Guiding Principles of Organization

Before redesigning your Organizational Chart, read through the following guiding principles for organizing a business.

1. Organize Your Business Around Positions, Not Around People.

When developing your organizational structure, don't think about organizing people; think about organizing positions. How can you best organize the positions in your business so that accountability and authority issues make sense? People are important, your business depends upon them, but if you try to support your people by organizing your business around their needs, you'll end up helping no one, especially yourself. Your business has a mission, a reason for being. You jeopardize that mission when you become distracted by the conflicting needs or wants of individuals who may or may not be on the same path. When you are working on your chart, imagine that you are starting your business over with entirely new staff, people you've never met before. Then decide what positions are needed to make it work the way it should.

2. Keep Your Organization as Flat as Possible.

The less layers of management you have, the more agile your business can be. Too many layers of management can slow things down by encouraging a “pass the buck” mentality. Decisions that should be made quickly tend to get over-debated when a company is top-heavy. At the same time, you don’t want to get your business into a situation where your structure is too flat and nothing is being accomplished. See the section When is it time to Hire for more detail.

Too many layers of management are also expensive. Make sure you're receiving real value from each management position. If you're not sure, you've probably got some positions you could do without.

3. No One Should Have More Than One Manager.

More than one manager for one position gets far too confusing when priorities have to be set. It's inappropriate to ask employees to juggle conflicting priorities placed on them by different managers. If employees need to work in more than one department, assign one manager as their “primary” manager. If priorities conflict, the primary manager can make the decision.

Ideally, your employees should be able to make their own decisions based on clear priorities and an understanding of your Corporate Vision, but things aren't always ideal. Right now you might be thinking “if conflicts arise I'll resolve them myself, after all, it’s my business,” but that kind of thinking will keep your business dependent on you. Remember, we're setting up your business so that you won't have to constantly make those kinds of decisions.

4. Focus Objectives

Use the org chart to focus objectives. Reducing the number of objectives for each position increases accountability by removing the tendency for objectives to compete with each other. For example, a sales person who is also accountable for customer service will constantly be required to make a judgement call as to which priority comes first.. helping an existing customer or generating a new customer. It's ok to put the same name in more than one box - as long as they know who their primary manager is.

5. Span of Control

The number of direct reports a manager or supervisor has is referred to as his or her Span of Control. One important management activity is finding the span of control that is best suited to each department in your business. You can imagine if your sales manager had a few dozen direct reports, they would do nothing but meet with their direct reports all day, and still probably not have enough time to properly fulfill their leadership role with any of them. When there's a large span of control, the cost of management is reduced, but it can leave a business floundering without appropriate leadership. If the span is quite small, so that there is a manager for every two employees for instance, not only will the cost to payroll skyrocket, but there will be too much managing and not enough actual work being accomplished.

There are a number of variables that can play into determining the appropriate Span of Control for your business.

• Organizational structure - A small 15-man operation will obviously have different managerial needs than a 1,500-employee enterprise.

• Technology - In some situations, reporting functions can happen electronically. For other businesses, daily face-to-face reporting is necessary.

• Work being performed - Some jobs require the employee to do the same thing every day with very little variation. Those types of jobs can sometimes require less supervision, therefore one manager can have more employees as direct reports.

• Competencies of manager - Of course, we would love it if all of our managers were shining stars. Unfortunately, this is not always the case. You will have some managers that are capable of leading, guiding and directing the activities of more employees than others.

• Competencies of staff - In exactly the same way, sometimes some of our employees are a cut above some of others. A manager of a group of star employees may be able to have a larger span of control than a manager of a group that needs a lot of special handling.