The Power of Business Structure

The Power of Business Structure

June 7th, 2016 // 6:39 pm @

Structure300How a business is structured has critical impact on how it reacts, what it focuses’ on, and how much of your staffs potential you unleash.

Business Structure is rarely used effectively as a business tool, and the structure of the business is often a historical inheritance or a chart produced by the Human Resources department. This is unfortunate as it is one of the most powerful tools a CEO has at his or her disposal.

If used as a management tool and not as an administrative chore, setting the business structure can be a powerful tool. It can focus the business and more importantly unleash the potential of the people within the business. The truth is most companies do not get anywhere near the full potential from there staff and structure is part of the way to release that potential.

There are some obvious basic rules for setting structure, particularly making the business structure as flat as practical, this makes communication up and down through the business much easier. And I personally never include “Dotted Line” reporting, I do not believe most people know how to report to more than one person, and even if they do it will inevitably cause at least some confusion in who is setting goals and direction for whoever has a second “Dotted Line” manager.

Beyond the basic rules for setting structure there are more significant things it can be used to influence.

Clearly how you structure your business allows you to allocate resources to those things that are critical to achieving the business strategy. Putting the correct level of human resource to support each part of your strategy is critical. Equally taking it away from areas that no longer need such levels of resource allows costs to be minimized. Most businesses suffer from headcount creep, where staff levels wander up without a strategical decision being made, and some redressing of this is required regularly.

Building the right structural teams to focus on particular parts of a business’s development is a good way to give focus to the business. People rarely work well when they have multiple goals, they work best when they have one that is clearly understood.

As an example I ran a sales operation in the US selling to the Hotel and Restaurant Industries. When dissecting the sales results it became clear that most people sold the majority of their sales to one industry and their penetration of the other was weak. Which industry they favoured was fairly random, and reflected their backgrounds and the industry in which they felt most comfortable. This however was a big issue for the company who’s market valuation was linked to our ability to achieve market leadership in both industries, and what we were getting was different industry penetration dependent on sales peoples preferences.

Simply by splitting the sales operation into a Hotel team and a Restaurant team, drove the sales team to focus on driving sales in their defined industry. And the company achieved what we needed strategically which was penetration of both industries.

Splitting a business into manageable divisions can in itself drive greater focus and responsibility. As a senior sales manager I witnessed a major food producer in the UK split its business into smaller manageable divisions. Those of us working within the business went from being small-disconnected parts of a massive business to stakeholders in a smaller division of the business over which we had greater control. It made the goals for our division something we felt we had real power over, and ability to influence. This linked to divisional targets and the forcing down the structure of responsibility changed the way people thought, they became more focused and willing to make difficult decisions to influence their divisions results than they had been when the impact was lost in the companies total results.

Structure can be used to fundamentally change the way decisions are made within a company. To make an effective decision one needs to know the company goals, have the expert knowledge to make the decision, be able to be held responsible for the decision, and have the authority to make the decision. The reality is in most business’s these things rarely reside in one person.

The norm is senior management holds the strategical goals, and the authority to make the decision. The expert knowledge pertinent to the decision is normally further down the business structure, and the responsibility for its success floats somewhere between senior managers and those implementing the decision with neither fully owning the success of the decision.

This causes the decision making progress in most companies to be the more junior person with the knowledge trying to brief in whatever time is allowed the more senior person who has the authority to make the decision.

I have watched too often senior mangers trying to make quick decisions based on a short briefing from those who actually understand the issue. This often causes poor decision-making and more seriously as those people with the knowledge are often those who have to implement the decision, they come away with little commitment to the decisions success, as they did not make the decision. People will move mountains to make a success of a decision they took; they have little commitment to decisions imposed on them.

Companies suffer from decision-making creep. Simply given time decisions tend to wander up the organization as managers see their role as to make decisions, rather than to ensure the best decision is made, by getting knowledge, responsibility and authority in the same person. When communicating with staff I ask them to preface any discussion with what they want from me, it can be to inform me of a decision they have taken, ask me to make a decision, or to have a discussion about an issue but one where they will still make the final decision. Normally CEO’s naturally assume that any discussion requires them to make a decision at the end of it, when often that is exactly what they should not do.

It takes a degree of courage to actively push decision making down the organization. We live in the culture of “I would not ask someone to do what I could not do myself”, it is therefore hard to accept the people below you are undoubtedly more skilled in their role than you will ever be, and they are the right people to make many decisions, and as a CEO or senior manger you need to trust them to make decisions.

This is counter intuitive for many managers, who feel much safer micro managing. It may make the manager feel safe but it stifles the creative ability of those they manage.

With courage and skill structure can be used to unleash the potential of all the people within the company, and they are your number one resource.

 


Category : Blog &Leadership &Management Technique

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