By: Arthur G. Scott

What is Owner Proofing?

Owner proofing is the minimized need for ownership involvement in daily operations as a manager and/or worker.

What Causes the Need for Owner Proofing?

Most owners want total command of their business and are reluctant to release any control. This is because when the business was started, they did everything. The operation becomes dependent on them. They like the feel of being on top of everything, “hands on”.

Owners tend to hold knowledge and information in their minds. Since it is not written down, employees find it difficult to do their jobs without the participation of the owner.

It is almost impossible for the owner to take any time off because they take their mind with them.

How to Owner Proof

By delegating authority, others take responsibility for doing certain aspects of the business. This reduces the company’s need for the owner to be involved to overseeing rather than doing.

Put on paper what is in the mind. This gives the employees the owner’s thought process to do the jobs they are authorized to do. Another benefit is it reduces training time for the employee because the employee can read the standards whenever they have a question. Reduced training time provides more time for the owner to concentrate on other aspects of their responsibilities or to take time off.

Example: By detailing maximum and minimum requirements on inventory items, the owner maintains control of inventory as long as the employees follow the guidelines. The owner designates amounts based upon storage space, usage, lead-time, quantity discounts, etc. With this information, almost anyone can come in and handle purchasing in a pinch.

Produce monthly written journals of profit and loss statement line items.

Included in the journal are: Previous year’s amount for the month, the amount budgeted for the current year, the actual amount for the current year. A variance analysis and a justification for the amount projected in that month for the next year are also included. WHY, WHY, WHY.

The journal provides the thought process in each situation.

The owner can review their ideas and make adjustments to compensate for changes in the business, which might not have been considered. They do not need to remember, it is written.

It helps track the success or failure of their planning.

Budgeting improves because of what is learned by the process in turn creating better planning.

The business has more value to a potential buyer or investor. They can see the thinking and be more apt to jump in because they are able to see the management philosophies. They have more confidence in the business.

Owner Proofing Provides the Following Benefits

• More time for the owner away from the business.
  
• More time in the business to plan and effect change for improvement.
  
• An opportunity to run the business rather than the business and employees running the owner.
  
• Better employees because they can act without the constant need of ownership to be present.
  
• Employees are able to “take over” while the owner is gone.
  
• The company is worth more to a buyer (investor) because details of the business are written and their required involvement is minimized. Value is created.
  
• Businesses find it easier to borrow money because they are “on top” of the company’s direction.

Owner proofing enhances the quality of life for the owner and their family.

Mr. Scott is known for his years of experience in restaurant management and consulting with small to medium retailers across the country.

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