One of the frequently discussed issues in similar countries is the inability of small and medium-sized enterprises (SMEs) to institutionalize and/or the barriers to institutionalization. Various definitions of institutionalization are made, generally indicating the ability of the business to perform all its functions without being dependent on individuals. A more systematic definition can be considered as the institutionalization of operational, managerial, and family levels of planning and management skills and systems in family businesses. Looking at institutionalization from a broader perspective, it can be defined as all efforts to replace the management of a business conducted in a small market and low competition environment under the management of a single owner in the old business understanding with a more flexible, but at the same time more systematic, fast, effective, efficient, and open to the outside world, competitive business management.
The purpose of this article is to seek answers to the question of HOW to reach more competitive, efficient, and flexible business management systems, which are described in the definition above, rather than analyzing the frequently encountered WHY we could not institutionalize questions. In other words, let's institutionalize, but how? At this stage, I do not intend to suggest a solution without thoroughly understanding the reasons. However, briefly, the reasons why our businesses cannot institutionalize have been explained a bit in the third definition made above. We can thoroughly evaluate the WHY question in another article.
If we briefly explain the second definition made by Dr. Dolmacı, who conducts studies on the development of our SMEs, the institutionalization can be divided into three levels. The first level is all activities where operational activities (purchasing, inventory control, marketing, sales, internal communication, resource control, etc.) are performed and can be described as all activities that can be seen as the visible face of businesses. The second level is the management activities, that is, the planning and administration of a business in the medium and long term and can be defined as the upper management of a business. In other words, the planning and administration of where this company that continues certain operational activities is going/to go in the medium and long term. The third and final level is how the structure at the highest family level of this family business works and the existence of a written family ethic and/or agreement.
To ensure the effective functioning of these functions on the three levels, various methods have been developed. Now let's discuss them one by one. Starting with the basic first level; the description and recording of the operational operations of the firm with written procedures, instructions, internal audits, and routine reviews, and effective implementation of the ISO 9001 Quality Management System (QMS) at a minimum level, can be done. In other words, ISO 9001 QMS offers a basic system for the daily routine operations and control by the top management. However, it does not provide a solution to family problems (third level), and regarding where the company will go, it only provides data (second level). A higher level of this is Total Quality Management (TQM), generally a more comprehensive approach that addresses larger organizations beyond the body of SMEs. If we briefly look at how a company that has correctly established and operates the ISO 9001 QMS makes improvements in this context, we see that it produces solutions in three problematic areas that are generally encountered in our companies.The first is
1) the creation of data-based decision-making systems.
It means identifying points that will provide meaningful data for top-level management when making decisions using the prepared procedures and control mechanisms, and constantly analyzing and providing the basis for decision-making while analyzing these data. Second,
2) improvement of customer relations.
With the systems created, the definition of customer groups, determination of their needs, and the ability of the company to respond quickly to the changing needs of the customer by monitoring these changes. The third area of development is
3) increasing efficiency and process approach.
One of the most significant gains of ISO 9001 QMS is the establishment of systems that will allow tasks to be done only once, completely, and correctly without being dependent on individuals and, with the philosophy of continuous improvement, prevent resource waste (time, labor, raw material, etc.) and reduce it to a minimum.
In companies managed without such systems, generally, the data examined are sales and accounting reports. However, it should not be forgotten that accounting reports only provide information about the past, and this situation is likened to driving a car by looking at the rearview mirror. For operational-level effective operation, the correct and effective implementation of the ISO 9001 Quality Management System, which is established in a way that is compatible with the purpose of ISO 9001 QMS, is inevitable. Given the problems experienced in this regard and the difficulties in the system being prioritized over document acquisition in our country, we have discussed it before. It is clear that approaches that focus only on documents and not on the system are not long-term.
Continuing from the second level on the path to institutionalization; it is a description of what the vision and goals of a business in the medium and long term are and how the management and administration of resources to reach these goals will be done. For example, what does the company think about growing, entering or leaving which sectors within the next three years, what are the tasks of individuals/units to achieve these goals, etc. For a company to create, implement, and revise a Strategic Plan at this level, it is possible only by working with experienced professionals on the subject. It is recommended to receive support from consulting firms at this stage. This is also useful for Performance Management.
The final level is the agreement on how the company(ies) will be managed within the family, how ownership, how new family members will take responsibility in companies (authority transfer), and how they will be raised (succession planning), or in other words, an agreement on ethical principles or in writing. The main goal at this level is to ensure that the qualifications of ownership, directorship, and management are separate from family membership and work in harmony with corporate legal structures. Second-generation family members who have a broader vision than the first generation, which has received education abroad, established and grown the company, demand to be more effective in companies and, if an agreement is not reached on this level, private and/or professional internal family problems may arise in businesses. Achieving an ethical commitment or agreement at this level, even going further and putting it into writing as a family constitution, requires the consent of all family members and a high degree of effort, sacrifice, and professional support from all individuals. Considering the sensitivities at this stage, professional support is important in terms of both methodology and impartiality.
In conclusion, the operational level efficiency and effective operation of our businesses will naturally occur with the increasing competition/market conditions. Businesses that cannot keep up with this will suffer losses. We can see this relatively more in some sectors where more competition is taking place today. On the other hand, business strategic plans and family agreements requiring a higher level of effort and vision on the path to institutionalization will become compulsory, both due to the dictates of external factors and competition, and internal factors and the upbringing of new family members. In the long run, institutions that will strengthen and become permanent, leaving aside all other factors, will be those who can manage these three levels well.
Dr. Bilinç Dolmacı
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