It's a Good System That Makes a Successful Business

 

2023 is about to end and it's going to be 2024 any time soon. It's very easy to talk about New Year's Resolutions but why is system change hardly discussed? I run into people on Facebook who love to say, "It's just common sense that it's the people, not the system, that's the problem." That's the wrong type of thinking that hits people whether it's business or politics. I would like to discuss how systems affect business. Back then, I was challenged, "If you manage the business, can you do better?" My only answer is, "There's no guarantee." What I should've said is, "We must create a system for the business that will force anyone, not just me, to do better."

We need to define what a system is 

Does a system really matter? If you look at the definition of what a system is in this context, I can give the definition from the Merriam-Webster Dictionary:

1

: a regularly interacting or interdependent group of items forming a unified whole

a number system

: such as

a

(1)

: a group of interacting bodies under the influence of related forces

a gravitational system

(2)

: an assemblage of substances that is in or tends to equilibrium

a thermodynamic system

b

(1)

: a group of body organs that together perform one or more vital functions

the digestive system

(2)

: the body considered as a functional unit

c

: a group of related natural objects or forces

a river system

d

: a group of devices or artificial objects or an organization forming a network especially for distributing something or serving a common purpose

a telephone system

a heating system

a highway system

a computer system

e

: a major division of rocks usually larger than a series and including all formed during a period or era

f

: a form of social, economic, or political organization or practice

the capitalist system

2

: an organized set of doctrines, ideas, or principles usually intended to explain the arrangement or working of a systematic whole

the Newtonian system of mechanics

3

a

: an organized or established procedure

the touch system of typing

b

: a manner of classifying, symbolizing, or schematizing

a taxonomic system

the decimal system

4

: harmonious arrangement or pattern : ORDER

bring system out of confusion

—Ellen Glasgow

5

: an organized society or social situation regarded as stultifying or oppressive : ESTABLISHMENT sense 2 —usually used with the

It's effortless to say that it's not really the system, just the people 

I ran into a certain someone on Facebook (whose Facebook profile pic was using a Chinese actress and she claims to be of Vietnamese descent) comparing former Philippine president Atty. Rodrigo R. Duterte and former Philippine vice president Atty. Maria Leonor S. Gerona-Robredo. To her. Mrs. Robredo is proof that systems don't matter. However, Mrs. Robredo's late husband, Jesse Robredo, has an industrial management engineering degree from De La Salle University and an MBA degree from the University of the Philippines-Diliman. It's a shame now that some UP-Diliman students are so anti-reform when Professor Clarita Carlos is also a UP professor herself.

Am I misquoting the late Robredo? As a businessman, Robredo would understand it more than I would. I may not have voted for the wife but I do admire the husband. With his expertise in industrial management, I believe that his quote can be applied to anyone. I wonder if his books on operations management are still there. If not, I might as well buy the latest edition instead of relying on an out-of-print edition. 

There's operations management taught during my MBA days and my BSBA days. Each and every lesson talks about identifying the bottlenecks and correcting them. For example, one must identify what has caused a poor production process and rectify the whole process. The whole process is governed by a system. Any good manager will think more than just correcting the flaw. We need a good operations manager which is necessary. However, we also need a system that will force people to do good. 

Take a look at the components of operations management. Each one of them is a crucial component for success. It's not just costs and controls. It's not just requirements. It's not just control of input-output and resources. It's also about overseeing, planning, and strategy. That means a good system is focused on making all these areas work as a whole. 

The problem with waiting for the "right person" with a bad system, is pretty much like gambling. In fact, it's gambling. A good example is the Philippine elections. How often are Filipinos told to vote wisely but they usually don't. The real problem has to be with the system itself. It's because as long as the person gets the most votes (either by plurality or by majority), that person wins. For example. Philippine President Ferdinand R. Marcos Jr. won because he got the most votes. I even point out how often the Liberal Party of the Philippines never held UniTeam (Marcos Jr.'s team) accountable face to face? However, a certain political scientist only hurls insults at me, presumably due to his seniority-based arrogance. Some people are just too proud to learn something new, sticking to old successes, as if all old successes will be forever. 

Why a business depends more on the system to get the right people

A good system cares about the kind of people. However, if the system is left in shambles, it's going to be a gamble to get a good person. It's going to be like this. Rules define how people will act. A system contains sets of rules to follow. Managers and supervisors have their tasks. Entry-level employees have their tasks. The managers and supervisors are delegated with the tasks. The managers and supervisors rise up from the entry-level employees. To have good managers and supervisors, it's important to make sure that a good system governs every entry-level employee. If there's no unified good system, I can imagine the chaos that can come out from each and every branch manager. Sure, branch managers should have their creativity. However, creativity without control is just as bad as control without creativity. One needs to have some rigidness and flexibility to govern things well.

Whether we want to admit it or not, the old adage that says, "When the cat is away, the mouse will play." is still real. Who can remember their student days that much misbehavior happens when the teacher-in-charge is away? Fortunately, there was a delegation of authority. A Grade 3 Chinese language teacher soon got mad and said, "You are third-year students, not grade three students. Look, I and the Grade 2 Chinese language teacher are complaining. We are both having a class. Why don't you all go and get disciplinary notice?" Sadly, some people never outgrow such a childish attitude that when the cat's away, the mouse will play. Not even surveillance cameras will serve their purpose without a proper system.

From the Making Dough Show, I think this describes the problem with people-dependence over system-dependence:

We recently went through this season in our restaurant that whenever the manager is there, everything goes well and fast. The staff is out, and things are spotlessly clean.

But the moment the manager steps out of the restaurant, the team's standard suddenly goes down. It's as though people are quite not on top of it without supervision.

And this is quite alarming.

First of all, kudos to our manager for being well-respected by the team. In his presence, it makes a difference in the performance of the crew.

However, on the other hand, as a business owner, it is a point of vulnerability -I have a team that relies on a person (our manager).

This is the whole point. Any business establishment should be running based on a system. I would like to cite some restaurants I've eaten. The owner's not always there but the quality remains the same. I remember going to Shawarma Gourmet a few days ago. Its owner, Chef Mansour Houran wasn't there. However, the staff was still as organized as ever. I went to Little India and Bollywood Tandoor some time ago. I haven't seen their owners, Raj Prasad and Soni Vasnani for some time. However, the restaurant owners are still running things smoothly even without the owner. The same goes for every restaurant that has lasted long. It's because the owners put in a good system. A system where the performance of the people is more dependent on what the rules say than what a person says. 

The Titanium Success gives this insight into why a business' success depends more on the systems than just people without systems:

If your business requires that kind of a person, you’re always going to be putting too much out there because you’re going to be too people dependent and you do not want to build a people dependent system. You want to build a systems dependent company.

And when you have a systems dependent company and then you put really great people on it and you give them really great training, imagine how good that’s going to be. What it does, it also takes some of the pressure off of your people. Because they are following a system where they know that slight errors aren’t going to cause this entire thing to fall apart.

Those slight errors aren’t going to destroy the whole company. And so they come in, they’re more relaxed. And guess what, they make even fewer mistakes and isn’t that exactly what happens to you as you’re driving down the freeway?

Because you know you all have this margin for error, most of you drive down the middle of your lane. Of course, that’s unless you’re talking on your cell phone which you shouldn’t be doing, don’t do that. So as you’re driving down the freeway, you have all this margin for error which puts you in a state of being relaxed and being comfortable and calm so you can focus on staying in the lane and end up getting even better results.

But if the highway patrol has decided that they are going to give you 40% room for error as a professional driver and over 50% room for error as a normal driver, then imagine how much room for error you need to give your employee. This is a short episode because I want you to turn off this podcast.

Then as soon as you do, I want you to make a list of the most critical systems within your business. And what are you going to do to be able to make the systems so good that as your employees make mistakes they’re still going to be able to get the desired results.

It could be related to sales scripts, it could be recipes, it could be systems where things are done, it could be how many different people are involved in a process so that you have multiple eyes on something so mistakes are caught by other people.

But either way, that’s your most important job. In terms of getting to that 70%, but if you can create a business where anything in your business can be done 70% as well as you and still get results, you got a business that is going to be able to grow, expand and do all of that without your day-to-day involvement.

Just what you really want in a long-term because you don’t want to have a job where you’re working in a company that you own. What you really want is you want that freedom to have a business that doesn’t rely on you day-to-day.

That means even if the chairperson of the board should resign, get incapacitated, or die, the whole company still runs on the same principles. With a good system, the business will be reliant on principles, which in turn will determine the kind of people to get into it. The right people will do better only when the system makes them do better. After all, a system is a set of rules and people follow the rules. If the system is defective, then more people will be defective. If the system is effective, then more people be effective.