Every business has an organizational structure. Sometimes it evolves haphazardly, and sometimes you design it deliberately. However, most of the time structure is a blend of the two. Regardless of how your structure came to be, its effect on your business is huge. At every stage, your organization’s structure will either enhance or hinder your business’s movement forward. Well-designed organizations foster communication, improve productivity, encourage innovation, and create environments where people can work effectively.
Many productivity and performance issues can be traced back to poor organizational design. A company can have a great mission, great people, and great leadership, yet still not perform well because of poor organizational design. So how do you know if your organizational structure is working?
It is easy to identify an “out-of-whack” organizational structure when you know what to look for. Misalignment leads to confusion. There isn’t a clear sense of direction or focus; there is a lack of authority and accountability; and employees display doubt, frustration, and a lack of confidence and become disengaged. The causes are many. Some of the more common red flags that indicate misalignment include the following:
The strategy is clear, yet the company gets set in its ways. This is the most common indication of misalignment. People settle into their roles, grow accustomed to procedures over time, and ask fewer questions because “it is just how we do things around here.”
When there is no clarity of individual responsibilities or the types of decisions employees are allowed to make, confusion arises about roles, responsibilities, and authority. This leads to misunderstandings, duplication of efforts, and a lack of efficiency.
When new hires repeatedly fail, it is often a sign of structural imbalance rather than poor hiring decisions. If you have a high turnover rate, then it is time to look at your organizational structure and identify how the structure can better support new hires.
Organizational design is the process of aligning your organization’s structure with your company’s mission. This means looking at the relationships among individual tasks, processes, accountability, and levels of decision-making and making sure that they each support the objectives and goals of your business. How closely are the following five areas aligned with your business strategy?
- Business Functions
- Job Tasks
- Workflow Processes
- Position Responsibility
- Position Authority
If you want to improve your organization’s performance, change your design. How your organization is designed determines how it performs. Think about a flock of geese. What happens when they need a course change or when a goose falls behind? They adjust and course correct, just as you should. When your business strategy changes, your organizational design should change as well so that functions and positions align with your new goals and objectives.
Designing an organizational structure is much the same for buildings, clothing, and vehicles—it involves a plan. A good design takes inventory of all the tasks, functions, and goals of a business and then develops groupings of positions, departments, and individuals to best and most efficiently achieve those ends.
Once you understand what functions need to be performed by your business and where authority will reside in these functions, you can work on an organizational chart for your business. When creating your structure, start with a blank piece of paper. Try to ignore naming the people involved but rather identify the core business functions.
As you create your organizational chart, it is important not only to identify a position’s key responsibilities and tasks but the types of decisions the person in the position has the authority to make. Be clear and intentional with your team about the types of decisions you expect them to make. Here are five types of business decisions you can use to further clarify your positions’ responsibilities:
- Programmed Decisions: Standard decisions that always follow the same routine.
- Non-Programmed Decisions: Non-standard and non-routine decisions. Each decision is different from any previous decision.
- Strategic Decisions: Decisions that affect the long-term direction of the business.
- Tactical Decisions: Medium-term decisions about how to implement strategy (e.g., what style of marketing to use or how many extra staff members to recruit).
- Operational Decisions: Short-term decisions involving day-to-day operations.
Finally, it is important to identify key metrics that are tied to performance for each position. This provides a clear line of sight on the outcomes the position is responsible for achieving and how the individual is performing toward those goals.
As you create or restructure an organization, be aware of the following mistakes that commonly lead to a structural misalignment that will impede business performance:
- The strategy changes, but the structure does not. Your organizational structure must support your strategy. Different strategies require the use of different structures. Closely align strategy, structure, and the environment; otherwise, your organizational performance will suffer.
- The organization is structured around people. Structure the principle first, then add people. Start with a blank sheet of paper—focus on functions, roles, and responsibilities. Design the organization as if you had no people currently involved in the business. Once you arrive at the right structure, then, and only then, start placing people.
- Avoid shared seats/responsibilities. Shared accountability never works. Always place a single name in each seat: one seat, one title. When an issue arises, there should be one individual who calls the shots. The buck must stop at one single seat.
- Don’t hang onto the past. Focus on functions, roles, and responsibilities. Go back to your blank sheet of paper. Bottom line: if nothing changes, nothing changes. Resistance is often minimal if the team sharply focuses on functions, roles, and responsibilities.
- The right seats need the right people. Assess employees’ knowledge, skills, and abilities. Evaluate and assess your employees’ skill sets and competencies for positions. Place the right people in the right seats. Gracefully exit the wrong people. Some people are like clouds; when they disappear the day becomes brighter.