Many entrepreneurs are reticent to invest the significant time it takes to document the processes they use to run their businesses. That's understandable. Documenting processes isn't sexy. It isn't exciting and no customer is going to pay you a nickel more because you have well-documented processes. However, as a business grows, it becomes increasingly import to write down the way you want things done.
Good process documentation will:
Ensure consistency - In grade school, most of us played the game where the teacher whispered a sentence in the ear of the first child in the class. Each child then repeated the sentence to the next. By the time the last child shared with the class what he or she had heard, it bore little resemblance to what the teacher originally said. Communicating work instructions through an oral tradition is no better. As information is passed from supervisor to new hire, things are inadvertently left out or changed slightly. The inevitable result is inconsistency.
We worked with a broker/dealer, a company that executes trades in the financial markets on behalf of their financial representatives. The company did not have good process documentation. It used an oral tradition to communicate how to do the work. Predictably, the communication was not consistent. Processers did their work in different ways with unequal results. As you can imagine, this caused a tremendous number of problems.
Protect against loss of corporate knowledge - When good process documentation exists, it lessens the impact of key employees leaving the organization. We worked with one company in which the principal could not bring himself to make a needed personnel change, in large part because the problem employee was considered irreplaceable. She had a lot of detailed information in her head about how the company functioned that would be lost if she were no longer an employee. She was effectively holding the company hostage. Well-documented processes would have enabled the company to terminate the problem employee without detrimental impact.
Provide consistent training - Good process documentation also serves as the basis for training employees to do tasks that are new to them. The documentation will ensure that the trainer presents the same information in the same way every time. If newly trained employees have questions, it will also serve as a record to which they can refer. Good process documentation will significantly reduce the time that it takes employees learning a new skill to climb the learning curve.
Serve as a basis for continuous improvement - Finally, well-documented process provides a basis from which to improve. When companies don't do work in a consistent manner, it is very difficult to implement process changes across the organization. Conversely, if good process documentation exists and actual practice matches the documentation, making improvements is considerably easier.
When a business is small, the principal is close to the operation. There are relatively few employees. Those employees continuously interact with the principal and with each other. In such an environment, an oral tradition can work just fine. Even without formal documentation, the principal ensures that the work happens in a consistent manner. As the enterprise grows, the business must run without your constant involvement in the day-to-day operation. You must delegate decision-making. No one person has both detailed knowledge of the entire enterprise and day-to-day interaction with every process. Communication between employees responsible for executing the primary work of the business is less consistent. Without formal processes, things will breakdown. To avoid this situation, as a company grows, it must take the time to document processes. No, documenting processes isn't sexy and it requires a lot of work. However, in our experience, taking the time to document processes well will pay big dividends as a business grows.