In the Rush to Grow, Operating Systems Often Crumble Under Pressure

Rapid growth for a young company sounds great in theory, but if not managed well, it can kill you. During this critical stage, I’ve found that the weakest link is generally the systems (or lack thereof) that have been put in place to manage the growth.

It’s tempting for managers who are feeling under pressure for growth to cut corners and take shortcuts assuming that once the business starts to roll in, systems will take care of themselves. Weak systems always have long-term implications on the organization but in the short-term, the manager might get away with it as they are able to “show” that they have met their short-term and immediate targets.

In the early years after I founded Guardian, I was faced with many such issues as we grew quickly. I also learned very quickly how to tackle those issues to improve both my company and my performance as CEO. Some of these challenges were:

Operations: With so much pressure to open stores and lack of trained staff, our operations leadership was forced to move store staff from one store to another. This led to a significant increase in pilferage of inventory since store staff realized very quickly that no one was watching. inventory would disappear and neither store management nor operations leadership would be willing to take responsibility.

One way I learned to tackle these and other operational issues was to study my competition. I walked the aisles of big retail pharmacy chains in New York and London. I talked to employees and managers. And I consulted with designers and pharmacists about how to improve my layout, product lines, and inventory systems.

Projects: Though my company had a standard store opening checklist which outlined every single step that had to be completed before a store was opened, in the hurry to open the store, the checklists were often ignored. This led to new store openings that did not meet expectations. It became clear to me that, going forward, I as CEO had to set a message from the top down that opening the store quickly, while important, was not as important as opening a store that followed my vision for what I wanted our stores to look like. I made sure that my employees knew that following my checklist was not optional.

Contractors: Since the contractors who were building the stores were under pressure too, they started using substandard material and this resulted in entire shelves coming off the walls. It was not a pretty sight seeing all this inventory broken and useless laying on the floor. Like other parts of my business, we had standard operating procedures that were well documented and if they were followed, the contractors would have been managed better. So we re-doubled our efforts to manage the contractor process to make sure that my team could hold our contractors to the same high standards to which we held ourselves.

People: Our need for people was large since we were opening more than five stores a month. To process so many people, we had walk-in interviews going on in our head office and in our hurry to staff the stores, we let our process of putting every new employee through one week of training slip through the cracks. Instead of training people, we started hiring and asking them to report at a store the following morning. Our customer service suffered and we started to get negative customer feedback.

Then one day, a customer walked up to me with a basket of over-the-counter products and asked to be billed in advance for some prescription medicines as well. I told her we couldn’t do that, because she was essentially asking me to charge her an incorrect amount. She stormed off in a huff and vowed never to return. The next day she walked in again and told me she was sorry. ‘The fact that you don’t give these kinds of bills means I can trust your pharmacy.” I put our company’s values in action myself, and all my employees saw it. The effect was immediate. Those who followed my example improved our customer service and helped my company grow. Those who didn’t follow suit were quickly replaced with other top performers. We learned quickly that you can’t ignore employee training and leading by example is one of the best ways to do it.

Technology: While we had a robust system to manage our stores, we realized that some of our hardware had started giving trouble and therefore computer invoices could not be issued. Some stores started to use manual invoices and these manual invoices were not reconciled on a daily basis. This resulted in lost sales and lost cash because if a manual invoice disappears, there is no way to track what has happened to the inventory until it is physically counted. This is what can happen when a CEO doesn’t keep his or her business up to date. Going forward, I made sure that Guardian had the technology it needed to keep our operations moving smoothly.

Cash: In our push for growth, we stopped reconciling our cash accounts on a daily basis because it was seen as too cumbersome. When this was brought to light by the auditors, the finance department of the company had to go through very intensive work for over one month to get this reconciliation done prior to our audit. I realized from this experience that the CEO has to take responsibility for the cash flow cycle. From then on, I became very aware of what we had in the bank, what our outstanding collections were, and how they were being reconciled by my immediate reports in the finance department.

Inventory: While my colleagues in the loss prevention department were mandated to conduct inventory checks every quarter in every store, this schedule fell by the way side and physical inventory checks were not carried out as per the agreed procedure. When we did conduct the inventory taking exercise, we found large quantities of inventory were missing. The staff who should have been held responsible for this inventory at the stores had resigned and were gone. The company, once again, had to absorb a loss that it should not have borne had systems been implemented correctly. As a result, quarterly inventory checks became one of the key metrics that I held my loss prevention department accountable for. And I implemented similar metrics and reports that kept my finger on the pulse of all my other departments as well.

As you can see from my experience, I learned the hard way that unless systems are followed by a startup from the very beginning, losses will mount from all sides–and they could be catastrophic. Of course, making mistakes comes with the territory of being an entrepreneur. But learning from those mistakes and implementing solutions makes you a better leader and is key to growing your business. That’s why working with a CEO coach who has already gone through the startup process and can help you avoid similar mistakes in your own business is such a valuable investment.

Ash Garg is a coach at CEO Coaching International, the founder Chairman of Guardian Pharmacies and the author of 5 best-selling books, Reboot. Reinvent. Rewire: Managing Retirement in the 21st Century; The Corner Office; An Eye for an Eye; The Buck Stops Here – Learnings of a #Startup Entrepreneur and The Buck Stops Here – My Journey from a Manager to an Entrepreneur.

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