02 Dec
binders-full-of-procedures

Binders Full of Procedures

Forming an organization’s structure is a difficult task for any entrepreneur to tackle – especially when he is just starting out. However, forward thinking allows for a small business owner to understand the steps necessary to bring his concept to fruition.

I have recently met with two founders, both of whom are experiencing similar dilemmas on how to best scale their businesses. Specifically, both are looking to hire their first few employees, but have concerns about which specific responsibilities should be included in a job title. Like many first hires (or second and third), the position requires the employee to wear many hats.

The E Myth, by Michael E. Gerber (1986), describes The Turn-Key Revolution as a method to grow and expand a successful business. Specifically, Gerber describes the processes of outlining an organization’s chart, determining all future job titles, defining each position’s future responsibilities, and over time, formalizing the processes to correctly complete the day-to-day responsibilities for each job. All processes for each job are to be organized in a separate binder.

When starting a business, all job titles and their associated tasks are the responsibility of the founder. Thus, outlining the organizational tree is an exercise. Once the tree is established, each position is outlined on a single sheet of paper. 300 sheets of paper represent a 300-person firm, each including a job title, description, and the individual responsibilities.

As the founder begins to solidify best practices for each task, he formalizes the process by recording the method used to complete the task. Each job’s individual task instructions are organized within a binder. The theory is that once an owner has the capital and need to hire an employee, he can hand off a combination of formalized binders and individual sheets of paper. If he was completing the work comparable to a future 300-person firm, he has now divided the responsibility between himself and the new hire.

Having processes set in place creates consistency. Hiring from the bottom up allows for two future benefits:

  1. Future managers and directors have an understanding and respect of junior responsibilities and the time involved.
  2. Subordinates have a mutual respect for their managers having worked their way up from their current position. Hiring from the outside for upper-management can sometimes cause hostility from those employees under the impression they were qualified to be promoted.

A first hire is a large step in any young business. While a number of processes are formalized, a larger number of responsibilities are not yet determined and a founder must trust his new employee to take a job description and its responsibilities and create an instruction manual. However, with each new hire, formalized processes are taken over by a junior member of the organization while a now senior member of the staff – who determined the process – is promoted to manager.

Solving a top-down problem with a bottom up solution allows for small businesses and startups to focus on innovation, rather than business operations and culture. Creating structure from day one ensures successful growth.

My advice to the two founders was simple: look for potential hires with senior level skill-sets, but focus on selling them on the business’s vision. By having them fully invested in the long-term success of the venture, they will be invested in formalizing junior level processes and shift upwards within the organizational chart as the business grows. First hires should always have the potential to be senior management.