~ 7 MIN READ
How To Build A Management Operating System For Your Small Business
Feel like your small business may be spinning out of control? Here’s how a management operating system can help.
Whether your small business employs 20 people or 200, you may feel like you’re running an empire. Enthusiasm abounds, but there may also be chaos in the form of communication issues, alignment challenges, and a constant sense of outgrowing your current processes—what worked for 10 or even 100 clients no longer works for 500. And every time you turn around it feels like you’re investing in a new HR, CRM, or finance system. Sound familiar?
What you’re experiencing is growing pains—growth itself is weighing your nimble organization down and it’s becoming harder to keep your fiscal head above water.
Imagine having a flexible system that allows your team to focus on what’s important, stay on the same page, and keep track of your progress toward goals. A management operating system (MOS) does all of the above. So what exactly is an MOS, and how do you implement one? Good questions—keep reading to find out.
What is a management operating system?
A management operating system is a business framework by which an organization operates, aligns activities, and makes decisions for the purpose of improving performance. The most common type of MOS is the Balanced Scorecard, which links organizational goals together in a logical way. You can then track those goals with measures (indicators that demonstrate your progress), and link projects to goals to drive performance. One of the most valuable elements in the Balanced Scorecard framework is the strategy map—a visual representation of the various perspectives of your strategy and your objectives in each. Strategy mapping communicates your plan succinctly, and in a “language” everyone in the business can understand.
Download these five sample Balanced Scorecard strategy maps and use them as inspiration for building your own management operating system.
The Balanced Scorecard is a powerful tool for understanding past performance and predicting future performance. But whether you use the Balanced Scorecard or another type of small business operating system, defining goals, having measures of progress, and linking your activities are all considered critical components to success. For small businesses in particular, management operating systems help everyone (even new hires) stay on the same page as you pursue opportunities or make adjustments to your strategy.
How To Build A Management Operating System
There’s no management operating system template, but there are two essential parts to building one: 1) identifying and linking the foundational elements (goals, measures, and projects), and 2) tracking progress. Let’s take a look at each of these parts in more detail.
Part I: Identify & Link The Foundational Elements
1. Define your big, hairy, audacious goal (BHAG).
Coined by Jim Collins and Jerry Porras in their book “Built To Last,” a “big, hairy, audacious goal” is a term that describes a bold, stimulating mission that serves as a unifying force for your organization. It’s audacious because it’s bold (more than just “make more than we spend”). It’s hairy because it's tangible (the opposite of “becoming a thought leader”). For a small business, some examples might be:
- Doubling sales next year by introducing new products
- Becoming the industry leader in sales within three years
- Attracting 1 million new visitors to your website
Your BHAG is central to your overall strategy and should align with your organization’s advantage (also called your value proposition) and scope (relevant area of opportunity). Considering all three of these elements together gives you a clear and concise strategy statement that underlies your management operating system.
2. Build your strategy by defining a set of goals that align with the BHAG.
Next, you’ll need to determine how the organization will accomplish the main objective. Build your strategy by developing other goals that support the BHAG. For example, if your goal is to double sales next year, you may want to make an additional goal of hiring x more salespeople to make it happen. Whereas large enterprises may have 15 goals that then cascade down to divisions and departments—ultimately creating hundreds of integrated goals—small businesses might have just one set of five to seven goals. The entire organization aligns around those goals, so everyone is focused on driving the business in the right direction.
As noted earlier, the Balanced Scorecard isn’t a necessity, but it is a comprehensive framework that reminds you of the four distinct (but connected) perspectives that must be considered to achieve almost any goal:
- internal processes
- people skills and culture
Work with your leadership team to develop a cohesive strategy that fully considers all these areas, and links goals together into a single story.
3. Add measures and targets.
Your goals define what you’re doing; your measures indicate how well you’re doing at reaching those goals. Here’s more information on how to determine what to measure; we recommend keeping measures to a minimum because you will need to collect this information regularly.
Going along with measures are targets, or key performance indicators (KPIs). These are used to communicate the level of performance you’re trying to achieve. So if you’re looking to double sales in the next year, you need to set periodic targets to ensure you’ll reach that BHAG. If you aren’t meeting those periodic targets, you’ll know you need a course correction to have a chance at achieving your goal.
4. Link key projects and activities to your goals.
The projects your small business chooses to pursue should all be in the interest of reaching your larger goals. This may seem obvious, but there’s often a disconnect between projects and goals, which takes away from the effectiveness of projects and splinters the focus of your workforce. Therefore it’s important to link projects to goals so your team is continuously (and enthusiastically) working to help deliver the BHAG.
Part II: Implement The MOS & Track Progress
Once you’ve done the hard work of defining your goals, identifying measures and targets, and linking projects with activities, it’s time to put the management operating system into play. As a small business, you want to keep things as simple as possible to decrease the burnout that sometimes occurs as a result of implementing overly complex processes and tools.
To ensure your small business operating system delivers the results you expect, do the following:
1. Make sure you have owners for the components (goals, measures, and projects).
Who's responsible for what? Assign owners to each part of your strategy; otherwise, no one will take charge and make sure things get done.
2. Define a reporting process—monthly or quarterly?
Reporting may seem like a lot of work, but it pays off. Reviewing your progress toward goals is both motivating and enlightening—and helps you make better decisions for growth. For a small organization that is rapidly changing, a monthly reporting cadence might be best because you can adjust your strategy using your MOS. Other small organizations may find that quarterly reporting is sufficient.
3. Build a report that allows you to quickly review information.
You don’t always want or need to see detailed progress information. Create reports that summarize high-level goal information and show linked measures and projects. If you’re not on track to meet a particular goal, you can always dig in deeper to the relevant project metrics to diagnose the issue. During review sessions, we recommend focusing on one goal at a time with an intent to drive decisions, not just report on information. For example, when looking at the image below, we can see that maintenance costs have been escalating over the last four months.
It’s one thing to acknowledge the rising cost and say “we need to get this under control,” but it is another thing to understand why it is happening and build a plan to control it. The business owner in this situation might propose consolidating to one maintenance contractor, bringing maintenance in-house (or outsourcing it if it is already in-house), or conducting a maintenance audit to see where expenses are growing above expectations. Any of these actions are appropriate during a strategy review meeting, and looking for solutions is much more productive than just acknowledging issues. This type of thought process may seem easy, but think back and see if you followed it during your last meeting.
Even for small businesses, reporting software like ClearPoint can be very helpful. It automates much of the reporting process, encourages consistency in reporting, and helps maintain steady focus on the larger goal.
Specifically, ClearPoint’s solution is capable of:
- Pulling data from multiple systems so you can manage your strategy-related information in one place
- Automatically calculating measure evaluations so you can easily see how you’re doing
- Sending automatic reminders to owners of various components to report on relevant information periodically
- Automatically generating and distributing reports
- Showing links between the different elements of your strategic plan to ensure alignment
Whether you’re a small business with a single scorecard and just a few people collecting data or an enterprise with a multi-layered management operating system, ClearPoint can meet you wherever you are.
4. Link your budgeting process to your strategy over time.
While large organizations strive to account for every line item or expense, produce and analyze multiple variance reports, and integrate expense tracking software into their systems, small businesses should focus on the basics. It’s more critical to recognize when something foundational in your business changes—for instance, if your company can no longer rely on crucial face-to-face interactions as the result of a pandemic. In that case, you need to pivot. That might mean some expenses will shift from one area to another. It isn’t necessary to have a completely integrated budgeting process, but it is advisable to revisit your budget periodically to ensure it aligns with your current strategy.
Position Yourself For Future Growth
Management operating systems are meant to spur success, so it’s important to invest time and effort in building one that can grow right along with you. The Balanced Scorecard framework has been adopted by many companies because it can be easily used with a 20-person small business as well as a 200,000-person enterprise. No matter the size of your organization, you’ll always need processes and tools to manage growth, so you can stay focused and continuously improve performance.
If you’re part of a small, growing company and would like to learn more about how strategy planning and reporting looks with ClearPoint, ask us for a quick tour! We’d love to help you get started on your path to growth.