Simple systems

Having run a small marketing agency for a number of years, I am quite sensitive on the subject of red tape.  What is probably a perfectly rational allocation of tasks between central administrators and individual businesses often appears to be a tortuous straitjacket of requirements, designed to frustrate. 

I used to employ several thousand staff each year, but for often very short periods.  In reality they were freelancers, working for a whole range of agencies, but regulations designed for a different purpose meant that we had to create PAYE records, give them contracts, offer them pensions, allocate holiday pay and later actually figure out how someone working for only one day can actually take the holiday they were now entitled to. 

We would stick to the letter of the law, but the benefit to those companies who flouted the regulations was not just monetary.  They were able to concentrate on their business, which in this case involved being creative.

The debacle over the scrapping of the ’10p’ rate of tax brought this back to mind.  Realising, too late, how much administration it would create to compensate 5.3 million individual people with the collective £700 million they have lost, the government was forced into throwing a staggering £2.7 billion at 22 million people instead.  This achieved by the next simplest means available (after a simple 10p tax rate) of raising the standard personal allowance by £600.

My point is not a political one (though I’ve long held that were the UK a company, a better business decision may have been to fire the CFO rather than make him CEO) but to make us think about the systems that we employ in our companies. 

The information we use to run our businesses has to come from somewhere and knowing how frustrating it can feel to have policies dictated to us, we should ask ourselves some simple, sober questions.

Firstly, what management information do we really need?  Current profitability by job, by client and by product, staff utilisation, cash at bank, net flow of cash this month and cash-flow projected forwards.  These should all be fairly simple numbers to access and they give us information that helps us drive our business rather than be driven by it.  Companies do vary in their requirements but if you’re missing one of these it is worth a simple review.

Secondly, what information do we gather but not really need?  Someone who is compiling non-essential information is a wasted resource.  A hamster on a wheel.  Spreadsheets full of data have a role to play so long as they genuinely tell us something.  If not, stick to simple figures. 

When you glance at your watch for the time, do you look to see where the second-hand is?  Sure, it’s more exact and if you were timing a race car it would be essential, but most of us get a sufficiently accurate picture from a glance at the hour-hand.  If it’s not where we expect it to be we can always delve further.

One of the great things about reviewing the information you need is the opportunity to engage with the people who work for you.  By engage, I mean asking their opinion.  Many of you will do this without thinking, but for those who don’t, give it a go.  You’ll be surprised how much your staff know about the business, know about things that you thought were secret and above all, by how much they care.

They care that they are not treated as hamsters performing a meaningless task, although they’ll do it because you’ve asked them to.  They care that you don’t throw a load of money at a problem to save face. but they won’t suggest better ways to tackle the problem unless you engage with them.

Get a firm grip on your simple numbers and free up the combined surplus brain power to concentrate on the business in hand.  Which in an SME should be making money.

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