Illustrations by Don Sparrow
Meet the Dilby family and Dilby & Sons Construction, founded in 1957.
Five family members own shares in the business:
Recently the family got together for their annual shareholder meeting, which focused on financial reports. As much to assert their independence as anything else, each of the businesses had its own accounting system, with different bookkeepers, using basically the same methodology their father had used for the past 50 years. That included doing payroll and accounts payable manually and producing monthly statements that sometimes were as much as a month late. Annette, who had been reading about creating greater efficiencies in business, R declared, “We’re wasting a lot of time and money doing things as if this were still the 1950s. There’s got to be other businesses like ours that managed to find a better way.”
John, the patriarch, immediately bristled at the mention of change in any form. “All I need to know is the bottom line,” he growled. “Either you’re making money or you aren’t. Period.”
Profitability is just the tip of the iceberg. The right system can transform your performance from mediocre to exceptional.
“If that’s all John wants to know, then he’s right. He doesn’t need me,” says Bo Østerberg Kristensen, who specializes in systems solutions in KPMG’s Advisory Practice. “But John needs to realize there are people between him and the business who are running various aspects of the business, and they need to know more than just the bottom line in order to be as effective as they can be.”
Kristensen avoids the term “IT,” which he considers outdated. He prefers to emphasize what systems solutions can do rather than how they do it. What they do best is turn data into useful information. “Each of the Dilby enterprises is possibly collecting enough data already,” says Kristensen. “It’s just that they’re not using it. There’s no statistical analysis, no effective comparisons. Profitability is just the tip of the iceberg. The right system can transform your performance from mediocre to exceptional.”
Achieving that transformation does not need to consume the Dilby family’s fortune. Kristensen recommends starting with a core system for enterprise resource planning (ERP). The ERP umbrella covers basic financial functions such as the general ledger, accounts payable and receivable, and financial statements. All of the Dilby enterprises would feed into the same ERP system. From there, other functions can be added, such as payroll and customer relationship management tools, and some functions can be tailored more specifically to a particular business, such as Julian’s fly-in fishing camp. All of this can be managed without hiring a full-time specialist. Instead, the Dilbys could receive the assistance and staff training they need by working with an outside consultant.
To get started, and to help overcome resistance from any family members, each of the Dilby family shareholders answered the question, “What are your top three issues with running your company?” Their answers were mainly about delays in getting timely financial information, and inefficiencies such as days spent doing payroll and invoicing manually (which meant licking stamps at Dilby Construction). They then considered how certain process applications could address those problems. “A system that has been tried and tested by thousands of companies is usually better than insisting on a customized solution,” advises Kristensen. “Better that you adapt to a proven system, rather than trying to get it to adapt to you.”
With the help of a professional consultant, the Dilbys began to realize benefits they could easily tap into. They began to follow a detailed plan. Adopting the right system will allow the Dilby businesses to use one internal accounting department rather than each having its own bookkeeper. They are automating functions such as payroll, which will save hundreds of hours each year that could be better spent generating new business or creating even more efficiencies. One of the biggest benefits is their new ability to all use a single database. “I’ve seen companies that have five or six databases,” says Kristensen. “That’s a 100% guarantee that there will be data mismatch, such as customer contact information. With one system, everyone is assured of getting the same information, treated the same way, at the same time.”
There will be some difficult decisions for the Dilbys, the most crucial relating to employees. The right system must be able to eventually pay for itself. Kristensen asks every business he works with, “Do you want to do more with your current number of employees, or do the same amount with fewer employees?” There should not be a third option.
Most importantly, the right core system, complemented by appropriate business specific add-ons, will promote not only employee efficiency and overall company performance for the Dilby family, but also greater understanding and a sense of unity among the family shareholders. “Ideally, everyone will feel they are all making smarter, more informed decisions,” says Kristensen. “They will see how working together, speaking a common language, makes each of their enterprises stronger and more profitable. That’s what effective systems solutions are all about.”
All names, characters, and incidents portrayed in this article are fictitious. No identification with actual persons (living or deceased), businesses, places, buildings, and products is intended or should be inferred.
First published in the December 2019 edition of The Business Advisor.