What Is a System?
It's the Reason You Hire People
I went over the 4 parts of a function or system in the Twitter thread that may have led you here. [Follow me there @BetterCEO]. Here I want to take a step back to look at your company from 30,000 feet. But first I'll repeat the Twitter thread for those who found this article another way. Scroll down if you want to pick up where the thread left off.
Why do you hire people? To perform some work and produce something. It's useful to give names to these "things" so you can build them into repeatable systems. Here are the names I use.
Functions are the names of the work people perform to produce outputs. When those functions are repeatable, I call them systems though the terms function and system are sort of interchangeable.
A function has 4 parts and it's done by elves. We'll get to the elves in a minute. But first the 4 parts.
Let’s use payroll to illustrate
Trigger = the day you do payroll
Input = hours & salaries of people for the pay period
Transformation = the calculations that the payroll service performs
Output = money to people's bank accounts, reports & tax forms
Let's work backwards.
The Output is THE MOST IMPORTANT PART.
It's the reason you hire people to perform the function in the first place. Poorly defined outputs are the cause of most management problems because outputs (not people) are the building blocks of your company.
If you had elves for employees & they only worked at midnight while you slept outputs are what you'd see to indicate if they were there and did a good job. Do you & your people know (and agree) what outputs you want from them?
TRANSFORMATION is what people do to produce the output. It's what's most commonly documented in SOPs and training. This is where processes and procedures live. Obviously important but if the other 3 parts aren't documented it's insufficient to document only this one.
INPUT is what people need to do the work. It's what they do the transformation ON - the ingredient list in a recipe. It's what's required to even start doing the work. Often the input to one function is the output of a previous function.
TRIGGER starts the function. Could be a day / time. Or an event: a customer makes a purchase. Or a condition: temperature reaches a certain level. Very important to define this well so everyone knows if a function is supposed to start or not.
-=-=-= END OF TWITTER THREAD -=-=-=
Why are Outputs (not People) the Building Blocks of Your Company?
Because even though outputs are produced by people, the outputs don't move around like people do. Good people are promoted, bad ones (hopefully) leave and even some good ones leave for reasons you can't control. But the outputs are critical to your company's ability to survive (and thrive).
Here's how I know. When someone is out sick, or leaves, you don't just ignore the outputs they were producing. You have the most critical ones done by someone else. If the absence is temporary, you might be able to defer producing some of the outputs. But any that don't need to ever be replaced probably shouldn't have been done in the first place.
Defining Outputs is the Most Important Job of Managers
And it's really hard for knowledge work. The problem is your "good" people often produce outputs they weren't explicitly assigned. They "figure it out." Sounds great right? But it makes them hard to promote and the company hard to scale. Better to do the hard work of defining the required outputs so you can promote people faster and train their replacements better.
Output Fall into 4 Buckets
At a high level, every output produced by every function or system falls into one of four buckets. It serves either to:
MAKE something customers want to buy.
To find those customers and SELL to them.
To SUPPORT the making and the selling by tracking the money, providing facilities, HR etc.
To GROW the company into the future.
If an output isn't supporting one of those ultimate functions, then (even when it's a legitimate tax deduction) it's more of a lifestyle choice than a business choice. Not that there's anything wrong with that. Just something you should be aware of.
Comment below with your thoughts.