The business as an organization

A woman with a laptop leaning against a server room window.
Photo by Christina @ / Unsplash

Often the words business and organization are used to refer to the same entity, yet when you take a closer look you realize that these encompass two distinct concepts: A noun business and the verb to organize.

The noun: business

Since a perfect, absolute measure of business performance doesn't exist, we're forced to use a proxy. Profit is relatively objective and, barring the complexities of accounting, readily available. More profit is strictly better than less profit, all else being equal. Sustainable and sizable long-term profitability is a strong indicator that the business will exist at some point in the future.

With that in mind, our analysis of business performance can be simplified to a single number: the (estimated) present value of all future profits. The challenge here, of course, is that the future is unknowable. Low probability events can have a tremendous impact on long-term profit both positively and negatively.

Capturing short-term profits and protecting long-term profits is a two-fold goal of a business. A "good" business, then, is one that generates and keeps short-term profits. This is a fairly obvious statement, but there's value in being explicit.

Further, a "good" business generates sufficient resource slack to undertake future-focused projects. These projects would generally make short-term profit generation and retention more efficient (e.g., process improvement) or create protective structures which increase the likelihood of future profits (e.g., introducing new products or services).

The verb: to organize

Unlike the relatively objective profit measure, your author hasn't been able to find a similar, generally agreed upon, measure of a business's level of organization. While frameworks certainly exist (please pass these along if you're aware of them), they aren't as ubiquitous as profit.

Given this constraint, I'll refer to a "highly organized" business as one that is "above average" in its organization relative to other businesses. Take note, this doesn't mean a particular business is more effective than a competitor or particularly well-suited to its environment, just that it operates efficiently.

Measuring organization through data accessibility

When working with business owners, I often use the example of data accessibility as a quick measure of organization. How easy is it for you to determine how well or poorly your business is performing?

Data which is difficult to access is difficult to use.

Let's use sales to illustrate. How much did you sell last year? That's an easy one, you probably have a report in your email from the accountant. What about last month? Perhaps you're an executive and have direct access to the accounting software and have the know-how to run reports to find this data directly. If so:

  • How many other people in your organization have access to the accounting system?
  • Does everyone who needs access have that access and the skill to use the software?

Access without ability is effectively the same as non-access.

Say you wanted to know how many widgets you've sold on Friday afternoons in November. Is that in your inbox? Probably not, it's at such a granular level that this type of reporting would do nothing more than fill your inbox. However, certain individuals in your organization may benefit from this level of detail.

As an executive, making sure your team is as effective as possible includes making sure that they have the data they need to be most effective.A highly organized business might have self-service dashboards available which allow users to independently explore business data.

Despite the many challenges associated with the intelligent use of data, you can't use data intelligently or otherwise if it's unavailable or lost.

Measuring organization through process standardization

To illustrate with a non-technology example, consider your business processes. Are these written down or otherwise outside of somebody's head? Assuming that at least one of your business processes is written down:

  • Is it still accurate?
  • When was it last updated?
  • Are quality checks identified in the process?
  • How is compliance measured?
  • Who is responsible for performing each step in the process?

A highly organized business might have a specific template it uses to organize its processes. An even more organized business might have a way to link the process to a dashboard showing up-to-date performance. How valuable would it be to know exactly how much revenue is in process at any point in time?

Given that the investment for writing down processes is essentially zero, there's a large asymmetry in its cost-to-value ratio. This deserves a more detailed review, stay tuned!

Implementing change: moving your business toward organization

If you're interested in making your business more organized, then you have to clear the initial hurdle: where to start. The advice I often share with small businesses is to start with an aggressively short-term task: write the steps required to take a prospective client from introduction to first payment. This shouldn't require a team to complete nor should it take more than one sitting to complete (at least for the first draft).

For service-based businesses this process would probably include steps like a sales call, submission of the contract, and invoicing. For businesses selling digital products, it might simply be two steps: prospective client visits website and completes the check-out process.

The goal here is to fight inertia. The act of formalizing the process likely causes thoughts to bubble up:

  • "If a prospective client visits our showroom, then we always try to sell them same day. First, we explain the top-of-the-line package and then..."
  • "Actually we've been having trouble with the checkout process, so if a person wants the premium add-on we have to email the technology team to understand the costs for provisioning the custom instance..."
  • "Oh, yeah, the software we use to manage our sales process just added a new feature that we can use to avoid those steps altogether..."

Thoughts like these are the fruit borne of action. This is why I encourage businesses to start with what's "right in front of you" rather than shooting for the moon as your first step. Taking action leads to learning and learning clears the path for new action.

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