EP31 - Foundations of Transition: Process Maturity & Operational Strength

Your processes can be documented, and your operations can still be fragile. In this episode of the Foundations of Transition series, Jason Miller and Makenzie Ragland explore the eighth foundation: Process Maturity and Operational Strength. They discuss why strong operations involve more than just having documented procedures and focus on building an organization that is curious enough to improve continuously. 

By examining how work actually flows through a business rather than relying on organizational charts or written processes, owners can uncover hidden bottlenecks, operational risks, and opportunities to create a more resilient organization. Additionally, they also explore the role of curiosity in developing a transferable business, explaining how "hero" employees, undocumented workarounds, and routine habits can quietly create dependencies that limit growth. 

They provide practical questions that owners can ask to gain a clearer understanding of how work is actually accomplished and explain why creating a culture of continuous improvement not only strengthens daily operations but also prepares a business for a successful ownership transition.

Transcript

Process Maturity as a Foundation

Makenzie Ragland 0:00

Today, we are discussing process maturity and operational strength. The big idea is that operational strength isn't just about having documented processes. You may be thinking of SOPs and flowcharts, but what we're really focusing on is the fact that operational strength comes from having an organization that's curious enough to continuously improve those processes.

I am your co-host today, Makenzie Ragland, officially introducing my new legal last name.

Jason Miller 0:47

And I'm Jason Miller. My name hasn't changed.

Makenzie Ragland 0:52

Today, we are continuing our series on the 12 Foundations of Transition as we enter the month of August, which is crazy to say. We're well over halfway through the year, and we've already covered seven foundations of transition. This month marks the eighth foundation.

If you've been following along, you know that we release one episode each month in this series to help owners become transition-ready, and their businesses become truly transferable.

In our July episode, we talked about financial fluency and clarity—understanding your numbers so your business can make informed decisions and what financial fluency really means. Today, we're turning our attention to process maturity and operational strength.

Curiosity as an Operating Discipline

Makenzie Ragland 2:18

Where do you think we should start, Jason?

Jason Miller 2:22

I love every episode that has anything to do with curiosity. I think you know that as well as anyone.

I like to say that my job is to ask silly or even stupid questions and then wait for other people to give me the answers. It's not that the questions are actually silly or stupid, but the smaller and more specific our questions are, the closer we get to a precise answer that leaves us better informed about whatever we're trying to understand.

So, talking about curiosity, all of you who are successful business owners already know what to do. We've talked before about where value gets hung up, caught, or trapped in the way you're doing things. You may not often think about what your role is as an executive on a day-to-day basis, but much of it comes down to asking questions: How did this happen? Why did that happen?

That quality of curiosity is what gets you closer and closer to a more precise answer. That's really what lends itself to operational strength. When curiosity becomes part of your culture instead of just part of you, you'll see it translate into employee ownership. It encourages curiosity from people who may have never applied that mindset to their own work—or to how the organization operates as a whole—because they simply haven't needed to.

Most owners don't say, "I've got great processes. Let me brag about them." Instead, they're always asking questions like, "What can we do better? How can this be more precise? How can we improve this?"

One thing we find when we work with clients is that we simply apply our own curiosity. We don't see inside your company until you reveal it to us, so we start by asking questions.

What do you think about that, Kenzie?

Makenzie Ragland 4:45

Yeah, I think it can be surprising for owners. They may not fully understand what we're trying to uncover, or they may think we're looking for problems. But really, as you said, we're just trying to understand how the business actually runs, how work gets done, and the story behind the numbers we've already reviewed. Throughout that process, the answers can be revealing for the owners themselves.

Jason Miller 5:14

I don't think it's really possible to improve something if you don't first understand it.

The Map Versus the Territory

Jason Miller 5:20

One way I'd like you to think about this is through laundry detergent. Has anyone ever thought, I have a stain on my shirt, I washed it, and the stain didn't come out. There's obviously room for improvement. Right?

But I'm not a chemist. I have no idea how to improve laundry detergent. I wouldn't even know where to start. Would you know where to start with that?

Makenzie Ragland 5:47

No.

Jason Miller 5:50

That might sound silly, but I've already prefaced this by saying that all I do is ask stupid questions. I also say stupid things, which is fun and entertaining for me, if not for everyone else.

I want you to think about this as an owner. Every company has two businesses: the one you think you have and the one your employees actually operate.

If you're running a five-person shop, you may be involved in everything that happens, so those two versions are probably very similar. But if you're running a 500-person organization, you're much farther removed from the day-to-day operations.

The business you think you have is your mental map of the company. The business your employees actually operate is the territory. The map and the territory aren't the same because the map is only a representation of what's happening on the ground.

Think about it this way. If you're a contractor and we ask, "How does an estimate get approved?" you'll probably describe the intended process. You'll say it goes from here to here, then it gets approved, the bid is finalized, and the work moves through the process.

Then we ask the estimator, and suddenly there are five spreadsheets, three text messages, two emails, and Susan, who's really running the whole thing.

That answer may be different from yours, or it may align perfectly. Either way, they're two functionally different perspectives: one from the ground level and one from above.

Makenzie Ragland 7:49

Yeah, I think the variety of answers—or the differences between the answers you receive—can be really interesting.

There may be undocumented shortcuts the owner isn't aware of. There may be an extra person involved that they didn't realize was part of the process. Maybe there's someone who's always catching mistakes and effectively serves as the reviewer.

Those are the kinds of habits the process has developed over time that the owner may not be aware of.

Jason Miller 8:25

Running on habit—I think all of us can relate to that.

You get up and go through your morning routine. It's called a routine for a reason. You do it repeatedly, and it's hard to break. You develop habits over time, whether they're good or bad, simply through repetition.

The same thing happens in a business. If you're producing a product or delivering a service, you're repeating the same activities over and over again. Naturally, habits develop.

Habits, by themselves, aren't good or bad. But they do warrant further investigation.

So how do we examine them? 

Follow the Work to Find Friction

Makenzie Ragland 9:17

Yeah, I think piggybacking off of that, the way you apply the curiosity we started with is by following the work rather than the org chart or a documented process that may not have been updated in some time.

Ask questions like: Where does this process begin? Who touches it? Where does it end?

As you follow the work, you'll likely identify pain points or bottlenecks. Is there a point where someone has to remember a critical piece of information to keep the workflow moving? Where does someone have to wait? Where does an email get introduced into the process?

The key is following the actual workflow rather than relying on the org chart or a potentially outdated process document. The org chart shows the hierarchy and approval structure, but the workflow reveals how work actually moves across departments, how those departments interact, and how everything ultimately comes together.

Jason Miller 11:00

I think that approval piece is exactly where you were going.

Your org chart tells you who has the authority to approve a process, solve a problem, or make a decision. It gives you the hierarchy of authority. But you're talking about something much more granular, which is the workflow itself.

The people higher up on the org chart don't always see what's happening on the ground. That's why the questions you mentioned are so valuable. How granular do we need to get? Where are things getting stuck? Where are interruptions happening? Is it an approval issue? Are there too many layers? Do people have enough authority to make decisions? How does one department hand work off to another? How long does that handoff take?

You find those answers by following a single customer from the very beginning of their experience with your organization all the way through the end. Whether you're producing a product, shipping something, building something, or delivering a service as we do, follow one engagement from start to finish.

If you're curious about every interaction your client has with your organization—and everything your team has to do between those interactions—you'll uncover an enormous amount of value.

Makenzie Ragland 12:41

Yeah, and one thing I'd add is that even if your process documentation is current, interruptions, waiting periods, and rework aren't necessarily things you anticipate when documenting a process. They may not even be realistic to capture ahead of time.

So even if your process documentation is completely up to date, understanding where those interruptions, delays, and pain points actually occur can only be discovered by following the work itself.

When Businesses Depend on Heroes

Jason Miller 13:26

We've talked before about operational debt, and we've talked about bottlenecks. Today, we're framing it a little differently: heroics.

Everyone loves a hero. I certainly have my favorites—I wear their T-shirts most days. As a culture, we celebrate heroes. But I'd argue that businesses shouldn't require them. It's great to have exceptional people on your team, but your business shouldn't depend on them.

Most organizations have one, two, three, or maybe ten people, depending on their size, who fit that description. It might even be you. You could be the person who swoops in to save the day every time there's an emergency or a crisis.

Or maybe it's someone in payroll, IT, sales, or accounting—someone who shoulders an enormous amount of responsibility and makes it all look easy.

So if you have at least one of those people—and I'm willing to bet you do—what happens if they suddenly disappear for a couple of weeks?

Makenzie Ragland 15:08

That could be the problem—or at least that's what you're uncovering.

Jason Miller 15:19

We've asked owners this question throughout our previous Foundations of Transition episodes: Can you detach from the day-to-day operations? How do you know your company is ready to transition? One sign is that it no longer fully relies on you.

Now we're asking you to take that question one step deeper. Who else in the organization creates the same risk? If both of you were gone for a week—or even just one of you—could someone else step in? Do your processes help carry the load?

The issue isn't that these highly capable people are the problem. The problem is that the knowledge of how their work gets done is trapped inside that individual.

Just as knowledge can become trapped in the owner, it can also become trapped at every level of the organization.

Makenzie Ragland 16:32

Rather than immediately trying to solve these issues, I think this is where we come back to curiosity.

Good operators ask questions in these situations. When you have these heroes—who, again, aren't the problem—but the knowledge could be shared more broadly across the team, ask questions like:

• Who does this process get stuck with?
• Why is this happening?
• Why is this step being repeated?
• When did we start doing it this way?
• What would happen if we stopped?

Those can be challenging questions, but they're important ones.

Jason Miller 17:38

Exactly. Why do we have to do this twice? Why are we repeating this step? When did we start doing it this way? What would happen if we stopped?

Curiosity can be direct. It can even be critical. But it doesn't have to be critical of a person when you're applying it to the process.

I want to emphasize that for owners. This isn't necessarily about the people. It's about recognizing when people have become part of the infrastructure of the business instead of allowing the processes themselves to provide that structure.

That's why you ask questions like the ones Makenzie just mentioned: Where did this start? What are we actually doing? Why are we doing it this way?

The more willing you are to ask those questions—maybe even aggressively—the closer you'll get to a more refined way of operating. I don't want to get hung up on the word process. I want to get to the right order of operations.

It's not about making assumptions. It's about investigating what's actually happening and asking, What's really required?

When you're able to eliminate unnecessary steps, combine multiple workarounds into a single solution, or simplify an approval chain, a spreadsheet, or a decision-making structure, that's what helps your business scale.

Curiosity is what helps you scale. Control, on the other hand, tends to keep you exactly where you are until that control eventually breaks. And when it does, it usually breaks around an individual or around something you simply weren't curious enough to examine.

Does that make sense?

Makenzie Ragland 19:56

Yeah, I think it definitely does.

Replace Control with Continuous Improvement

Makenzie Ragland 19:58

I think it all ties back to transitioning, which is, of course, the theme of our Foundations of Transition series. In order to transition successfully, you need to be able to scale. That's really how all of these ideas come together.

Jason Miller 20:22

I love that this is something you can do well before becoming an employee-owned company because it helps build a culture that develops the ownership mindset we talk about so often.

When people care enough to ask increasingly specific questions about how they do their work and how it can be improved, that's what gets everything moving. They begin to see themselves as part of the improvement process.

Then, when ownership officially becomes part of their role, it clicks: I'm an owner now. They've already been asking these questions, but now they have an even greater incentive to keep asking them.

So if there's one thing I'd encourage our listeners to start doing today, it's this: How can we get more people asking more questions about how we do things better?

What kind of exercise can we give our listeners for this foundation, Makenzie?

A Practical Exercise to Start Today

Makenzie Ragland 21:33

As you're listening to this episode, there's probably one process that immediately comes to mind. Maybe it's hiring, payroll, sales, or something else.

Choose that one process and bring the right people into one room. Then start asking questions without assigning blame and without trying to fix anything right away.

Ask, How does this actually happen?—not How should it happen?

Follow the work. Map every approval, every spreadsheet, every workaround, every email, and every interruption. Then ask, What's surprising about this? Let your improvement efforts grow from what you discover.

Jason Miller 22:35

I think it'll be really revealing for everyone who takes on that challenge.

Pick one part of your business and simply ask, How does this actually happen? Don't tell me what the SOP says or what you think I want to hear. Tell me how it really works.

When you discover how many emails are involved, how long approvals sit in someone's inbox, or how many sticky notes it takes to revise a document, I think some of you will be surprised.

Hopefully, some of you will also be pleased because you'll discover that certain processes are working really well. If that's the case, that's great. Then challenge yourselves even further by asking, What can we still improve? Where can we make this even better?

That's simply a natural extension of the curiosity that helped make you a successful business owner in the first place. The difference is that you're making it intentional. And the deeper into the organization you invite people to participate, the more employees you bring into the conversation about how to get better and how to become stronger.

I think great companies with strong operational discipline never stop being students of themselves. They stay curious because they know change is constant. Businesses change. People change. Technology changes. Customers change. As those things change, your operations have to change, too.

The goal isn't to build perfect processes. It's to build an organization that's curious enough to improve tomorrow what worked yesterday.

You've already built a successful foundation. Otherwise, you wouldn't be listening to an ESOP podcast asking how to transition your business to its next chapter and its next owners. That's incredibly valuable—not only to you and your legacy, but also to the people who've supported you, worked alongside you, and, hopefully, will soon become owners themselves.

So please, stay curious. Ask smaller questions. Get closer to what's actually happening on the ground. As you better understand the territory, the map—your journey to an ESOP—will become much clearer simply because you've exercised your curiosity.

Series Reminder and Closing

Makenzie Ragland 25:44

Well, listeners, thank you for joining us today.

If this is your first introduction to the Foundations of Transition series, we encourage you to go back and listen to the first seven foundations. Then follow along with us as we work through the remaining foundations in the series.

Thank you for listening, and we hope you'll join us again next time. Thanks, everyone.