By now you probably realise a few business truths
- There is no one right way to manage your business
- This includes the order of your to-do list a list may provide a logical sequence, but your focus should be making the best changes for your business at the time.
- Just because you've tackled an item doesn't mean you should review how it's working
It makes sense to have an organisation structure as soon as you have more than one person involved. Note I didn't say employees - it also includes advisors such as accountants, insurers and so on. You can just leave them to do their job, but they'll achieve more if that job's defined, and you're less likely to "assume" the advisor has things covered as you expect.
Many strategic plans have failed because they do not ensure that the business has an organisation structure that facilitates the execution of the strategy.
An organisation structure shows the composition of the business' roles, responsibilities and relationships. It is used to indicate the duties of team members and how these should interact with one another. This involves outlining all of the functions required to deliver the strategy, assigning team members and advisors to those functions, reviewing their current skill levels to identify development needs and communicating all changes made to the team.
Generally, this takes one to three weeks depending on the present situation within the business and assuming widespread involvement. Let's take a brief look at what needs to be done.
Process
Clarify the business' vision and strategy
NOTE: Structure follows strategy. If you are working with your client to develop an organisation structure your first step should be to ensure that they have settled on a vision and have a strategy for delivering that vision. If they do not it would be appropriate to take a step back and work on those items first.
Draw an organisation chart
This should be based on the functions needed to be carried out to implement the strategy. At this stage, you are documenting functions, rather than writing down people's names. You can assign people to functions later on. First, it is important to ensure all functions are covered. As a broad guide ensure you include design, production, marketing, sales and customer service (the important value chain functions), as well as covering the support functions found in most businesses (finance, IT, HR and administration).
In small businesses frequently one person will fulfil multiple roles. This is permissible, indeed, it is often unavoidable, but still ensure that you accurately identify each role that they undertake separately.
Once you have documented all existing functions, take some time to objectively review what needs to occur to execute the business strategy.
Consider the following as prompts:
- Level of customer contact - where this is high, generally, it is best to have a structure that empowers people broadly across the organization to make decisions at the point of customer contact. Contrast this with a civil construction business with few customers and exceptionally high-value transactions which would demand a tighter, fairly centralized control.
- Nature of staffing model - this can vary in many ways, e.g. a high proportion of part-time or temporary team, (e.g. hospitality); balance of qualified v unqualified,(e.g. professional firms and retail respectively); age profile,(e.g. fast food outlets tend to have a very young average age). All these factors will affect the type of structure that is appropriate and where decision-making responsibilities lie.
- Do not automatically think of a “functional silo” structure, i.e. sales, operations, finance etc. Sometimes it is more appropriate to have cross-functional or process-driven structures.
- Many businesses have a matrix structure where roles have a vertical primary reporting line but also a secondary, horizontal line - often, the secondary role is geographic-based, e.g. to a State Manager. If the business is to have a matrix or multiple reporting lines, ensure it is absolutely clear which is primary and which line carries sway on key decisions.
Assign team members to the functions you have agreed upon
Once you have identified the functions requiring an accountable team member your next step is to assign the person to each function. It is permissible in a smaller business to have someone's name appear in more than one box. As a business grows you will need to revisit this and ensure that you have appropriately skilled people assigned to each function and that individuals are not wearing too many hats.
NOTE: An individual's name appearing in a box as the incumbent of a role does not necessarily mean they are the right person to do the job. While you work on identifying the skills needed and held within the organisation, in the interim, it may be necessary to assign a more senior person to a weak function.
Communicate the organisational structure to the team
Compile an organisation chart. Document the structure, roles and responsibilities of each team member.
Organise a team meeting and communicate the new organisation structure to team members.
Deliverables
A documented organisation structure to support the implementation of the business strategy. It should include; an organization chart with the title of each key role and the incumbent. Each team member must know where they fit on the chart, who they report to and the responsibilities and expectations of their role.
If the business has a vision, mission or values statement, it is worth distributing them with the new organisation structure also.
Do's
Stand back and identify the functions the business needs before you look at the people it currently employs.
Talk to team members and management and work with them to determine the best organisation structure.
A common difficulty in doing this is you may be too close to see the reality of what is happening. An independent, objective assessment of their team's ability to undertake the key functions can be useful.
Don't's
Dive in and try to design an organisation structure without being clear on the strategy of the business. Structure follows strategy and it is important to keep this in mind as you work on this Action Step.
Fall into the trap of assigning people without the necessary skills to a function just to fill a box on the chart. It is better to have one person's name in three boxes than to try to match under-qualified people with a role they are not capable of undertaking.
Ever create a role or make an appointment for political reasons.