Wednesday, February 12, 2014

SMEs need an “Operating System”

The sudden death of Tata Motors Managing Director Karl Slym was in the news on Jan 27th 2014. He died on 26th Jan in a Bangkok hotel while attending some work engagement. Immediately the papers started reporting who will be taking over at least for the short term. However, there were some statements of leadership gap, vacuum etc. 

Imagine what will be the plight of a MSME if they incur such a sudden loss! Forget death, what if the owner is suffering from a debilitating illness and is bed-ridden or one fine morning some key person resigns and quits. It might sound horrible but disaster does strike and problems come unannounced. The impact is horrendous in certain cases. 

I met a person few days’ back who quit his erstwhile company and now the company is cutting down production and shedding human resource since they are unable to manage. 

Companies like Tata have layers of management staff and professionals. They can easily shift people laterally to fill up a vacuum to tackle any crisis. They also have a well-thought of succession plan. Thus, there is not much dearth of talent and people rise to the call in such occasions. But the most important feature of these companies is the way it functions on a daily basis. They are completely system – driven. Of course some decisions and deliberations are dependent on human intervention but the assembly line and production will continue like any other day.

Slym’s death again brings back the focus on the routine topic of making system-driven organizations. The case is strongest for SMEs. They must have a strong operating system because they do not have large number of people working at various levels and there is no redundancy of responsibilities or skills.

No one is indispensable, but in SMEs . . .

Though we often say no one is indispensable but in small businesses the case is different. Here a single person often multitasks and handles disparate activities too. Due to the lack of a well-defined system and proper training, lot of work is done haphazardly. Information is stored in bits and pieces often on scrap of paper lying on our table while having a telephonic conversation. A buyer might just call up and change the dimension of an item. The person receiving the call in all probability will forget to communicate it to production and the wrong item will be delivered.
There are extreme issues in small businesses like information is jumbled into a single file or too many files are made with no clue of the purpose of each. Sometimes any person handling the function as stop gap starts making his/ her own filing system.
Computer system is another black hole. Files are saved randomly with no regard of version, content, obsolescence etc. If a computer crashes, no one knows what data has been lost until the need arises.
At times it seems like small businesses thrive in chaos. Fact is they have poor efficiency and suffer huge loss of productivity.

What should we do?

Start building your small business with proper systems and processes. Use the right tools and methods to overcome such catastrophe. They create adequate support for people to function efficiently. For example: Order Management is a system. 

You get an order, manufacture the item and ship it. There is an input, process and output. Process is how you make the system work. How will the order be received, who will receive it, where will it be stored, who will process it, when, how, how will the packing be done, who will ship it, who will confirm that the shipment has been completed and all statutory information is correct. Who will inform the customer about the completion of the order? Who will manage customer queries and how? 

A detailed process for any system is the golden key for efficiency.

Have a look at the Total Integrated Baldrige Excellence System Framework. It is a good model for developing your company’s operating system. It will give an idea on which areas need to be focused on and standardized. How will you manage your customers and employees? How will you plan for the future and expand the knowledge that you have gained? How will you create the Leadership pipeline? How will you get work done in your business everyday without fail? 

Start with the basics. Identify the functions. Establish systems. Define process and workflow on paper. Create formats and fonts for data collection, communication and reporting.
Go to each and every work area regularly and see how things are done. It will give you an idea to define systems. Routinely audit your systems to improve and check deviation. As Deming suggested – Plan – Do – Check – Act.


Any business has common functions like order, procurement, production, planning, IT, materials and distribution. If you are able to create the right operating system for each function and develop strong processes, your business will remain resilient and prepared to face distractions, anomalies, calamities. 

Benjamin Franklin said – “By failing to prepare, you are preparing to fail.”