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Are You The SPOF In Your Business? Read This To Find Out

Posted by John Boudreau on May 4, 2017 3:10:37 PM

In this new multi-part series, I am going to speak to the common pain points that small business owners face. How do I know these are common? Because I see them over and over again in businesses from $1M in revenue to $25M in revenue. If you are a small business owner, chances are you've experienced these problems, so I thought I'd share solutions to each.

The first problem I'd like to discuss is the "SPOF" problem.

What Are The Symptoms?

  • When someone calls or emails you, it takes you forever to get back (if you ever do).
  • You are in constant fire-fighting mode.
  • You over-commit and then don't follow through on your commitments to customers, vendors, employees etc.
  • You go home each day worrying about all the many details of the business.
  • You worry if that prospect will say "yes."
  • You worry about how you will deliver on the next big project.
  • Your family is forever wanting you to take a break, but you can't seem get away.

 

I've noticed that some business owners are really good at juggling multiple items. If you're a newer business or start-up, this is just the way it is, but as you grow above $1M in revenue, it cannot stay that way.

I've heard some business owners even talk as if this is a badge of honor, literally resisting handing things off to other people. Maybe because they've been burnt in the past doing so.

But I am here to tell you that if this is your life, something is wrong. If you cannot respond to an email or call in a timely manner, something is wrong. If you go home stressed every day, something is wrong. If all roads lead to you, something is wrong.

Let me give you an example. Recently I was hired to consult for a 50 person company. They brought me in to help them develop an organizational structure (they realized something was wrong). Everyone reported to the CEO. Everyone. Now how productive do you think the CEO was? Not very. All roads led to him, and of course the organization knew there was a problem, but when 50 people are reporting to one person, there isn't a high degree of accountability going on and many of the employees really didn't mind.

Now every business goes through momentary times of stress and distress that they need to navigate out of, but if you've been living like this for a long time, something needs to change.

So, what is the root cause all these issues? Let me tell you what it is NOT. It is not that you don't have enough sales, it is not that you can't find the "right" employees, it is not that your industry is unique, it is not that you don't have enough time, and it is not that your customers are unusually demanding.....I hate to break it to you, but it's YOU.

You are the SPOF, the "single point of failure". The good news is that there are steps you can take to get off the merry-go-round of insanity (doing the same thing over and over and expecting different results).

According to Wikipedia, a single point of failure (SPOF) is "a part of a system that, if it fails, will stop the entire system from working. SPOFs are undesirable in any system with a goal of high availability or reliability, be it a business practice, software application, or other industrial system."

So how do you stop being the SPOF in your business?

Here are 5 steps to take to stop being the SPOF in your business and in turn, avoid that long list of problems at the beginning of this post. Here's a little warning, these steps are difficult, but no more painful than the stress of being the SPOF is causing you.

Step 1 - Identify Your Initial Leadership Team

Chances are you already have a "team". You have employees who are focused on specific functions in the business: admin, sales, production, customer services etc. You need to develop some sort of organizational structure which allows you to begin distributing the decision making in the business. If everyone is always checking with you to make a decision, that is a problem. You are the SPOF. If business grinds to a halt when you're not in the office, that's a problem. You are the SPOF.

Determine who is on your leadership team and move forward.

Who should be on the team? The employees that are currently leading the core functions of your business.

You can see an example below of a very basic organizational structure where the core functions are finance / HR / Admin, sales and marketing and operations. Your business may be slightly different, but the team should include those employees that are (at a minimum) leading the core functions of your business.Basic org structure.jpg

Note: Each member may not have all the skills you'd like, but you need to operate the business as a team. You must start somewhere.

The key here is to focus on the core functions in the business that deliver value to the customer and define the key responsibilities for each core function. I often find that employees are busy, but not productive because these core functions have not been defined. Employees (even ownership) are working on things that don't deliver value.

Take operations for example. Who in your organization is ultimately responsible for the successful delivery of your product, ensuring the customer is happy? If that's not clear, you'll find that either the customer is not getting what they were expecting resulting in high customer churn OR the customer is getting too much, driving down profitability and running the team ragged. This dynamic is often the source of many small business fires. You need sales and operations as two separate functions to balance this tension.

Step 2 - Develop an accountability chart that the team agrees to

Once you've identified your leadership team, you need to create an accountability chart. I've written about this before and you can download a FREE accountability chart below.

Download Your Free Accountability Chart

You need to drive clarity around the top three responsibilities for each core function that your team members are filling.

You will most likely find that you or someone else on your team is "wearing too many hats". You may also find that your expectations regarding an employee's responsibilities does not match their expectations. This simple exercise can drive a ton of clarity.

Step 3 - Identify Gaps In The Organization And Seek To Fill That Role (make sure you have a financial model or budget in place)

You may find that you are really not equipped to handle one of your responsibilities and neither is anyone else on the team. You may need to hire someone for a role or two. You might even decide to remove some responsibilities from some people and add responsibilities to others. This is not an overnight process, but one that takes time.

Hiring is an area where small business owners get nervous. "I don't think there is enough revenue to hire someone,” they say. To which I ask, "Do you have a budget or a projection for the year". They say, "No, we don't have one.” So, they are trying to make decisions about the business without the critical information they need to make the decision, so they don't make a decision and stay in SPOF mode. If you had a financial model or budget, you would be able to make these decisions.

Remember the core functions I described above. One area I see small businesses under-value quite often is the finance function. If you don't have good financial statements you are going to be flying blind when trying to make decisions to move out of SPOF mode. If you don't have a budget and are not reviewing your financial statements at least monthly, you need to start doing that right away. There are many reputable outsourced CFO services that you can employ who can help you get clarity on the financials of your business.

Once you've defined the gaps in the organization that need to be filled, plug that into your financial model and determine the impact. Often, when the owner has things removed from their plate, they can be more effective and focus on increasing revenue.

There may also be issues with the operating model of your business that can be optimized (which you won't know unless you have solid financials).

Step 4 - Meet As A Team Weekly And Monthly

I've written about this before, so I won't go into it too deeply here, but you need to get into a monthly meeting rhythm with your team to discuss the business and how the team is executing on the expectations for each role.

If someone is ultimately responsible for sales, how are they executing? Do they need any help from the other members of the team? Whoever is ultimately responsible for the financial performance can bring data related to cash flow and profitability. Why was a particular project so unprofitable and what could we do about it? What about customer complaints? How do we keep our customers happy? What is the root cause of the client's issue?

This is where you begin to off-load your day to day concerns of the business onto the other members of your team. They help to carry the load and solve the problems. By the way, that's why you hired them in the first place right?

Step 5 - Get Strategic And Develop A Plan As A Team

Once you've been operating as a team for several weeks, it's time to pull your heads out of the day to day operating of the company and begin to think strategically.

I suggest an all day off-site where the team gets together to plan for the next 12 months. This is where you leverage the collective intelligence of your team and get their feedback on the most pressing strategic issues the company is facing. This process is like building muscle. It takes time and practice, which may even feel a bit awkward at first. Your team will be tempted to focus on the tactical day to day issues. Having someone help facilitate this process can be really helpful.

There is much more that can be written about this topic, but I assure you if you implement these steps you will cease being the SPOF in your business to reap the rewards and peace that comes with operating as a team.

Need help implementing this process? We can help.

How are you getting pulled into being the SPOF in your business? Let us know in the comments below. 

 

 

 

Topics: single point of failure, SPOF, org chart, organizational structure