?

Not always. Capturing, refining and mapping a shipping process are straightforward compared to developing a process for executing software development projects. However, the approach that I took in this article can be applied broadly across your organization. It might be more difficult to execute in some areas than others might, but generally speaking, it works.

Over the rest of August, I'm going to write a lot more information regarding how you can reap the benefits of processes in your own organization, so you might want to consider subscribing to Working Smarter.

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Filed under: Flowcharts, Business Processes

Getting Started with Working Smarter

Published 9 August 8 6:29 AM | Aaron | with no comments

Regularly, I receive inquiries from both users and non-users of SmartDraw asking: “What’s the deal with Working Smarter ? Is it a product blog, a corporate blog, or what?” Actually, Working Smarter is neither of those things –...

Filed under: Management, About, Productivity

Why Businesses Need Processes

Published 8 August 8 11:34 AM | Aaron | 3 comment(s)

Processes are essential to preparing your organization for growth - no large organizations would exist without them, and there's no reason why your small organization shouldn't convert all of its work into processes. Your work should consist of processes where possible.

I've covered the benefits of processes, albeit briefly, but why do businesses need processes? This post is my answer to that question.

A quick note: expect individual posts that provide specifics on how to use processes in order to reap these benefits.

Processes Eliminate Two Key HR Issues

The biggest benefit of processes, in my mind, is that they can drive a stake through the heart of two major HR problems:

• The Key Employee Problem
• The Specialized Knowledge Problem (Reinventing the Wheel)

The Key Employee Problem is a major concern for small organizations.  What happens when Joe, a key employee in one area of your organization, departs suddenly? Joe was the one person who knew exactly how to handle his responsibilities and no one else in the organization knows exactly how he did it. How do you possibly fill that void?

To answer this question, I'm going to borrow a metaphor from Jim Collins' Built to Last: Successful Habits of Visionary Companies:

Joe is a time-teller. Once Joe is gone, no one else knows how to tell time, and this leaves your organization vulnerable to the key employee problem. Rather than have Joe tell time until the day he decides to leave, have him build a clock instead. This is where processes come into play.  Processes are one crucial part of building a clock for your business-they explain how Joe did his job. If Joe builds a clock, everyone will still be able to tell time if Joe leaves.

The Specialized Knowledge Problem is a training/exodus issue similar to the key employee problem. Two jobs with identical job descriptions in two different companies might be vastly different due to the different markets, company culture and millions of other variables-in essence, your current employees have acquired all of the specialized knowledge needed to make your business work.

It can take years, even for experienced professionals, to take hold of all the specialized, organization-specific knowledge required to do the job well. Many companies accidentally let specialized knowledge go to waste when employees leave and they simply expect new hires to "pick it up" along the way. We call this "reinventing the wheel"-businesses lose a lot of utility and productivity from new hires because they have to rediscover all of the knowledge that was lost when the predecessor departed.

Processes can help alleviate this problem-each documented business process is one more piece of knowledge that doesn't need to be reinvented whenever turnover occurs in your organization.

Processes Make Measurable Quality Possible

Here's a quick theoretical for you: you have a team with two employees assigned to identical tasks. At the end of each day, the outcomes of each employee's tasks are completely different from the others; how do you measure the quality of that team's performance?

If the two outcomes differ by a wide margin, it's almost impossible to measure the quality of your organization's results-it's only possible to measure quality of results when the outcomes are predictably similar, and that's where processes shine. Processes standardize routines and tasks.  When organizations have their employees conform to identical processes for business, the outcomes of those routines become predictably similar-this establishes a reasonable baseline by which organizations can reasonably begin to measure quality.

Processes Can Help Identify Operational Inefficiencies

The act of capturing business processes itself has an additional benefit: they help you identify inefficiencies in your operations. If you inspected every major operation in your business and formalized those operations into processes, you'd undoubtedly come across a number of inefficiencies.  Correcting those inefficiencies can obviously help to improve the level of output and quality of those procedures, with little additional cost.

Over the next few weeks, we're going to publish four more additional posts that cover all of these individual benefits and how to reap them using business processes-so make sure you subscribe to Working Smarter for more updates.

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Filed under: Flowcharts, Business Processes

Growing Your Business without Growing Pains

Published 5 August 8 3:33 PM | Aaron | 10 comment(s)

Every small business owner, every entrepreneur who's ever taken the plunge to launch his own startup, and every entrepreneurial hopeful has dreamed of reaching that day when his or her business finally "takes off." It's that day when you finally start hit that monthly sales goal, or that day when the demand for your product is growing so quickly that you're struggling to fill it.

And that's when growing pains hit your business. The demands on your business start to rapidly outgrow your organization, and then you're stuck in a position where you forced to slap band-aids on everything without being able to consider the implications on your long-term growth.

The good news is that some growing pains are avoidable, so long as you properly prepare your organization for growth.

Preparing for Growth

What do you need in order to prepare for growth? Ideally, you need to establish the following things in your organization:

• Predictable Results - you need to know that if two different people in your organization do the same thing, like processing a new order, the results will be the same. If you can't guarantee that the outcomes will be predictably similar then your organization may experience a lot of additional overhead due to the liabilities associated with unpredictability.
• Standardized Quality of Output - you need to know that the quality of your output will be roughly similar across your organization. Imagine if you had an assembly line for manufacturing automobiles and no one would know if you were producing lemons or masterpieces until the vehicles hit market - it'd be a disaster. Well, what applies to a big auto manufacturer also applies to smaller organizations - you need to have predictable outcomes and a standardized quality of results in order to achieve scalability.
• Standardized Training Routines - you need to able to expand your human resources in an organized, routine fashion. The most important HR factor, aside from making good hiring decisions, is having a standard set of instruction to offer new employees. This is essential to creating both predictable outcome and standardized quality of output.
• Clearly Established Roles - roles are essential to growing your company; one person can have multiple roles, but it is important that you lay out a roadmap for all of the roles that are going to need to be filled as your company expands. Roles are simply a collection of assigned responsibilities and expectations, and these are necessary for establishing accountability throughout any organization.

How do you install all of these traits into your organization? The short answer is "by defining roles and processes for each aspect of your business" and we're going to cover this subject in more detail over the course of August.

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Filed under: Business Processes, Grow Your Business