Companies rely on specific production, marketing and sales methods and techniques to maximize profits, but all must be integrated into an overall operational management system that coordinates all of a business’s functions. While large corporations use a variety of advanced operational management techniques, such as Lean Six Sigma and Total Quality Management, small-business owners can build strong operations using common, tried-and-true business practices.
Operational management refers to the practice of organizing and running a company so that its various departments and functions work together to achieve overall company goals. This requires creating management policies, processes and procedures. An example is holding weekly meetings of department heads to discuss what each function is doing and to show each manager how his efforts affect the other departments and overall company performance. Operational management functions include human resources, finance, office administration, sales, marketing, production and information technology.
An operational technique a small business can use to better organize its management efforts is to create an organizational chart. When entrepreneurs launch companies, they often oversee much of the management work themselves, using a few key employees to help with specific tasks. To help organize the operations of a small business, assign functions to specific managers, create a totem pole to show who reports to whom and create specific job descriptions for each position on the org chart to ensure no aspect of business operations is left unassigned.
Strategic Human Resources Planning
A key operational management technique requires proactive human resources planning, rather than simply hiring and firing as needs arise. Once you have an organization chart and know your staffing needs, it’s important to manage the process of recruiting, hiring, training, managing and terminating employees. This includes creating succession plans to develop future managers and prevent operations slowdowns when key employees quit, retire or are terminated.
Coordinated Financial Strategies
An important method of managing operations includes strategic financial planning, often cited as the difference between accounting and bookkeeping. Businesses can develop operational strategies such as creating specific profit margin goals, maintaining pre-set expense levels, keeping debt ceilings and pursuing tax-reduction strategies. For example, a small business might decide not to pursue a new client if it will require taking on additional debt to purchase new machinery or hire more staff to service the client. Another method is to coordinate production, inventory and payment schedules with customers to help maintain stable cash flow throughout the year. Budgeting and conducting budget variance reviews are key operations management techniques.
One of the more critical areas of operations management is keeping compliant with all laws, rules and regulations. Methods and techniques include creating employee policy guides, developing safety practices, keeping customer and client data secure, paying taxes and fees on time, practicing non-discrimination in employee hiring, management and firing, and staying current with local, state and federal laws and workplace rules.
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