In turning around an organisation and its people, structure is of key importance and without a structure, it is difficult to maintain good balance. Of interest to note is that organisational structure goes beyond the organisational organogram, but incorporate the combination of people relationships, facilities, processes and how things are done. Put in the terms of the Encyclopedia of Small Business, “An organisational structure defines the scope of acceptable behaviour within an organisation, its lines of authority and accountability, and to some extent, the organisation’s relationship with its external environment.”
It is structure that differentiates big businesses and small businesses, as well as differentiating performance and growth in such institutions. A wrong structure may seriously weaken business performance and may even destroy the business.
In other words, structures are the methods by which the organisation communicates, adapts to change, deals with certain issues and distribute responsibility. To have an organisation that sustains profitable growth, the structures must be made very dynamic and effective to enable quick response to the ever-changing business environment. Good structures, that are dynamic, often result in good performance.
In setting up structures, the first to be tackled should be the organogram (which many call ‘organisational structure’). Designing the organogram helps management in the identification of talent that needs to be added to the business, and the outlined positions should be filled based on merit, and not to just make the numbers, as every position must deliver a specified job. Sometimes, business failure starts with the organogram if it fails to capture all the jobs, in the form of positions, that must be delivered. The organogram must include all current and future key functions and managerial positions, including the order in which each role supervises and is supervised, as well as titles and job descriptions.
Each position included on the organogram must have its roles and responsibilities clearly defined, creating a standard for the position. As such, the responsibilities do not have to be designed after hiring but should be present from the plans and objectives of the organisation. These roles and responsibilities should not change because of the person hired but should change when the plans of the business change regarding the position, or the direction the business will be taking. Several times, employees have had their roles and responsibilities changed, without a change on the plans and objectives of the organisation, creating confusion and uncertainty. Not to say that roles and responsibilities should not be changed anytime, but the change must be driven by the organisational plans and objectives.
The organogram is also of importance for a growing business as it provides direction and clearness on managerial authority. With such, small businesses or start-ups should consider formal organograms from the on-set. When clear lines of managerial authority are set, employees are provided with guidance on the official reporting relationships that administers the workflow of the business. Clear organograms make it easier in the future to add new positions that will drive performance and growth, making it possible to attain the plans and objectives of the organisation in the medium to longterm horizon.
Especially in small businesses and start-ups, without formal organo grams, employees find it difficult to know who they officially report to in different situations, making it unclear as to who has the final responsibility and for what. Well-structured organograms improve operational efficiency and effectiveness by providing clarity to employees at all levels of the organisation. With the help of the organogram, departmental functions can be collaborated well, focusing on performance and productivity. Likewise, a clearly outlined organogram provide a pathway for promotions, enabling organisations to create employee advancement tracks.
When small businesses and startups fail to design organograms and clarify who is to do what tasks and who is responsible for what result, it results in obstacles to performance and growth due to uncertainty and confusion of assignment. If you are a start-up, design the organogram to meet the needs of your business, and not your current staff levels. Ignore the current staff levels and come up with a structure, as you envision the organisation, that drives the business forward and not one that makes your current staff happy, at the expense of the business.
It should never be forgotten that structure is the backbone of business. As a start, let the organogram be shaped by functions. Look at the functions of a properly laid out business and ensure that each function is well staffed, and if means are not permitting, ensure that each function is covered by competent men and women who can handle more functions whilst the organisation gains its standing. But, the combination of functions should be done in a logical and efficient manner to enable smooth flow of tasks and responsibilities. Key functions to include on the organogram are marketing and selling, operations, finance, administration or human resources and information systems. Nonetheless, do not overload other employees as that has a negative impact in the long-run. The fact that one can perform many functions does not mean that the organisation should ignore making them focus on their most outstanding abilities and areas. Equally important, to design an effective organogram, one should take into consideration factors like the environment, the strategy, the size of the organisation and technology. The environment would consider the political, economic and social conditions. Ignoring the environment might result in a weak organogram that will not be able to meet the objectives of the business.
The size of the organisation is also of importance when crafting the organogram, as it determines the number of the functions or departments the business should have. A bigger organisation might mean an increased number of functional departments, managerial levels and employees, to fully cover the needs of the business and vice versa. Information technology can no longer be ignored in the 21st century, the design or size of the organogram may depend on the ability of the available technology to handle some functions. If functions are routine and repetitive, they can easily be replaced by technology, making the organogram leaner.
Expressly, the business strategy and the organogram should be in sync. As business strategy is a plan for achieving the organisation’s mission and objectives, the organogram should be in line with the strategy. When the strategy has been laid out, the organogram should support the strategy, for improved business performance and growth. A wrong organogram is likely to affect even the profitability performance of the business as there will be confusion and uncertainty in the laid-out functions. An effective organogram that leads to good results should not have two roles, especially managerial, that are expected to deliver the same results. If that happens, employees are given conflicting assignments by two or more managers above them, and the results are disastrous, even leading to creation of camps in the organisation!
Important to realise is that many Getting better with structures mistakes are made in times of economic turbulence, as several organisations hope to make a saving on the numbers, laying off some employees. The organogram is affected depending on where the big saving will come from, not where the turnaround will come from. In the processes of changing the organogram, the right skills and talent are laid off and the less competent are left because they are cheap to run with. Not everything that is cheap is beneficial, during such times, quality and competence should be the number one thing to consider.
When the organogram is filled with less competent people, the performance and growth of the organisation will be negatively affected. Economic turbulence does not mean that there is no room for growth, with the right people and talent, growth can still be experienced. Whenever changes are to be made to the organogram, regardless of the driver, consider the importance of the functions to the overall business and not be blinded by the dollar value. Some businesses lost everything in the hope of saving through laying off staff. In tough times the organogram should be filled with competent people who can adapt to the changing conditions.
Since the business of the 21st century has moved dramatically from the business of the 20th century, businesses should not be conducted on the same organograms that were set in the 20th century. Let the organogram resemble creativity and agility to the changing needs of the customer every day. Ignoring the organogram is ignoring the future of the organisation, ignoring profitability and growth also. A holistic view of the organogram should encompass functions or departments, roles and responsibilities, the talent needed on each role and decisionmaking ability for the role, to promote profitable growth.
Good organograms clearly lay out lines of authority and communication, removing doubt and confusion as to who is supposed to be doing what and who is responsible for what. With such clarity, it may be easy to drive the organisation to profitable growth and prosperity.
Batanai Kamunyaru is a business writer, speaker and coach. He can be contacted on firstname.lastname@example.org or +263 718 852 489.