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Managing For Failure

ichael Adams; Ideas and Strategies for Business
Emerald Business Services, LLC
P.O. Box 1875
Ramona, CA 92065
(619)985-0799

Managing For Failure, The Infection of Procedure,
Process and Structure in Small Business

Development and implementation of process,
procedure and structure is indeed an epidemic if
not an obsession within the small business
community. However, the process may very well
strip a small company of its most valuable assets
; entrepreneurial spirit and creativity, rapid
time to market, swiftness in adjusting to market
trends, cash (development and implementation is
an expensive endeavor) and the ability to attract
and retain the creative souls who are the very
heart of small business.

While these Three Musketeers are a necessity in
larger organizations where structural entropy
rules the day, they are a ball and chain around
the neck of the cash poor entrepreneur who needs
to be quick on foot and swift to market.

To be successful small companies must use
strategy, not structure to power their operations
. It is the understanding of the power of strategy
that is the difference between a technician and a
true entrepreneur.

To be competitive small business, by necessity,
starts out as a learn machine with a passion for
solving customer problems and doing it better,
cheaper or faster than their larger competitors.
As the enterprise grows the founder recognizes
weaknesses in the organization are taking a toll
on customer satisfaction, profitability, company
growth and cash flow. To solve the problem the
decision is often to move the company directly
from the technician stage, (where the owner owns
his job) into the structured stage of business
where procedure, process and structure are
thought to be the answer to everything ailing the
business. It is this leap from the technician
stage directly to the structured stage (missing
the strategic stage altogether) that keeps small
companies small.

Successful entrepreneurs know that to be
successful they must utilize processes and
procedures to get things done, but only at an
elementary level where certain principles and
concepts are important to maintain order, such as
cut off times for shipping, meeting delivery
schedules and so on.

The Value of Strategy in Small Business

If structure goes before strategy, you will be
dealing with a complex set of processes,
procedures and policies that are created to
address symptoms of the real problem. Strategy
solves problems at the highest level, or the
generic level because it addresses the real
issues, when a symptom arises it shows up as just
that, a symptom, and the strategy has already
been established to deal with it, so it is not an
issue.

When structure goes before strategy decisions are
made based upon analysis of symptoms instead of
getting at the real problem, or as Peter Drucker
puts it, the generic problem. When my wife
Theresa and I dated we argued about how we would
discipline our children after we were married.
However, discipline itself was not the real issue
, in child rearing the real problem is how to
discipline and for what. So we needed to
establish a strategy, a set of guidelines, which
would give us direction in our parenting roles.
Once the guidelines were in place, (the strategy)
we had a means of deciding what type of
punishment was needed for the seriousness of the
offence. We decided that when a child said no to
us, it was direct defiance and was met harshly,
and consistently. Mistakes such as spilling milk
were not punishable but were to be dealt with
through training. Poor judgment was to be dealt
with through natural consequence. There you have
it, our discipline strategy for raising our
children, (I wish it were really that easy.)

Small companies need a focus on doing the right
things

Undoubtedly the most dangerous effect the jump
from strategy to procedure has is that it takes
the companies focus off of producing results for
its customers and puts it on becoming highly
effective at operations. Small companies must
have a strong external focus on customer results,
which comes by way of the strategic business
planning process, not structure. In other words,
structure focuses attention on doing things
right when the company should be focused on
strategy, which is all about doing the right
things. Doing things right is a necessity, but
it is doing the right things that produce results
for both your customers and your company.

Small companies draw the wrong type of people for
the structured stage

There are several reasons why people are drawn to
the companies they work at; 1) Creative people
are driven to follow their passion, not policy; 2
) The creative entrepreneurial types will not
operate well in an environment of policy and
procedure; in fact they often fight it because
the structured stage tends to develop followers,
not leaders; 3) People who have the types of
skills and personal discipline to develop and
execute policy and procedure don't typically work
for small companies; 4) A highly structured
company without a strategic prospective drains
drive and passion from the creative types when
these types are what you need to empower the
growth of a small company.

Small companies do not have the extensive capital
resources for the structured stage

The nature of the structured stage is that it
requires a higher level of disciplined people to
execute properly in the more complex startups.
The exceptions of course are franchises and
businesses, which by the nature of their product
require highly structured operating procedures
and policies to be profitable, such as fast food
and lube and oil businesses. These are the
exception and not the norm .

Development of policy and procedure typically
begins with the utilization of specialized
outside consultants and the addition of expensive
specialized staffing to develop it, maintain it
and implement it. This process is not only
expensive but it drains scarce capital resources
out of the company when it needs it most.

If we had not set the strategy ahead of time,
raising our children would have been a
frustrating process of decision after decision,
punctuated with disagreements along the way
because we never established a sound set of
guidelines for dealing with the problems ahead of
time. Process, procedure and structure would have
been worthless in addressing the larger issues;
every decision would have to come in the context
of addressing the symptoms rather than the real
issues.

Strategy Leverages the Chief Executives Motivating
Factors

A motivating factor is a reference to the factors
motivating someone to do something; it describes
why people do things. When it comes to building a
business, it is very important that the
motivating factors of the owner or entrepreneur
are built into the very heart of the business.
This is done through the development of a
strategic objective that acts as a guideline in
the development of a strategic business plan.
When the strategic objective is established ahead
of time, along with the other important
strategies developed in strategic business
planning, the business has a set of high-level
guidelines, which guide its operations and growth
while assuring you are working on the right
things.

Strategic business planning must replace the
technician stage and come before the structured
stage if you are to take advantage of the
benefits of organic growth and gravity marketing
processes inherent in a strategically run
business. Properly developed and implemented
strategic planning will fuel a small business
with entrepreneurial drive, adjust the company to
a customer focus, encourage creative thinking,
attract entrepreneurial talent, preserve precious
working capital, leverage the Chief Executives
passions (motivating factors) and most
importantly strategic thinking establishes a
culture of high level decision making and assures
the entire company is about doing the right
things, not just doing them right.

If you are in the technician stage or have
ventured down the path of highly developing your
businesses systems by developing complex
structures, policies and procedures, the thesis
offered in this paper will ring true as you
evaluate your current business development
process. The only way to get on the right track
is to begin doing the right things; the only way
to know what the right things are is to begin a
strategic business planning process.

If this type of planning is one of your personal
strengths you should already be operating under a
strategic plan, if not, begin development of your
strategic plan today with the help of a qualified
collaborative business advisor or consultant. The
strategic planning process usually takes a period
of six to nine months to develop and implement;
it is educational, encouraging, well received by
employees and relatively inexpensive. The costs
can be spread over the entire project and require
about fifteen to twenty hours a month. There is
not a piece of equipment, a person or a computer
system more critical to your success than a well
thought out strategic plan.

Remember, if you do not know what the right things
are to be working on, you and many of the people
who work for you are most likely doing lots of
the wrong things, they are most likely being done
very well, but they are still very expensive
wrong things, which will keep you in a hold
pattern within the technician stage.



[1]As an organization increases in size and
complexity, it tends towards disorganization as
the amount of energy required to maintain
equilibrium increases. See http://en.wikibooks
.org/wiki/Systems_Theory/Entropy
[2] For the purposes of this paper a small company
is defined as a 75 million dollar a year or
smaller business.
[3] In these types of operations entrepreneurs
have gone through the strategy stage long before
the doors are even opened.
About the Author
Mike Adams has founded 10 companies over the last
30 years including retail, distribution, business
systems, services and e-commerce. Each company
provided valuable insights into what it takes to
make a company grow. From 1989 until today Mike
has been researching the dynamics of applied
leadership and business strategy relative to its
effects on the nature of business.