Business scalability: effective procedures and policies essential. Incomplete or absent policies and procedures reduce efficiency, require individual attention to nearly every situation, and open the door to potentially devastating legal liability.

• Author: Brown, Andy
• Position: HR MATTERS

Joe started his marine parts business with high hopes; the market was ready and there was a definite supply need. He had sufficient capital and within a week he was taking orders. In a year, the company took off and he had to hire more people just to keep up with demand. He hired an administrative staff and still more employees. In year three he changed locations because he needed more space. His profits were solid and the outlook was great. Then in year four Joe noticed his margins were declining without apparent reason. There had been some turnover in personnel, but the overhead hadn't increased that much and the business model had remained essentially the same as when growth was fantastic. Joe conducted an audit and finances were in order but in spite of having more than 50 employees, he was not able to meet growing demand efficiently without incurring a higher cost per dollar. Looking at the trend, Joe saw that unless he could slow or stop the margin decline, growth would stop.

SCALABILITY

Joe's problem is not new and is, in fact, a normal phase in business development. A great idea and solid business model are only some of the tools needed to build an efficient organization. The businesses that are able to move beyond the slump are those that can scale their companies to grow efficiently.

The term "scalabitity" is typically reserved for technology and refers to the ability to efficiently accommodate increased demand. However, the principle can be easily applied in the business sense as well.

Comparing technology scalability to business scalability is, like all metaphors, imperfect, but the similarities are striking. Non-scalable technology adversely affects the bottom line by drawing away valuable resources. Additional time, money and personnel are required to maintain functionality when a system is not scalable. Incomplete or absent policies and procedures reduce efficiency, require individual attention to nearly every situation, and open the door to potentially devastating legal liability.

Making your organization scalable by adding effective procedures and policies to your business allows you to maintain efficiency and minimize margin declines, as well as increasing predictability for employees and guidance for supervisors.

PROCEDURES

Procedures define everything, and I mean everything, you do in your business. Whether or not you realize it, you have a procedure for everything from the methodology you use for bringing in new hires...