How to Build an Effective Management System

There are so many words that we frequently use but it’s a little difficult to wrap certain words with a definition. ‘System’ is easily one such word. Think of ‘system’ as, say, a working mobile phone. Broadly, a phone has a processor, battery, touch screen, cameras, speakers, operating system, applications, etc. For the phone to work (in its entirety), all these smaller components must work as designed. These components must not only work independently but also in relation to one another as a part of the bigger mechanism called the phone. Thus, a system can be rounded up as a set of smaller components working in coordination towards the functioning of a bigger mechanism within a designed framework. A management system is an approach of managing an organization as a ‘system’.

In this article, we shall discuss a few basic points about building an effective management system.

Organization Structure: Departmentation and Division of work

In departmentation, the entire business is divided into departments/ units. The basis of departmentation could be functional, product-based, geographical, matrix, etc. It leads to the formation of an organized structure and lends simplicity in management. The same concept can be applied further down to the team level where team members can be split up based on roles and responsibilities to be assigned. Coming up with goals, responsibilities, resource allocation, strategies, etc. is easier for smaller or specific units. For example, domestic companies may segregate business state-wise while retaining certain functions like HR and Finance centrally at their headquarters. An HR team can be further structured based on specific roles – recruitment, payroll, performance management, etc.

Bring Home the Key Performance Indicators (KPIs)

What cannot be measured cannot be improved. Every department, team or employee in an organization must have clarity of the definite performance/output expected from it or from him/her. This transparency will go a long way in ensuring that the smaller objectives are achieved at the micro-levels leading to improved effectiveness of the overall system. For example, a performance indicator for the HR department of an organization could be whether the correct salaries are paid on time or not.

Have Mapped and Documented Procedures (SOPs)

Detailed documented procedures are crucial for the execution of business processes and operations. SOP manuals will ensure that sufficient clarity is imparted to the people involved, in terms of who, what, when, how, and where covering an entire process or an operation. SOP designing should be aimed at removing the element of the guesswork from the process and bring clarity on procedure, standards and output expectation. Employees will have a clear path on what to do along the course of work. While documenting, it is not only necessary that you build voluminous SOP process manuals, but also necessary that you convey what needs to be done to your employees in no unclear terms.

Focus on a Culture of Learning

Learning is a very important element in any organizational culture. Management systems thrive on business processes and operations which need to evolve with time and stay responsive to the changes in the business environment. And these processes and operations are executed by the employees. Thus, a culture of learning and self-improvement combined with training and development sessions should always find accommodation in an organization and in its work culture.

Process Audits

Having a robust feedback loop is critically important for the success of your management system. Auditing helps in evaluating the efficacy of the internal systems of a business. Designing correct systems is important, but it is equally important to ensure that the systems in place are checked and updated from time to time.

Process Audits are applicable for all the departments of a business enterprise like information systems, finance, HR, operations, etc. Process audit reports can be used for business process improvement.

Focus on Human Resources (HR)

Having the right people for the right job at the right time is a crucial parameter for successful HRM. And achieving this goes beyond recruitment.

A well-planned and technically-sound recruitment system will work towards ensuring that the right people are hired. Training and development programs will further help in maintaining and upgrading the skill-sets of your human resources, for now, and for the future.

A performance management system is not just about measuring performances and distributing the give-aways. A good PMS should be aimed at encouraging productivity, identifying training needs, employee mobility (promotions, transfers, etc.), job redesign, etc.

Fair and competitive pay plays an important role in attracting the right candidates and employee retention. Both financial and non-financial benefits need consideration in determining wages and salaries.

Cultivating leadership amongst your employees could prove to be handy in preparing for succession at all levels.

Use of Technology and Automation

An efficient business management system cannot be imagined without the use of technology and automation in the present day. Business technologies are helpful in two broad ways – expediting business processes and eliminating human intervention (where it is not necessary). With the use of technology-driven business process automation, processes and operations get more speedy, accurate, and cost-efficient (in the long-run).

Process Automation can be helpful in business activities such as preliminary resume screening, order processing, email marketing and retargeting, customer support, processing sales orders, payroll processing, invoicing and sending collection reminders, etc.

Financial Discipline

Financial discipline is about being principled with money; the numbers get taken care of in the process.

Financial discipline can include adherence to defined procedures for carrying out financial transactions (internal or external), adherence to accounting principles and standards, ensuring financial transparency, timely and authentic reporting, periodical audits, etc.

For example, a habitual delay in making payments to stakeholders (employees, suppliers, customer refunds, etc.) is a sign of financial indiscipline. Other examples could be giving unsustainable credit lines or not following the internal procedures for processing internal fund requisitions.

Summing up…..

If the smaller things do not work well, the bigger mechanism will always be flawed. Although the points we discussed are not small enough they go a long way towards building an effective management system in small ways.


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