Systems Thinking Benefits for Small Businesses

The Shocking thing about Systems Thinking Benefits for Small Businesses

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During high school summers, I worked for a local company. 

They had an incredibly high employee turnover rate — defined as the percentage of workers that quit during a certain period. Except for a few managers, their team was re-built within two summers.

When I asked the company’s director why they changed employees so often, he responded he needed to find people appropriate for the job, and that was difficult. Since commissions made up a substantial percentage of the employee’s pay, the underperformance was detrimental to both parties.

Years later, as a hospitality entrepreneur, I wanted to improve my business and expand. That’s when I discovered John Seddon’s works. An expert in the field of services, Mr. Seddon created a unique method for diagnosing company problems. His process-assessment formula disproves the concept that replacing people solves most problems. 

What Does Systems Thinking Mean

Systems thinking is a straightforward approach to understanding complex systems and their interactions. Understanding the complete system rather than just the elements is critical when making strategic decisions.

Here are three basic principles that help explain how systems work:

1 — Systems always have interdependencies.

2 —  There’s always a feedback loop. 

3 — The whole is greater than the sum of its parts.

A system is made up of pieces that work together to produce desired effects. In other words, Systems power your business and they are the interaction of:

  • Norms and practices
  • Infrastructure
  • Investments
  • Human actions, trust, kindness, etc.

If each component is a gear, the system is the engine. A system problem is a malfunction in the engine or the gearbox.

A system problem is a malfunction in the engine or the gearbox.
You now understand why changing your staff won’t solve most business difficulties. One gear change cannot fix all engine issues.

Systems Thinking Benefits and Leadership

Systems thinking is a framework of analysis that helps leaders understand how various parts of an organization fit together. It’s especially useful for managers who oversee large teams in diverse functions. 

The insights gained from systems thinking can help leaders make better decisions, develop more innovative products and services, and lead more effectively.

Systems thinking helps you understand how your organization works as a coherent whole. It helps you see how different elements are connected and affect one another. This view can help you make sense of complex situations and spot opportunities for improvement — and ultimately drive better business performance.:

How to Apply Systems Thinking to Solve Underperforming Staff Problems

The most revolutionary aspect of Mr. Seddon’s technique is that it has no intricate procedures or plans. It’s all about questions. Questions with simply yes or no answers.

When I applied this to my company, I recognized my issues were systemic. Like the local firm that recruited me as a youngster. 

Try it in your business if you ever have a staffing issue. It may shock you.

Picture to illustrate The Shocking thing about Systems Thinking Benefits for Small Businesses
The Shocking thing about Systems Thinking Benefits for Small Businesses

The Systems Thinking Approach

The first five questions to be asked are about your company’s knowledge transfer. 

Systems Thinking to identify Knowledge Transfer Problems

1 — Does the person know what is required and what is “Satisfactory”?

2 — Are the correct metrics used? Are the measures relevant to the system’s goal? Are all targets transparently assessed?

3 — Are the indicators linked to actual performance?

4 — Do the indicators tell the person what he isn’t doing well?

5 — Is there appropriate guidance or support for excellent performance? Are they straightforward?

If you answered no to the previous five questions, move on to question 6.

Systems Thinking to identify Method Problems

6 — Is the system — the workflow — optimized and waste-free?

7 — Could such things be constructed better to maximize performance?

If you answered no to 6 or 7, you have a method problem, which is a subset of your system. If you said yes to both, keep on.

Systems Thinking to identify HR & Compensation Problems

8 — Are there extrinsic motivators (incentives, etc.) that encourage people to “get the reward” rather than “do a good job”?

If you responded yes to this question, you need to restructure your system’s incentives and rewards to avoid people gaming the system. If your answer was no, go to 9.

An idea for a present for yourself (or to any entrepreneur).

Systems Thinking to identify Training Problems

9 — Would the person fail to perform to excellent standards if his life depended on it, even with ample information, method, and motivation?

10 — Does the excellent performer appear to know something others don’t?

Answering yes to any of the preceding questions indicates a knowledge issue. So your problem is a lack of instruction. It may also indicate a poor training design.

Remember to train your employees on what the customers want them to know, not just what you believe they should know.

If you answered no to question 10, there may be a people problem, but we are not sure yet, so continue to the next question.

11 — Does the person need specific abilities, skills, etc. to do the job well?

If you answered yes, you have a selection problem, which is quite similar to a people problem. Still, if the selecting procedure is a system component, it should be fixed. If you answered no, go to the last question.

12 — Is it impossible or uneconomic to reorganize the job to create a satisfactory fit between performance and ability?

If you responded yes to question 12, you have a people problem and thus the employee is not the right person for the job.

Following this method will reveal that many of the challenges experienced by entrepreneurs are not about people, but rather systems. 

Based on my observations, over 90% of issues are systemic. In this situation, you will stop between questions 1 and 11. During my 4 years as an entrepreneur, I only reached number 12 twice. Only twice I had a people problem.
Using this method can drastically reduce employee turnover and allow you to quickly detect system flaws. 

If you use it, tell me later how it worked.

Conclusion: Systems Thinking Benefits for Small Businesses

Video version of this article: The Shocking thing about Systems Thinking Benefits for Small Businesses

Systems thinking can help small businesses identify what is a people problem and what is a system problem. It will also help you identify when a problem is both — and that’s the best time for management to step in since the whole system needs adjusting. 

The method present in this article is based on John Seddon’s works and is composed of 12 questions that should be answered in a sequence. Only when the decision-maker arrives at question 12 and answer YES to it, he/she has a people problem. For all other situations, the problem is with systems.

The biggest challenge with systems thinking, though, is just remembering to use it. It’s easy to get caught up in the day-to-day details of running a business and forget that you’re managing a system. 

When you do remember, though, you’ll be able to see problems from all sides instead of just one — and that can mean better results for your employees, your customers, and your bottom line.

For more insights for entrepreneurs and small businesses, I recommend this book: All the Hows of a First-Time Business Owner: There is a thin line between bankruptcy and the freedom to be an entrepreneur

Liked this article? Check also:

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Levi Borba is the founder of, creator of the channel Small Business Hacks and The Expat, and a best-selling author. Subscribe to my articles (for free) and receive (also for free) the ebook “The Blueprint for First-Time Business Owners”.

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