An E-Myth Lesson

In The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It Michael Gerber tells a humorous but informative story that demonstrates how systems solve problems.

Years ago his company regularly used white boards for meetings. At the end of each meeting the leader of the meeting was responsible for cleaning the white board. In their haste to get on to more pleasant tasks, the employee would invariable hit the wall with the eraser, leaving blue marks on the wall. Despite a series of memos, meetings, signs, and other exhortations, the problem continued.

In short, the company had a conflict. Color standards dictated white walls and white boards. Cleanliness standards dictated that the white boards be cleaned promptly. But the result–blue streaks on the walls–was not acceptable. Thus was born a new system within the business.

The story demonstrates how to use systems (no surprise there). When you experience a problem or frustration (bottlenecks) within your business, rather than plead with employees to act differently, develop a system to address the bottleneck. The system will change their behavior without you becoming an ogre who is constantly complaining.

The franchise model

In the The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It Michael Gerber speaks of the franchise as a model for all small businesses. This does not mean that every small business owner should aspire to franchise his business. It does mean that the franchise can serve as a model to operate a more efficient and profitable small business.

The franchise model is based on systems–on performing tasks in a specific and consistent manner. When tasks are performed in a consistent manner, the results are also consistent.

Gerber uses McDonald’s as an example. No matter where in the world you go, your Big Mac will be the same. Consistent actions create consistent results. The same principle can be applied to any business, whether you are baking pies, or building widgets, or mowing yards.

Having systems and procedures in place becomes particularly important once you begin to hire employees. Systems provide a means for insuring consistent performance without micro-managing employees. So long as they follow the system, the results are the same no matter who performs the task.

Everyone benefits from systems. Employees have clear instructions on how to perform their job. The owner can focus on those aspects of the business that truly require his attention. And customers know what to expect.

While systems do not guarantee success, they certainly increase the odds. And anything that can help a small business owner overcome the challenges of entrepreneurism is worth considering.

Book review: The E-Myth

Few books can be called revolutionary. The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It, by Michael Gerber, is one such book.

This best seller presents a compelling argument for entrepreneurs to look at their business differently. Gerber points out that many entrepreneurs start a business doing something that they love, believing that their days will be filled with an enjoyable activity. However, as the business grows, and new employees must be hired, the owner quickly discovers problems that previously did not exist.

These new employees don’t have the experience and motivation of the owner. They don’t have the same drive and desire as the owner. While the owner recognizes the need to train his employees, it is the nature of that training which often proves inadequate.

While sitting in a McDonald’s one morning, killing time between appointments, Gerber wondered why the Golden Arches were so successful. Most of the employees were teenagers possessing few job skills. Yet the quality of the service and the product was similar in every store.

Gerber realized that the company’s success derived from its approach to the business. Each step of the process was carefully analyzed, and then procedures and policies were developed. That is, a system was developed, and when followed, the system virtually assures success. Thus, a McDonald’s in Houston operates almost identically to one in London, and with very similar results.

Throughout the book, Gerber exhorts the reader to work on his job, not at it. In other words, develop a systematic approach to each job within the organization. In the process, the success of the business is less dependent upon any one individual. As with McDonald’s, the system becomes the key to success.

Of course, this is usually easier said than done. Within any business, hundreds, perhaps thousands, of tasks must be performed. Often, the owner has automatized these tasks, and performs them with little or no conscious thought. Yet, he must identify and then explain each of them clearly. Systems, and their documentation in an Operations Manual, is the key to becoming a true business owner, rather than the owner of a job.

By developing production procedures and policies, and then properly training production personnel, this transition can go smoothly. The owner can then spend his time working his business, rather than in it.

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