Systems in Small Businesses

"SME" stands for small and medium-sized enterprises – as defined in EU law: EU recommendation 2003/361.

The main factors determining whether a company is an SME are:

Company category	Employees	Turnover	or		Balance sheet total
Medium-sized	< 250	≤ € 50 m		≤ € 43 m
Small	< 50	≤ € 10 m		≤ € 10 m
Micro	< 10	≤ € 2 m		≤ € 2 m

1Euro =86p

There were an estimated 4.8 million businesses in the UK which employed 23.9 million people, and had a combined turnover of £3,100 billion. SMEs accounted for 99.9 per cent of of all private sector businesses in the UK, 59.1 per cent of private sector employment and 48.8 per cent of private sector turnover. SMEs employed 14.1 million people and had a combined turnover of £1,500 billion. Small businesses alone accounted for 47 per cent of private sector employment and 34.4 per cent of turnover. Of all businesses, 62.7 per cent (three million) were sole proprietorships, 28 per cent (1.3 million) were companies and 9.3 per cent (448,000) partnerships.

micro: 0-9 employees, small: 10-49 employees, medium: 50-249 employees

(updated October 2012, figures obtained from the Department for Business Innovation and Skills. Home working figures courtesy of Enterprise Nation).

Mintzberg’s Model of Organisational Structure

The Canadian academic, Henry Mintzberg, synthesised organisational design literature into five ideal organisational forms or configurations that do not exist in the real world, but provide consultants and managers a framework to understand and design organisational structures.

Mintzberg defined organisational structure as "the sum total of the ways in which it divides its labour into distinct tasks and then achieves coordination among them". Each configuration contains six components:

Operating core: The people directly related to the production of services or products.

Strategic apex: Serves the needs of those people who control the organisation.

Middle line: The managers who connect the strategic apex with the operating core.

Technostructure: The analysts, who design, plan, change or train the operating core.

Support staff: The specialists who provide support to the organisation outside of the operating core's activities.

Ideology: The traditions and beliefs that make the organisation unique.

The Four Basic Steps for a Small Business to Systemisation:

1. Flowchart each process in the business.
2. Document how it gets done.. A team member who is currently doing the job writes down   every step in performing a task. A new person then does the task with the written down steps. If the person currently doing the task has to step in and explain anything to the new person then they need to add or clarify the step etc. Once completed start again with another person until any person can do the task without intervention. It may seem laborious, but it will save time and money in the long run.
3. Measure using key performance indicators. Typically, these will be the top five measures to show system performance e.g. in sales you could use no. of leads, conversion rate, average sale value etc.
4. Allow the system to change/grow. Ensure the system is self-correcting and can evolve – this does not mean loss of control, but strengthening and maturity.

The key systems for small businesses are:

1. Lead Generation – Marketing
2. Lead Conversion – Selling
3. Client Fulfilment – Delivering Value

 

 

Sense-making

Sense-making involves turning circumstances into a situation that is comprehended explicitly in words and that serves as a springboard into action. The concept of sense-making fills important gaps in organizational theory. Sense-making is central, it is the primary site where meanings materialize that informs and constrain identity and action.

Although there are others contributing to the study of sense-making, Dervin, Weick and Snowden are the three big names associated with different approaches.

Dervin (1998): Dervin has been developing ideas and working with hundreds of academics since 1972. In her approach, she reconceptualised Knowledge from noun to verb. She relates sense-making to Knowledge Management, especially to do with knowledge creation. It is dynamic, forever changing, which has implications for systems that try to store and transfer knowledge. Dervin (1998) explains some of the problems about knowledge very neately: “Sometimes, it gets shared and codified; sometimes a number of people agree upon it; sometimes it enters into a formalized discourse and gets published; sometimes it gets tested in other times and spaces and takes on the status of facts. Sometimes, it is fleeting and unexpressed. Sometimes it is hidden and suppressed. Sometimes, it gets imprimatured and becomes unjust law; sometimes it takes on the status of dogma. Sometimes it requires reconceptualizing a world. Sometimes it involves contest and resistance. Sometimes it involves danger and death.

According to Weick (1995), sense-making consists of seven aspects - Grounded in identity construction, Retrospective, Enactive and sensible environments, Social, Ongoing, Focused on and by extracted cues, Driven by plausibility rather than accuracy.

Dave Snowden developed the Cynefin Framework in 1999. The Cynefin framework has five environments – Simple, Complicated, Complex, Chaotic and Disordered.

 

adapted from Kurtz, C. & Snowden, D. 2003. The new dynamics of strategy: Sense-making in a complex and complicated world, IBM Systems Journal, vol. 42 no. 3, pp. 462–483

Simple, in which the relationship between cause and effect is obvious to all, the approach is to Sense - Categorise - Respond and we can apply best practice.

Complicated, in which the relationship between cause and effect requires analysis or some other form of investigation and/or the application of expert knowledge, the approach is to Sense - Analyze - Respond and we can apply good practice.

Complex, in which the relationship between cause and effect can only be perceived in retrospect, but not in advance, the approach is to Probe - Sense - Respond and we can sense emergent practice.

Chaotic, in which there is no relationship between cause and effect at systems level, the approach is to Act - Sense - Respond and we can discover novel practice.

Disorder, which is the state of not knowing what type of causality exists, in which state people will revert to their own comfort zone in making a decision. In full use, the Cynefin framework has sub-domains, and the boundary between simple and chaotic is seen as a catastrophic one: complacency leads to failure.

Knowledge Management

Definitions of Knowledge Management (KM): 

According to Ron Young, CEO/CKO Knowledge Associates International - "Knowledge Management is the discipline of enabling individuals, teams and entire organisations to collectively and systematically create, share and apply knowledge, to better achieve their objectives."

A similarly broad definition is presented by Davenport & Prusak (2000), which states that KM "is managing the corporation's knowledge through a systematically and organizationally specified process for acquiring, organizing, sustaining, applying, sharing and renewing both the tacit and explicit knowledge of employees to enhance organizational performance and create value."

It is useful because it places a focus on knowledge as an actual asset, rather than as something intangible. It enables the firm to better protect and exploit what it knows, and to improve and focus its knowledge development efforts to match its needs.

Explicit and Tacit Knowledge:

In the KM literature, knowledge is most commonly categorized as either explicit or tacit.

Explicit: Information or knowledge that is set out in tangible form. It is formal and systematic and can be expressed in formed and specific language and processed and transmitted easily.

Tacit: Information or knowledge that one would have extreme difficulty operationally setting out in tangible form. It is highly personal and influenced by ideas, commitment, beliefs, values and emotions.

The classic example in the KM literature of true "tacit" knowledge is Nonaka and Takeuchi's example of the kinaesthetic knowledge that was necessary to design and engineer a home bread maker, knowledge that could only be gained or transferred by having engineers work alongside bread makers and learn the motions and the "feel" necessary to knead bread dough (Nonaka & Takeuchi, 1995).

KM in an organization is regarded as the core for achieving organizational objectives such as:

• Clear organizational vision and goals (Leonard, 1995;Kanter et al,1992)
• Flexibility in the system
• Knowledge capturing, sharing and creation (Seeley & Dietrick, 2000)
• Support Learning (Martin, 2000; Davenport & Prusak, 2000)
• Collaboration, transfer & knowledge exchange (Martin, 2000)
• Cross functional interaction (Ahmed et al, 2002)
• Multidimensional, trust, commitment (Garvey & Williamson 2002)
• Effective Communication, interaction and support ( Leonard & Sensiper, 1998; O’Dell & Grayson,1998)
• Social network (Paton & Mc Calman, 2000; Wasserman & Faust, 1994)

Managers should ideally combine capture and connectivity to develop and continuing system of knowledge acquisition, distribution, storage and refreshment. For effective KM, organisations need to have people whose job it is to be accountable for managing the knowledge within the organisation. They need to have processes that identify and budget the knowledge needed to do a piece of work, knowledge tracking and reporting so that new knowledge is shared and reused.

Embedding KM into the everyday working practices helps move the organization into a state of continuous learning and innovation.