Mistake #3: Putting People Ahead of Process: Barriers to Scale

All too often businesses make poor people decisions:

1. Hiring unproven talent and hoping they work.
2. Tolerating poor performers: Moving ineffective people around an organization from one role to another impedes accountability, fosters cynicism and contempt among hard workers, and is a terrible waste of time. 

Promoting ineffective managers.

1. Hiring employees before validated processes have been implemented.
2. Hiring based on legacy thinking (“I need feet on the street” or “I need a manager”), feelings, and hope. 

The cost of labor is expensive; in fact, typically labor is the highest expense for labor intensive businesses. At Ephor Group we advise clients to not hire until an environment has been created which mitigates risk and ensures the new hire has the highest probability of being successful.  This means creating processes, systems, and assets the new hire can leverage to ensure their success.  Labor intensive businesses and those businesses that depend on the daily performance of their people require leverage in order to scale and grow. 

 

Additional economic reasons to put process ahead of people:

1. Labor shortage of “A Players”; small businesses and non-VC funded companies must build processes around “B Players”
2. “A Players” are difficult to find and retain. Small businesses simply cannot afford to pay top dollar and compete with large corporations for talent. 

When an organization lucks into an “A Player” they will reap the benefits.  When they build and optimize for “B Players” they ensure success. To create scale businesses must create repeatable processes that achieve results because of their process-orientation.  That is that the process leads to delivering more value at a lower price point, but yet stills achieves profitable margins. 

 

The Most Common Management Barriers to Scale:

1. Event or task orientation as opposed to process orientation
2. Ineffective leaders promoted to an environment with low probability of success 
3. Poorly trained managers
4. Lack of definition regarding organizational values and principles, lack of a common culture, ineffective policies and procedures, unacceptable cultural norms.

Today’s management challenges represent a significant opportunity for those organizations that can simultaneously address the change management challenge required while retooling for 21st century management.  Creating wealth requires unique business models with a compelling value-proposition supported by a scalable model that typically includes: a) repeatable processes, b) recurring revenues, c) raving fans as well as a “branded platform with franchise effects.”

 

Fact: Organizations that measure and report on key operating indicators outperform their peers 2:1.

Key Organizational Drivers for labor-intensive businesses: