Systems = Success – Part 1
by
Tom Grandy, president Grandy & Associates
Let’s begin our discussion on why systems are important to your company by reviewing a couple little know, but true statistics. These are not my numbers, these are published numbers created by none other than your own federal government. Did you know that 86% of all companies in the United States of American have 25 employees or less? Think about that for a moment. Eighty six out of every 100 companies are owned and run by individuals just like you and me. These companies are the basic fabric of this nation so surely there must be classes taught in high schools, trades schools and colleges all across the land on how to run successful small companies. However for the most part there is no where to go when it comes to learning how to run a bakery, small retail store, a restaurant or in our case a trades company. The lack of educational opportunities, when it comes to running a small company, can only mean one thing. It must mean it is relativity easy to run a small business. If that were not the case lots and lots of training would be promoted all across the land. Right? Wrong! Let’s review statistic number two, again provided by you friendly federal government. According to the government 90% of all the businesses that start up this year will fail the very first year. That’s right. Ninety out of every 100 companies that starts up this year will fail within 12 months. Worst yet, only 1 company of out a thousand that start up this year will ever see its 20th birthday. Man, that is a real confidence builder when it comes to starting your own company. Now the question is “Why do they fail?” Well according to Uncle Sam they fail because of poor paperwork. In other words the typical company owner knows what to physically do to provide the product and/or service but very few understand the business side of business.
Well we now know that 86% of all companies have 25 or fewer employees and we also know that most fail within the first year or so of being in business. Armed with these statistics I can hear the words of my dad ringing in my head. He used to say “Son, if you want to be successful simply find a need and fill it.” Sounds logical doesn’t it. We know the need is there so how has it been filled, at least for a select few? Does the word “franchise” come to mind? Many years ago a few sharp individuals saw the need and began filling it. They created the franchise industry to teach individuals how to run small businesses of all kinds using a “system” to run the company. Has it been successful…..well lets again look to Uncle Sam for the answer. Isn’t it good to know your tax dollars are not wasted? Isn’t it great knowing that while you are sleeping your close friend Sam is spending hundreds of thousands of your hard earned tax dollars to provide you with statistics you didn’t even know you needed! Wow, it gives me a warm fuzzy feeling just thinking about it. Oops, a bit off the subject. So what did Uncle Sam find out? He found out that 97% of all franchises make it through their first year of business and he also found out that 95% of them make it through their first five years. Those statistics are a bit different than the “normal” business startup. So what’s the difference between the two? In a word it’s systems. Franchises have done their homework, found out what works and what doesn’t, and then they have taken the time to document the process so it can be repeated over and over again. The results? 97% of franchises make it through the first year of business and 90% of all other companies fail within the first year. There must be something positive about putting systems in place.
Many years ago when my youngest daughter was in high school the annual fund raising season was upon us. Most years the youth, with the strong physical and financial support of the parents, were asked to sell candy, magazine, doughnuts and other overpriced and basically useless items. This year was different! This year the youth were asked to pre-sell pancake breakfasts at McDonalds good for one specific Saturday morning. That was what the students were asked to do. Now for the catch, the parents, yes it always seems to come back to the parents, were asked to actually go to McDonald’s that Saturday morning to cook the pancakes. My first thought was “I can’t boil water much less cook consistent quality pancakes – in volume.” However, being a supportive parent we not only bought enough tickets to feed the neighborhood but I also agreed to cook.
As that special Saturday morning approached I became a bit more anxious about cooking. The parent volunteers were asked to be at McDonalds 45 minutes before the event began to “learn how to cook perfect pancakes every time.” The day arrived and there I was with four other parents thinking of 27 ways I could, and probably would, mess up the process of cooking even semi-acceptable pancakes. My wait was short. The manager soon arrived, introduced himself, and announced that in a short 5 or 10 minutes we would all be able to produce perfect pancakes….every time. I chucked, silently, but was ready to learn. First the manager showed us an empty stainless steel container which had a mark on it about four inches from the top. Next, he proceeded to open a cardboard box filled with individual packets of pancake mix. He then instructed us to open one packet and empty the contents into the stainless steel container. Once emptied, we were to then add water to the mark I described earlier. The container was then placed in a mixer and allowed to “mix” for a specific period of time. The batter was ready.
Now it was time to cook. We were taken to a flat surface stove with twelve dots on it. Each dot was numbered. Number one was in the upper left corner of the stove top, number two was below it and number three was below number two. The fourth dot was again at the top of the stove top to the right of spot number one. The process continued with rows and columns until all twelve dots covered the surface. We were then shown a special pancake dipper. It held the exact amount of batter for one pancake. We were told to dip the batter and to place the batter on the dots, in order, beginning with dot number one. The process was to continue until all 12 dots were covered with one dipper of batter. Once covered, we were instructed to press “Timer Number One” above the stove. When the timer went off we were to begin flipping the pancakes, but NOT randomly, we were to flip them in order beginning with spot number one. When all twelve were flipped we were instructed to press “Timer Number Two”. When timer number two went off it was time to remove the “perfect” pancakes, but again in order, beginning with spot number one.
It worked, the system really worked! Within a very short period of time I was making perfect pancakes by following a predetermined, proven, system. What were the benefits of the system?
• Consistent quality product was presented to the customer no matter where, or by whom, the “pancakes” were made.
• Any employee with a minimum of education and/or ability could do the job…..at a lower pay scale (more profit) to the company
• If a problem did occur with the pancakes all the supervisor and/or employee had to do was review the system to see what went wrong. When the system pointed out the error in the process the necessary correction would be made and the process of producing high quality pancakes for the consumer would be back on track.
• With systems in place for the entire business overall quality and profitability were assured.
What kind of person purchases a franchise like this? It is typically a doctor, lawyer or successful business person. Do they run the business on a day-to-day basis? Absolutely not! They hire management people and send them to McDonalds University in Chicago to learn the “systems”. Have you ever been to McDonalds University, sometimes known as “Hamburger U”? I have, and it is an amazing place. It is just like any other college campus with classrooms, dorms and labs. I can still remember walking past the “Milk Shake Lab” followed by the “Hamburger lab” just a few short steps down the hall. Each classroom will filled with students learning new systems to put into place when they got back to town. The business classes taught managers how to track costs and how to adjust pricing if, and/or when, the profit margins began to fall. It was amazing to see real people being taught how to run real companies to generate real profits.
Next month we will continue our discussion of how systems equal success by making a few parallels between McDonalds and your company. We will also talk about how to create those systems and we will look at the long terms benefits of making the investments in those systems.
For more suggestions on how to run a profitable business you might want to consider attending our three day “Basic Business Boot Camp”. Give us a call for details or check it out on our website at www.GrandyAssociates.com
Grandy & Associates
One Executive Blvd.
Suite LL-4
Owensboro, KY 42301
Phone: 800-432-7963
FAX: 270-684-7425
E-mail: TomGrandy@GrandyAssociates.com
Website: www.GrandyAssociates.com
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