Small Business Management Information and Organizational Staffing

Different-sized businesses have different needs in terms of internal structure and systems, particularly during times of economic decline. As the entrepreneur adapts to changes in his or her competitive situation, the size of the business may vary enough to put it in competition with either larger or smaller competitors. Implementing systems to match competitive requirements is a necessary first step toward efficient organization and operation.

Management Information Systems

Small businesses usually enjoy the pace a smaller organization and a high level of personal involvement in decision-making. The systems typically in place range from a manual bookkeeping system inadequate in reporting timely developments to overly complex programs that require more attention than the small business leader can give. Therefore, the goal in a small operation should be to minimize company reliance on record-keeping as a chore and focus on the development of meaningful reports. With all systems tied together, the financial systems can work with marketing and operations systems. The reports generated can then be used by each department.

Accounting Information

Accounting information that should exist in at least a semi-automated form includes accounts payable, cash projections, expense estimating, and quotation systems. It is impossible to run an efficient operation with anything less than this skeleton. The payables are easily recordable as invoices are received and paid. Cash projections contain–at a minimum–information about loans, revenues, and disbursements. A basic expense estimating system posts invoice amounts  (direct costs) and allocates indirect  costs as appropriate to to specific projects or clients. Finally, a method of preparing quotes should be implemented to standardize pricing based on cost data.

Marketing Information

Marketing information should include inventory listings, commission agreements, advertising schedules, and research into market demand and competitor product offerings. Inventory listings are a natural by-product of the job costing (expense estimating) system and should include gross profit percentages, inventory age, and a measurement of the relative sales priority of inventory based on carrying costs. Commission agreements highlight the sales force’s expectations for representation of company products. Advertising schedules will help the business leaders plan for regular promotions. Finally, research into market demand and competitor product offerings will require periodic updates.

Operations Information

While accounting information is preferably computerized or otherwise automated, operations information, like marketing, need not be automated as a first priority. Information systems for monitoring operations include purchase orders, scheduling, and either timekeeping or job progress. A purchase order system is essential for cost controls, order documentation, and verification of amounts and qualities delivered. Finally, scheduling systems provide for systematic fulfillment of orders.

Organizational Staffing

Small businesses must determine the organizational development and staffing levels based on their need to delegate tasks and thus free themselves for critical activities. Office management, marketing and operations managers should be hired only after careful screening. These individuals need to possess industry specific experience and a good general feel for how your business works. Sales people and administrative staff are not innately qualified to work for a particular organization. When verifying references and conducting interviews, then, look for a match in values!

Office Management Staff

In the management of the office functions, organization and attention to details are essential. One or two well-trained individuals–preferably capable of performing each other’s jobs–should be enough to keep the internal operations running smoothly and to help with some of the company’s daily busy work when necessary. Ideally, these office employees should be able to handle accounting, calls, filing, and word processing.

Marketing Staff

The marketing staff need not consist of one or two well-trained individuals either. One person must have responsibility for digital marketing–all things web-based including website, social media, and CRM. The other should handle strategy and supporting sales and other executive staff on marketing issues, including advertising, branding, collateral materials, proposals, etc.

Operations Management

A team of one or two should again be sufficient. Depending on the size of the organization, the complexity of its operation, and the rate of growth, a good rule of thumb is that one manager should have responsibility for no more than five to eight direct reports. These managers should be expert in keeping work on time and on budget.

 

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Management: Information, Structure, Mission & Goals

 

Thorough management information systems can also aid the company in gaining a competitive advantage. By monitoring job progress, collecting data about percent complete against target, a good system can help the organization adapt more quickly to changes in either the internal or external environment. In the financial area, a proper system can eliminate much busywork, thereby allowing office staff and managers to focus on priorities, such as customer service.

Therefore, management information systems should be designed to provide the meaningful financial and operating information necessary to plan a company’s direction. The costing, pricing, and scheduling systems produce information necessary to control expenses. Similarly, work schedules, purchasing systems (purchase orders or the equivalent), and supplier files establish the framework for orderly completion of work according to budget. An accurate reporting system is required to maintain financial controls. However, many of these systems take on characteristics over time that may not aid the company in achieving optimal efficiencies. Only through review and analysis of the documented assumptions behind the systems and the logic of the systems themselves can the executive team determine whether reporting can be improved.

An illustration of one area in which management information systems can shape corporate planning is in inventory listings for a manufacturing or retail company. Inventory classifiable as old or having low margins can be highlighted for increased marketing focus to increase sales turnover. As sales increase, interest carrying costs diminish. Carrying costs include the cost of capital, insurance, theft, obsolescence, repair, financing costs, maintenance, and loss of use of capital.

Management Structure and Characteristics

The structure of a company contributes to its strengths and weaknesses. In turn, the form of management, motivation techniques, and employee job skills dictate the structure of the company. If management and employees are not motivated to perform their jobs or lack the skills to do so, the entire business suffers. Every company must be based on three essential elements:

  • mission statement
  • goals 
  • objectives

Mission Statement

Many executives carry their company’s mission statement around in their heads but fail to share it with employees in a way that encourages them to share the enthusiasm and commitment. Committing the mission statement to writing in language understandable by all interested parties lays the groundwork for the joint development of company goals and objectives. This mission statement should explain the product, the operating focus, and the distinguishing characteristics of the company’s vision. The statement should remain valid for the life of the company.

Goals and Objectives

Goals that take shape through employee input usually result in shared dreams. If the goals, objectives, and tactics needed to accomplish the mission are agreed upon by all at the outset, they become a standard against which performance can be judged. An example of a goal would be to achieve 15 percent market share in the Gen Y demographic in a certain geography within five years. An objective would be to sell X number of units in one to three years. A tactic would be to sell X number of units in a given channel in a given price range by a certain date within one year.

A review of organizational charts reveals much about the work flow in a given operation. The actual flow of work needs to be compared against planned work flow and adjusted periodically to achieve efficiency. In addition, job descriptions need to reflect reality and effectiveness. Employees should be asked to write both what they have been hired to do and, additionally, what they actually do. After receiving the employee descriptions, the executive team can draft job descriptions that promote effective work completion.

 

Turnaround Analysis Information Sources

Information for planning and analysis during a turnaround needs to be derived from both the internal and external environments. The internal environment addresses the management of the marketing, finance, and operations functions of the company. Business management controls these functions. This is primary information that should be at the fingertips of the executive team.

Sources of Internal Information

Internal information is gathered from employees, vendors, creditors, and the customers. This information generates a picture of the business, which can be compared to recognized performance standards. Marketing information requires research into demographics, psychographics, and analytics. Financial information comes from the accounting system and is augmented by other types of management information and reporting. Operations information is derived from supervisors, vendors, and subcontractors and compared against benchmarks. Benchmarking indicates relative performance; actual performance against internal standards is also necessary.

External Information

The external environment consists of economic, competitive, technological, cultural/social, legal/political, and geographic influences. Management cannot control this external environment is secondary by nature. It is essential, however, that the management team analyze this information and plan in light of predicted changes.

Strengths, Weaknesses and Opportunities

Determining a company’s strengths, weaknesses and opportunities is essential to successful implementation of the turnaround plan. Though some can freely discuss their personal and business strengths, most lack the objectivity to understand their weaknesses–and determine how to minimize those weaknesses and maximize strengths.

Many entrepreneurs have stumbled upon an opportunity and made some money. However, those who desire long term success use management information systems in the process of reorganizing their companies. Moreover, the best executive teams create a setting that enables goals and objectives to become a reality. Plans are modified through flexible strategic planning. 

Strengths

Business strengths are those innate qualities that produce a competitive advantage and hold value for the end users of the product. In the case of home building, for instance, the “bells and whistles” that attract prospective buyers may be as simple as quality landscaping or as complex as multi-member molding. Some clothing designers offer an edgy look or unique fabrics; others go for utility like pockets. The object is to determine a specialty or basis for market niche, brand identification, and reputation. It is often helpful to solicit the advice of experts to identify market wants and how to fulfill them.

Weaknesses

Despite the ingrained resistance to admitting shortcomings, those with declining businesses must be willing to discuss their personal and business weaknesses freely. The team can only restructure the business by implementing solutions to problems caused by these weaknesses. For example, outside salesmen and the marketing team are in an ideal position to obtain data about the market and the position of the company’s products in that market.

Meaningful information can be learned from these professionals if the team is patient enough to listen and hear a bit of criticism. By taking the input to heart and allowing the feedback to challenge established business practices, the team members profit from it. The purpose of this exercise is not to dampen enthusiasm for the product but rather to point out areas that need improvement. 

Opportunities

Understanding the local market is essential. Opportunities, particularly those for market penetration, should begin to arise out of a deep knowledge of the market. Buyer profiles by demographic and psychographic patterns can be prepared to assess the features and qualities buyers want. Such profiles can be developed with professional assistance at a minimal cost using secondary data. 

As trends in preferences for various geographic and cultural markets emerge, executive teams can predict how they can service customers by price range, features, and channel. Promoting products that meet identified needs is half the solution; the other half is to transition to offering more of what is in demand and eliminating what is not.