In a previous post, we introduced the basics of Entity Relationship Diagramming (ERD). Basically, ERD is a software-driven method to make the overall operations of your enterprise accessible and digestible. It aims to overcome the tyranny of thousands of documents and spreadsheets that each present a fragment of a fragment of the picture by presenting a general portrait that boards and senior management can understand, relate to and act on.
A future post will take up the nitty-gritty details of building a good diagram. This one focuses on several of the best practices that you should aim to follow when creating, understanding and interpreting a diagram of your entity relationships.
ERD software is an enormously powerful tool that lets you potentially achieve all of these objectives simultaneously. But you need to be clear about how and why you're using it to put it to the greatest use.
Establishing consistent rules for diagramming is the best guarantee that a diagram will effectively present the information that you need it to present. You should be thinking about not just how the elements of a diagram fit together and cohere within themselves, but what kinds of diagrams will accurately capture significant information given the specific needs of your operations.
A diagram of ownership, for example, won't necessarily foreground the historical relationships between each subsidiary. The cool thing about ERD is that it allows you to chart operations in many different ways. Always keep in mind that one diagram presents only part of the picture, and that for accurate understanding, you'll need to gain more thorough knowledge through examining many of them.
Charts and diagrams are created in ERD to help your organization proactively assess and respond in a market and business climate that is in constant flux. If they're not helping you plan and execute decisions, then, at the most fundamental level, you're discarding the basic advantage that diagramming gives you.
A future post will take up the nitty-gritty details of building a good diagram. This one focuses on several of the best practices that you should aim to follow when creating, understanding and interpreting a diagram of your entity relationships.
1) Think hard about the best ways to diagram information for your specific business
There are many different ways of charting entities based on the different needs of your leadership at any one time or for any given project. ERD can break down operations country by country, group different subsidiaries by their function, detail the ownership structure of each entity by charting shares held, and visualize entities by their corporate structure, tax status, voting, shares, participation and interests, depending on the objective of a given diagram.ERD software is an enormously powerful tool that lets you potentially achieve all of these objectives simultaneously. But you need to be clear about how and why you're using it to put it to the greatest use.
2) Achieve the maximum usefulness possible through customizations
Going along with the above, any good diagramming software is infinitely manipulable and customizable based on the specific needs of your business and the kind of information you need to present at any one time. The elements of a diagram, such as color, text, line and shape, are essential to presenting information accurately and effectively. You may want to use color to define the types of different subsidiaries, for example, or use lines to show details of ownership.Establishing consistent rules for diagramming is the best guarantee that a diagram will effectively present the information that you need it to present. You should be thinking about not just how the elements of a diagram fit together and cohere within themselves, but what kinds of diagrams will accurately capture significant information given the specific needs of your operations.
3) Remember that an entity diagram is an abstraction
A chart is just a chart, and the coolest-looking one is still a simplification and an abstraction that will conceal as many things as it reveals, if you aren't familiar with the most powerful tools of ERD software. Hyperlinks are a good way to keep diagrams accurate by allowing users to click through to more detailed information, whether online or stored in your firm's data libraries.A diagram of ownership, for example, won't necessarily foreground the historical relationships between each subsidiary. The cool thing about ERD is that it allows you to chart operations in many different ways. Always keep in mind that one diagram presents only part of the picture, and that for accurate understanding, you'll need to gain more thorough knowledge through examining many of them.
4) Entity diagrams as tools for understanding and action
The boxes, circles and other shapes, lines, text and colors that make up a diagram aren't there first and foremost because they're pretty or aesthetic. They're meant to help your leadership come to actionable insights about your business. With entity diagramming, you can see in real terms the effect different decisions — for example, spinning off a new UK entity in light of Brexit or expanding operations in the US to take advantage of the new tax law — will have on your overall operations.Charts and diagrams are created in ERD to help your organization proactively assess and respond in a market and business climate that is in constant flux. If they're not helping you plan and execute decisions, then, at the most fundamental level, you're discarding the basic advantage that diagramming gives you.