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Entrepeneur Notebook

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HARRY KRAUSHAAR

In the beginning, people always make use of a new technology by simply swapping their old machines out for new ones. When the personal computer first appeared in offices more than 20 years ago, managers used them as souped-up typewriters.

Today, workstations do more than spit out words. They connect people with company data, communication tools, and in some cases, work automation systems.

In order to make technology pay, companies often have to redesign their processes. Such is the case with the current wave of automation systems, technologies which may streamline any of your business functions (e.g., accounting, distribution, manufacturing, operations, human resources and sales).

Implementing such a system begins with an understanding of your current level of computer sophistication.

In this column, I will help you to assess the level at which you are currently using computers and computer software and the level at which you have re-engineered your business processes.

Typically, entrepreneurs at early-stage companies have purchased computers for most of their employees and might have purchased a network server.

Unfortunately, their employees use the computers as replacements for adding machines. Their business processes using the computers are essentially the same as they would be without the computers.

This situation usually occurs due to a lack of understanding of the capabilities that computers possess. It is also due to a lack of training at all levels of the organization.

A tell-tale sign of this level of computer usage is what I call the “spreadsheet syndrome.”

Spreadsheets are awesome tools. Unfortunately, in many organizations they are used in the wrong way and for the wrong reasons.

I have seen situations in which four or five employees enter the same data into different spreadsheets for different purposes, resulting in inefficiencies and increased risk of error.

I have also seen situations in which spreadsheets are used to create invoices. The invoices are printed and then handed to the accountant who manually enters them into the accounting system. Then the invoice clerk deletes the invoice data in the spreadsheet so it can be used for the next period.

Most entrepreneurs at mid-stage companies have purchased computers, set up a network, implemented a multi-user accounting system, and, maybe, implemented an internal e-mail system.

They have started to build a good electronic infrastructure. Unfortunately, they have not fully re-engineered their business processes and have not fully automated their operational systems.

A tell-tale sign of this level of computer usage is what I call the “accounting syndrome.” This is where most business processes are developed in order to fit into the rules of the accounting system. There is no doubt that every business must use standard processes to control its business transactions, but management must be willing to customize or alter the way its accounting system works if it does not meet the needs of the company’s production or sales employees.

Many distribution companies do not fit the established purchase-receive-pay-sell-reorder cycle dictated by most distribution accounting systems. Employees in operations and sales essentially circumvent the system in order to get their work done, leaving the accounting department to pick up the pieces.

Another sign of this level of computer usage is what I call the “great wall syndrome.” This situation arises when data from one system is manually re-entered into another system. An example of this is when an executive receives a report and decides it is not useful.

The executive directs an analyst to create a report on a spreadsheet, using the same data but formatted differently. The spreadsheet is then sent to other executives who alter it to fit their needs.

The same data has been re-entered and manipulated many times, resulting in wasted effort and increased risk of data entry errors.

Entrepreneurs at mature-stage companies have purchased computers, implemented a network, and re-engineered their business processes to fully integrate sales and operational employees. They might even be using their computer systems to distribute products and generate revenue.

A tell-tale sign of this level of computer usage is what I call “integration.” This is where information systems are fully integrated into operations.

Federal Express and UPS have achieved this, as they make extensive use of automation to support their operations and customer-service functions. Small companies can achieve this level of integration, too. It takes vision, education and management will.

I have seen a small service company that has created systems that integrate complex order processing, detailed task scheduling and prioritization, accounting and management reporting. It is able to operate efficiently, resulting in lower labor costs for each dollar of revenue it earns.

It is hard to assess your organization’s use of automation, but I’m sure you will find the process worthwhile, as you will identify opportunities for improvement once you are through.

Harry Kraushaar is founder of teamCIO Inc., a Beverly Hills-based consulting firm specializing in assisting businesses achieve competitive advantage through the creative use of technology.

Entrepreneur’s Notebook is a regular column contributed by EC2, The Annenberg Incubator Project, a center for multimedia and electronic communications at the University of Southern California. Contact Dan Rabinovitch at (213) 743-2344 with feedback and topic suggestions.

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