By Samuel Beard
Living in an age marked by increased information flows and advanced IT systems, the key to long-term organisational success is doing more with less.
The modern mantra of business and organisational success is no longer growth, in the traditional sense, but automation and delegation – that is to say, less emphasis is placed on increasing an organisation’s size, but how the organisation can get more done, without doing more.
The advanced nature of information gathering and business technology has not only made automation and job delegation easier, it has made it vital for long-term success. In order to recognise the importance of automation and delegation, it is important to first break-down what each task is; while both are similar, there are important differences.
Automation can be defined as taking a process, removing (in the most part) its human fulfilment elements by replacing it with computer systems. This allows for the process to be scheduled and controlled in a more streamlined manner, the added benefit of this is it reduces costs (no wage expenses) and saves time and man-hours (as the process will have already been scheduled, and man-hours can be delegated elsewhere). The net effect being a reduction of double opportunity cost – for more information on the subject, check out the article here.
On the other hand, delegation is more “human centric”, human centric insofar as the process (needed to be fulfilled) is outsourced to a party external to the organisation. Delegation frees up internal resources, such as time, to focus on other tasks.
While separate, both delegation and automation can be grouped together as systemisation. Systemisation should be the first priority of all organisations, whether these organisations are operating in the public or private sector.
Growth vs Systemisation
In both a macro and micro sense, growth tends to be pushed as the sole goal of all organisations; the logic being, that the more you grow, the more value you offer your stakeholders – be they: customers, shareholders, constituents, or the wider stakeholder body. There is only one problem with this strategy: it is wasteful.
Growth requires resources, capital of all descriptions: cash, human, and time, it is an investment in the truest sense of the word. However, investments represent risk, as it is a forgoing of resources in the present for the hope of greater returns in the future. The waste part, however, comes from the process of growing itself, as it is this process that requires planning, deviation from prior operational responsibilities, as well as the physical outlay of time, man-power, and cash. The bottom line is: growth requires a break-away from traditional activities, the kind of activities that generate value for stakeholders, whomever they may be.
Systemisation, on the other hand, is more operations orientated it is not so much “how can we expand?” in the same way growth is, so much as it is “how can we streamline what it is we are currently doing?”. Systemisation is building on what already works to make it work more efficiently, and maximize value; what must also be made clear, is that value is maximized through the limiting or elimination of waste. Therefore, systemisation is about limiting or eliminating waste.
For example, at the beginning of an organisation’s economic life, it is still developing its operations – there will be waste as said organisation attempts to find the right balance of human, financial, and time resources in delivering its value-offering. Once this balance is found, a system can be devised, and the automation and delegation of the systems elements can be put in place, to free up the in-house resources of the organisation.
It can be seen as trying to create a recipe, in the beginning stages, not everything works, but once that perfect balance of ingredients has been found, the process can be repeated, with calculable specificity – it can be systemised.
Systemisation as Growth
At this point, the sentiment could be felt as “anti-growth” and “pro-systemisation”. However, being pro or anti anything, from an organisational perspective, means losing all objectivity and missing the bigger picture from an organisational efficiency and value delivery standpoint. In fact, the paradox is – focusing on systemisation, means growth will not only be easier in the future, but more effective, as (through developing systems) waste can be minimised.
Systemisation should not be done instead of growth, it should be done for growth. It’s just a matter of course – doing one before the other (systemising), so as to get as much out of the other (growth).
Inefficiencies and the Scope of Developing Systems
The younger the organisation, the more emphasis that organisation should put on developing systems. However, even larger bodies should develop, or improve, their systems, so as to avoid diseconomies of scale – that is to say, the larger an organisation becomes, the less productive (or efficient) it becomes with its resources. Both automation and delegation can be used to cure this ailment, as well as develop a detailed course of action around how to avoid becoming affected by it.
Diseconomies of Scale is main enemy of the systemisation process – as with it, growth becomes meaningless (because resources are being used, yet they are not adding as much value as they should). The term diseconomies of scale however, is too vague from an organisational perspective, as it does not encapsulate the true nature of what a lack of systemisation leads to, a more succinct term is, simply, inefficiencies. Again, to break it down further, an inefficiency is purely when a resource (human, financial, or time) is not performing as well as it should, or it is creating waste for the organisation, and thus putting a strain on its stakeholders.
For example, an accountant splitting their work time (for the sake of example, 50/50) between the usual accounting duties and manufacturing activities. This leads to a 50% loss on both the manufacturing and accounting front – human resources are being wasted as you’ve got a specialist wasting 50% of their time in a non-speciality area. This is likely to lead to errors in the non-speciality area, which will create waste, and flow upwards to the stakeholders.
Another example, on a more organisational level, is a construction company splitting its time between (again, assume a 50/50 split) fulfilling construction jobs, and finding construction jobs. This creates a lack of specialisation, the company is accruing 50% waste in both areas, as there is a lack of specialisation.
The role of specialisation is not new in organisational and business management, nor is it to the wider field of economics, yet many organisations find themselves falling victim to generalising and trying to do everything, instead of focusing – to limit waste, and bring in a greater degree of efficiency.
A caveat can be recognised at this point – an organisation simply cannot specialise 100%, otherwise there would be no means of delivering value. Should the accountant not dedicate some time to manufacturing (on behalf of their employer, who happens to be a manufacturer of some description), then who else would. Likewise, if the construction company did not spend time (trying) to get construction jobs, then they would not deliver value to its stakeholder (no jobs, no revenue, no profits, resulting in unhappy owners – or beneficiaries of construction services).
At this point it comes back full circle, these tasks need to be completed, so systemise them – automate or delegate them, so as to focus on the core value offering, and maximise that value as much as possible. The accountant could automate the manufacturing process (through technology), and the construction company could delegate the sales and job finding process to a dedicated marketing or lead generation firm, both parties being free to dedicate most of their resources to their main value offering. In essence, maximising efficiency and eliminating waste.
It’s important to recognise that there are trade-offs when considering: specialisation, systemisation, and growth. These trade-offs are born from the resources that must be allocated to facilitating systemisation – for example, time will be saved through the delegation of tasks, but this will cost financial resources (perhaps more than what would have been the case had the task remained in-house).
Not seeing the financial cost as the sole influencing factor is crucial, because, remember, the goal is not to save costs, it’s to limit waste. If it costs more to free up the time and human capital of an organisation (to focus on core tasks and value offerings) it’s a viable trade-off, especially in the long-run, as this will mean the organisation is doing more for its stakeholders.
It all comes down to balancing the three aforementioned resources to achieve the best possible results, with the quantity and quality of resources available at any given time. Every resource should be audited, so as to identify what that resource should be doing – all organisational tasks must be scrutinised against the current priorities of the organisation, all staff members’ daily schedules must be audited to make sure they are using their time effectively, and working capital must be allocated towards value adding services and the development of systems/limiting of waste.
The aforementioned is an ongoing job, and such auditing must be done regularly, perhaps once a quarter, or bi-annually. This, in itself, may seem wasteful, especially as resources need to be allocated to the auditing process in question. However, it can be seen as an investment – short-term “waste” of resources, to mitigate against long-term waste: this is the trade-off.
Putting It Together: Developing Effective Systems
Perhaps the most important part of building systems is identifying what tasks need to be performed; the operative word in the previous clause being need – any and all tasks that do not need to be performed must be culled immediately. Identifying what needs to be performed will take time, one full revolution of the process must be gone through before the value of the task can be identified and appraised.
In order to determine value, a tangible means of measurement must be used, this can be done in four ways:
- Is money being made (how much)?
- Is money being saved (how much)?
- Is time being saved (how much)?
- Are man-hours being saved (how much)?
All tasks are centred around some or all of the aforementioned variables, and these numerical pin-points allow for efficient process appraisal and effective system development.
Every task in a process should be broken down in a flow chart structure, within which structure the following questions need to be asked:
- Can this task be delegated?
- Can this task be automated?
The above vetting guidelines represent a purely scientific approach to determining the value of a task (a lack of value would result in said task being cut from the overall process) and whether the value of that task can be maximised. Through systemisation: more money may be made, more man-hours gained, time saved, or money saved.
The waste limitation (or value maximisation) can be seen as the difference between the measurable variable (time, revenue, cost, man-hours) being expended/made currently, and the amount to be expended/obtained through either delegation or automation.
For instance, if a task expends three man-hours, and delegation meant those man-hours are freed, there is a saving of three man-hours (value adding). However, delegation would incur a financial cost (value reducing/wasting). There will always be a cost of some nature, it is just a matter of balancing the variables to make sure value is added, defined by the stakeholders and managers.
An outsourced task may result in a saving of three man-hours, and an increased cost of, £1,000 (+3 man-hours against -£1,000). However, the other side of the equation must be considered: what value can those freed up man-hours yield? This is the real gift of systemisation, a loss on the one hand will mean a gain (preferably dwarfing the loss) on the other hand. It is a simple matter of doing the cost benefit analysis and going with the option that has the minimal loss and the maximum gain. The key to determining this is an analysis of the task, and detailed accounting of the variables.
Systemisation over Growth
The future of organisational success is not in growth, but in systemisation. Organisations, be they for profit, not for profit, or public sector (or any combination of the aforementioned) should not strive aimlessly towards growth. Rather, the emphasis should be to systemise: make every resource go as far as it can in maximising value, and limiting waste in the process.
Too often a firm or organisation has plagued itself and its stakeholders with pursing growth as its sole objective – leaving stakeholders (be they shareholders or taxpayers) footing the cost of diseconomies of scale or wasted public resources alike.
A much more sensible strategy would be to systemise all organisational processes (to tighten efficiency), and then pursue a growth strategy, so that value can be further maximised through a pre-established, highly oiled machine.