While in business school, I didn’t put much thought into the many classes offered on the topic of organizational design and effectiveness.  It seems obvious that these are important but it was hard to fathom that they were more important than effective operations, marketing and sales.  Yet as I’ve continued my education from business school to the “School of Hard Knocks,” I’ve come to find that I should have taken many more classes in this area.   What I’ve learned is that as a company grows, it cannot be effective in the critical functions of operations, marketing and sales without an effective organizational design.

As a young, small company, organizational structure is very fluid – everyone does a bit of everything to just get things done.  Yes, job titles are usually given and core responsibilities outlined, but that is only because custom states that we need these in place.  In a small company, they don’t really matter much because, again, everyone’s job is to get things done.   Communications are informal as well.  Since everyone has their hands in most parts of the business, they know what’s going on.  Ad hoc planning and strategy sessions are more common than corporate communications from the “top.”  And without formal infrastructure, the company can function well – and sometimes better than its larger competitors – because it’s nimble and quick.

As the company grows, however, the informal relationships and communications create more work and significant inefficiencies.   The informal roles become jumbled as people are hired for specific jobs.  Something one employee used to do is not clearly moved from that employee to the new hire, creating confusion and redundancy.  In addition, with growth, reporting relationships change without clear expectations of managers and employees.  Ad hoc communications and decisions don’t get to everyone who needs to know about them.  These communications are then passed along informally as issues come up, and like a game of “telephone,” they become less clear.  Possibly the context of the decision or the strategy behind it is lost in the translation.  The vision and the reasoning are not communicated clearly, so employees don’t buy-in.   These redundancies and inefficiencies will cause the other critical operational and sales functions to fail.

A few key steps as you plan for growth can alleviate many of these problems:

  1. Formality in roles and responsibilities. As your company moves beyond just a couple of people, you must begin to think about how to remove yourself, as the owner, from the center of all activities.  You should seriously consider what roles require your involvement on a daily, monthly, quarterly and annual basis as well as what roles you excel at in the business.   Create an organizational chart of the core functions of the business including Administration, Sales, Marketing, Strategy, Operations/Production, Quality Assurance, Human Resources, and Finance.  Then document who “owns” the function and then who “performs” the function.  In a small company, the same few names will be in many of the functions, but clarity of these roles is essential.
  2. Clear communication. With more people in the company and more segregated job responsibilities, cross-functional communication must be more formal.  Where the entire team used to be involved in determining marketing activities (or at least in the room when the decision was made), now some individuals will find out second hand or maybe not even until their involvement is required.  You’ll need to understand what kinds of communications are effective for your people.  This could be a monthly newsletter or a weekly email about organization wide events.  An awareness of how each person is impacted by the changes in roles and how they respond to those changes will help you determine the right communication strategy for both the short term and longer term.
  3. Keep the vision front and center. Changes in the company’s organizational structure can be distracting to some employees.  The focus shifts from the “we” and the goals to the minutia of the changes and the impact on “me.”  In addition, new employees don’t have the same history and backdrop of the company’s experience and success.  Be sure you keep the company’s “why” and its goals front and center to help every employee understand everyday what they are working toward.  This is your primary and most difficult role as owner and leader of the company.

Although these appear to be simple changes, I know they are difficult to implement as other priorities in your business take precedence.   Make the time as you plan your company’s growth to create an effective organization through clear roles, communication and vision.

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