The Australian Small Business Blog

Tuesday, February 07, 2017

The 5 Ways Business Systems Fail


by Dr Greg Chapman


The importance of systems in business is well known, but even in great businesses, they can fail. While the outcomes can range from minor inconvenience to catastrophic, the causes of failure come down to one or a combination of 5 fundamental reasons.




1. Fault in Design

As all systems are created by human beings, it is highly likely that they will contain faults. The more complex the system the more likely that is the case. This means that systems should be thoroughly tested before they are made live, preferably by someone not involved in their development, as developers can have blind spots. Pilot programs are often used to test systems in a live environment before a major rollout so any faults detected will have limited impact.

The good news is that in many systems there is in built redundancy (which creates inefficiencies- a topic for another day), so a fault in one system may be picked up by another in the workflow process, but even with redundancy, you can have multiple point failures, which may be rare, but can be devastating.

2. Change in the internal environment

A system may have been functioning well for some time, but when there are organisational changes, this can affect workflow processes, particularly when roles change. A person who was previously responsible for checking progress may have other duties and a gap in responsibilities with the new structure appears.

New technology can also affect the functioning of existing processes. While often introduced for productivity reasons, there may not have been a review of the impact on other parts of the workflow. Any change in the internal environment must include a review of the effects on existing systems.





3. Change in the external environment

The external environment is changing all the time with the needs and demands of suppliers and customers, regulatory changes and general societal changes. Often a business can be caught by surprise when what has been accepted practice is no longer. Customers may change their specifications, suppliers may change their terms and governments are forever changing the rules. Business inputs and outputs can all be affected by external changes which can disrupt the internal procedures of a business. It is incumbent on the owners of each system in a business to be aware of the external changes and to update their systems accordingly before failure occurs through lack of attention.

4. Inadequate Training

It doesn’t matter how good your systems are and how well documented, problems will occur if staff don’t know how to use them. Mistakes will happen if there is inadequate training. For each new system, there should be a communication strategy to let staff know, what has changed and how to follow the new process.

For new staff, there needs to be an induction procedure and mentoring to ensure that the systems are understood as well as how they are positioned in the workflow process, their inputs, and their outputs.

5. Inadequate Reporting

Systems may be carefully developed and rolled out but problems can still arise in spite of all these precautions. Whether there are problems of design, environmental changes, or training issues there needs to be a mechanism for measuring system outcomes and compliance. When problems occur there should be a process to track them, understand root causes and see they are corrected. Often staff get used to shortcuts which most of the time get the job done, but set up failure when there is an event that only occurs rarely for which the system was specifically designed to mitigate. A reporting system should audit both outcomes and compliance, without which management will only be aware of a problem when disaster strikes!

No system can last forever and there should be a regular review of the performance and relevance of all systems even if no problems have been identified. The frequency will depend on how critical the system is to the business.

While each system should have an owner responsible for its maintenance, the responsibility to drive overall system integrity and performance lies with the owners. That is, they must create a Business Management System which enables them to manage their business by reports. This will greatly reduce, if not entirely eliminates the risk of system failure.

May Your Business Be – As You Plan It!


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Dr Greg Chapman is the Director of Empower Business Solutions and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.



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