Tuesday, September 19, 2006

Creating Organizational Structure

Don’t let the title bore you. This is the fun stuff. Another necessary component of business building – well, successful business building. Anyway, you should love this. I’m going to teach you another step in systemizing your business, and pulling yourself out of it. It’s not nearly as difficult as you make it out to be.

Every successful organization has some semblance of hierarchy. Everyone has a role, and the more clearly defined that role, the more efficient a person can be in that role. The more efficient a person can be in a role, the better off everyone else and the organization as a whole. What I’m describing to you is an Organizational System. And any business that is successful has one. As a small startup venture, you will find it difficult to assign responsibilities and tasks to roles, because you may be the only individual filling many roles. It may even seem like there is no need for a system, if you don’t have anyone else to worry about. That kind of thinking will get you in a lot of trouble if you don’t change it fast.

By defining roles and creating an organizational structure, you are developing the prototype for how you want your business to look in the end. You should make sure every position is outlined, from the President down to the cashier – and each of their responsibilities and whom they are accountable to is defined. Nevermind that YOU are going to fill each of these roles for now – just work to get each position established and defined. And put it all on paper. Documenting everything you do will help you build your systems from the ground up.

So now you have your President, a VP of Marketing and a VP of Operations. Under the VP of Marketing you have your Sales Manager, under your VP of Operations you have your Service Manager. (For simplicity, I will leave off Sales Reps under the Sales Manager, and Techs under Service Manager, and any of the other titles we could have added. If you plan to make them a part of your business, then add them in accordingly.) You have your structure, and you personally are fulfilling the role of each one. For now.

Now you need to identify the responsibilities of each position. Again, documenting everything. You may even draw up a Position Agreement for each, summarizing the expected results, the expected workload, standards to be evaluated, and a signature line. Now you have a contract, an agreement, for the individual you deem worthy of this position, so they understand and are reminded of their role. Until you make the decision to bring someone into this position, then it is YOUR agreement to uphold.

At the point and time you decide your business is doing well enough you can afford and/or need someone to help you out, you have the Organizational Structure in place to do so. You need to decide who you are going to hire and for what role. Interviewing and hiring is another discussion, so let’s focus on that role. In most, if not all cases, you are going to hire someone for one of the lower positions, for a couple of reasons. 1) You aren’t ready to relinquish control of an entire division of your operation, and 2) you need to get someone started on the ground level, so you can evaluate and groom them for any promotion. It is also much simpler to bring in a new Sales Manager and refine or make any adjustments necessary than it is to bring in a new VP of Marketing who will also be your Sales Manager.

Now you’ve added your Sales Manager, freeing yourself from that role and giving you more opportunity to work on your business.

From here it is a takedown schedule. Next you look to find a Service Manager. Then a VP of Operations, which may be a promotion for your Service Manager. Then you move on to your next need. One by one you are bringing in people to a setting that is conducive to success. If you have done your job, defining the positions and training the employees, then you have a system in place. You have increased the predictability of the results. If your infrastructure is well-oiled, then you just need to focus on getting the right people in your organization.

Now, take that very generic model that we just developed, and imagine if you had never defined those roles. If you just did all of the work, and one day decided to hire someone to do the things you either a) don’t want to do, b) aren’t good at, or c) spend too much time on. What kind of structure is that? Where do you go from there? What would your prototype look like?

There is the key: the Prototype.

Imagine it. Define it. Realize it.

Decide what you want your business to look like in the end, and start to assemble the pieces.


At 10:14 AM, Anonymous Andre said...

Hi Nick,

great article on org structure. I just finised reading e-myth revisited. Altough I am not a fitness trainer (IT Services) we still face the same type of issues. Keep the blogs coming.


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