Honeywell International Inc. (HON) suffered from an organizational breakdown in the early 2000s after their merger with AlliedSignal didn't work out and they were unfortunately left to deal with several low-performing businesses.
Referred to as 'Honey Hell' at the time, the company was called out for being ‘consistently inefficient’ in operations. Several key managers left, and the divestments in their two core businesses were put on hold.
David Cote took over as the CEO of Honeywell in 2002 and introduced the Honeywell Operating System (HOS), which changed the company’s trajectory and made it a profitable entity again. He applied six management theories — Six Sigma for consistent quality, lean manufacturing to minimize waste, and Just In Time to keep inventories low — that skyrocketed overall productivity and dramatically improved the company's financial position. As a result, Honeywell recorded 72 percent higher sales in 2011 from 2002, and their profits doubled to $4 billion.
Developing business operating systems has not only helped Honeywell, but companies like Toyota, Danaher and others to improve their organizational efficiency and ultimately boost their top and bottom line.
In this article, we will cover the following:
- What is a business operating system?
- How can business operating systems help your organization?
- How to create a business operating system for your company?
- Three popular business operating system frameworks
- Challenges companies face while implementing a business operation system
- Using documentation to streamline your business operations
What is a business operating system?
Like a computer operating system that manages software and hardware functions, a business operating system (BOS) standardizes organizational processes. It outlines a set of instructions for every function — setting goals, onboarding, training, communication with employees, launching new products and so on.
A business operating system aims to clarify individual roles and responsibilities, establish best practices and procedures, improve communication and collaboration, and boost organizational efficiency.
How can a business operating system help your organization? (3 benefits)
Maintaining operational consistency
A successful BOS lays down the why, what, and when of the company’s day-to-day operations, providing a framework and sense of direction for everyone to work towards and produce consistent results.
“BOS is essential in everything we do, from payroll to scheduling and invoicing. It keeps all our information organized and accessible, making it easier to coordinate with our team and clients, and grow our business.” — Matthew Ramirez, Founder, Rephrasely
Streamlining employee collaboration and communication
A company operating system outlines workflows, roles and responsibilities, and preferred communication channels with internal and external stakeholders. Clear protocols mean everyone knows what's expected from them, resulting in a better-aligned staff and improved collaboration and communication.
🔥 Scribe Top Tip: Scribe can help you automate your workflows and processes by creating visual step-by-step guides that you can easily share with your team.
“Scribe is so simple and intuitive. I can make a tutorial for team members in minutes. The process is so simple, and the tool has all the features I need to work effectively.” — Carla R., Partner Program Manager
Improving organizational efficiency
When there is consistency in processes, a company can produce results that align with its goals and objectives, ensuring maximum efficiency and productivity.
James Wilkinson, CEO of Balance One Supplements said they saw a 40 percent improvement in operational efficiency within 20 months of implementing BOS.
BOS also allows real-time data and metrics tracking, enabling business leaders to identify gaps and opportunities to revamp their current business strategy.
Amy Bos, Founder of MediumChat Group, said their company operating system helped them reduce their internal meeting time by 18 percent per management-level employee. She said, “Our efficiency has skyrocketed, and now we have more time to focus on individual development.”
How to create a business operating system for your company?
A business operating system is typically made of five components: processes, systems, roles, skills, and structure. Let’s look at how you can develop each element to create an effective BOS for your company.
Step 1: Document the process
The automotive giant, BMW, recorded their best operating profit in 2012. Despite that, their profits were flat in the year, and the post-tax returns on sales were abysmal. While the company attributed low profits to several factors, the one that stood out was higher organizational complexity.
Typically, the bigger an organization is, the higher the complexity, resulting in inconsistent processes, systems, and a lack of alignment.
Documenting your processes can streamline operations while reducing costs and complexity. It’s a critical step because it helps companies to get as specific as they like about their business processes, such as onboarding, hiring, training, etc., to facilitate better coordination and maximize efficiency.
For example, here's a template you can use to build step-by-step guides for your company to streamline these processes.
Step 2: Establish systems
As per a study conducted by Asana, employees spend 60 percent of their time in the organization:
- Communicating tasks.
- Searching for documents and files
- Preparing for meetings.
- Duplicating efforts.
Only 27 percent of the time is spent on performing the tasks they’re hired for, such as market analysis or coding.
Systems are tools and technologies a company uses to support its processes and achieve its goals. By documenting the tools employees should use to perform a task, companies can streamline day-to-day activities, reducing the time spent on redundant activities.
👉 Scribe can make this easier with fast, clear and easy-to-access documentation so teams can easily share and collaborate with each other.
Step 3: Create roles
To understand what is expected from your team members, you need to create roles with specific objectives and responsibilities that will help them perform the task to the expectations.
Document what each role encapsulates — key responsibilities, the scope of work, pay range, and skills required. Once you have done that, create a job description that will also help you when you need to hire more resources. Check out this job aid template made with Scribe.
Step 4: Assign talent to each role
After you have created roles, match the right talent to each position. Develop a simple assessment test for your current employees to evaluate if their skill sets match their current roles. This alignment will help you get the right people in the right seats.
A well-designed business operating system helps companies easily hire, train, and develop employees with the right skill sets to perform their job effectively.
Step 5: Build an overall structure
Structure defines how the company is organized and managed with different sets of processes, systems, roles, and skills. It answers: who reports to whom, who takes business-level decisions, and who is responsible for the execution.
In the company's internal documentation, you can mention who is responsible for doing what that will create a culture of accountability, eliminate redundancies, and drive more efficient results.
Use tools like Scribe to make it easy to show anyone how to do anything. The tool uses AI to automatically create how-to guides for any process — like this one.
And with Scribe's feature, Pages, you can combine Scribes with videos, images and more to build larger process documents, like the templates you see in this blog!
Three popular business operating system frameworks
Entrepreneurial Operating System (EOS)
Developed by Gino Wickman, the EOS focuses on six key components: Vision, People, Data, Issues, Process, and Traction.
- Vision: Creating organizational values, goals, and objectives to keep everyone on the same page.
- People: Getting the right people for the assigned roles.
- Data: Tracking key metrics to monitor the company’s health and performance.
- Issues: Identifying and resolving conflicts and opportunities.
- Process: Develop standardized processes so the team functions efficiently and effectively.
- Traction: Developing synergy between employees and management to achieve targets.
EOS focuses on developing short-term goals (rocks) to streamline problem-solving, align vision, and measure performance through data tracking. It also emphasizes on holding weekly meetings so the leadership team can identify, discuss, and solve current organizational challenges.
Objectives and Key Results (OKR)
Objectives and Key Results (OKRs) is a goal-setting framework that companies use to define and track measurable results. It follows a straightforward template that fits into every business model:
- I will [objective] as measured by [key result].
Best practices for setting OKRs:
- Focus on what matters: Define 3-5 OKRs per team and five key results from an objective.
- Make it measurable and time-bound: Key results need to be quantifiable with a time frame to complete the project.
- Keep it outcome-focused: Objectives should be established at the start of the quarter, and the progress should be tracked weekly.
OKRs can be used for short-term and long-term objectives—and can be used by all types of businesses. Companies can find this framework limiting because it focuses solely on execution. Those companies, which require a more detailed and comprehensive model, should look into Scaling Up, which we will discuss next.
Scaling Up (The Rockefeller Habits)
The Rockefeller Habits or Scaling Up, created by Verne Harish, outlines four core habits: Priorities, Strategy, Execution, and Cash. It’s the most detailed and comprehensive framework yet, and perfect for hyper-growth businesses looking for holistic transformation.
Scaling Up is built on the foundation of planning and tracking quarterly goals. This allows companies to break long-term goals into short, achievable priorities aligned with the company's vision and core values. The focus here is on high-level strategic planning and business tools that guide the organization toward their goals and objectives.
Challenges companies face while implementing a business operation system
#1: Resistance to change
The biggest challenge in fully implementing a BOS is getting people to change. The longer they’re a part of the company’s culture, the harder it is for them to adapt to new systems and processes. Internal politics, poor behavior, and personal agendas also contribute to a change-resistant culture.
To overcome this barrier, you need to clarify to your team why the organization leaning towards this change and how it will help them, answering the question “What’s in it for me?” for each employee.
Good to know: Organizations that execute change management are six times more likely to achieve their business goals than those that don't.
#2: Lack of clarity:
Many organizations lack clarity on how BOS can help them achieve their goals. They fail to communicate the values and purpose of BOS, which results in broken execution, and wastes a significant amount of time and resources.
To ensure everyone is on the same page, you must address the following questions:
- Why is the change needed?
- How will it affect the current state?
- How will it affect everyone in the organization?
#3: Strategic misalignment
Another challenge business leaders face during implementing BOS is aligning key processes with business goals. Team members are unclear about the business strategy, which leads to everyone working on different goals rather than a collective vision.
The lack of a strategic alignment cost BMW approximately $10 billion. As per another source, strategic disagreement costs companies 25% of their revenue every year.
#4: Lack of executive support
Research indicates that many executives don’t understand their role in implementing BOS, the resources required, and how it will help the company. This results in inconsistent communication and misalignment that affects organizational health.
To make this a success, the top management needs to be more actively involved. Rather than only sponsoring the initiative, executives need to take charge and implement the change from the ground level.
Documentation can help to successfully implement a business operating system
Think about your business and the processes and systems you have in place. Without documentation, it can become difficult to communicate various aspects of the business and get things done. Documentation not only outlines how to perform a specific task but the process that should be used to get consistent results.
Scribe can help you with documentation that can make the implementation of BOS easier. All you have to do is press record and go through your usual work process. Scribe will do its magic and convert the process into a guide or template, complete with images, screenshots, and videos.
You can edit the text, redact sensitive information and add custom branding, to make the documentation even more informative and beautiful.