Executive management of companies large and small has four primary functions:
- Planning the work– Creating a competitive strategy that defines success and how to achieve it
- Organizing the manpower – Building a team that can perform the necessary work
- Leading the team – Communicating the company’s vision and its key success factors
- Controlling the outcome – Ensuring the necessary performance in those key success areas
The old adage plan your work and work your plan sets the sequence for planning and organizing a company. First, the strategic plan specifies the company’s theory of business - who its customers are, what products and services are offered, and how the firm will entice those customers to buy that offering – and defines the actions and performance required to achieve the critical objectives.
Designing your company’s org chart follows. This sequence enables the design process to establish an organization that focuses on the business’ key success factors. If your company’s organizational structure fails to concentrate on those most critical objectives, what the strategy intended will not happen.
The adjective key in the phrase key success factors is important to remember. Organizational design should be concerned with the key activities of a company, the critical processes and operations that must be done well in order to succeed. Think Pareto’s Law: 80 percent of your results are produced by 20 percent of your activities. And remember business thought leader Peter Drucker’s advice, “There is nothing so useless as doing efficiently that which should not be done at all.”
Why is getting the right organization so important?
Organization is required to achieve performance that cannot be accomplished by a single individual. That structure provides a stable environment in which managers can direct their teams, focus their effort on key tasks, enables coordination of various jobs into an effective process, and minimizes costs. As important, the correct design funnels critical communications up, down, and across the org chart. Getting the right product to the right place at the right time requires getting the right information to the required places on time. Information is the glue that connects individual workers into a well-functioning process.
Why question your organization's design?
Most likely, in today’s changing world, the who, what, and how of your business is continually evolving. It follows that your organization must adjust to this disparity. To ensure your organizational effectiveness requires constant questioning:
- Are market demands requiring new key activities and success factors?
- Is your organization collaborating successfully on the key activities?
- Have performance failures in key activities become permanent?
- Do tactical issues divert senior management’s attention from strategic thinking?
- Do every job and management level contribute to profitability?
- Are decisions made and executed at the lowest possible level on the org chart?
- Does everyone understand his/her job, its responsibilities, and its authority?
- Is the right information flowing to the right place at the right time to facilitate superior performance?
Wise executives recognize that organizational design can be a competitive weapon. In the furniture and cabinet industry, most companies employ similar process technology and materials. Success in such case depends on how those elements are organized and operated to satisfy customers.
What structure is best?
Once the need for change is identified, you must shift the assignment of responsibilities and authorities accordingly. Business textbooks are full of ways to organize people – centralized, decentralized, or by function, product, or market. No one way is perfect. Nor will today’s solution remain optimal for long. You should always draw your org chart in pencil.
One design principle is certain: an organization plan must guide the actions of every employee top to bottom. Thinking workers that operate without structure, with no command and control, is patently wrong. What if the members of a football team made eleven separate decisions for each offensive play? The punter would get lots of playing time. In short, workers in a company, whether slotted in a permanent job or in an ad hoc group, must be subject to a well-defined hierarchy of responsibility and authority.
The process of creating that structure includes five steps:
- Outlining the tasks to be completed concentrating on those that demand performance excellence – what to do.
- Clustering related tasks into definitive job descriptions for each position – who does what.
- Assigning the necessary authority to each position – who has command.
- Establishing authority relationships – who reports to whom, who is the boss, who is the subordinate.
- Defining required performance – what result is expected.
Beyond the traditional org chart, the product of a complete design process must include:
Job Descriptions – A key communication tool, this resource prescribes the title; job duties/responsibility/authority; qualifications; relationships with manager, co-workers, peers, manager, and customer; and expected performance results for every required position.
Succession Plan – The departure, retirement, or death of key personnel can jeopardize a company’s survival. Smart senior executives proactively identify the potential risks and economic impacts then devise their responses.
Whose job is it?
A company’s org chart is one degree removed from its long-term strategy. Shaping an effective organization then is a top-down effort, a responsibility of the senior executive team. Successfully matching the key success factors with the necessary organizational resources demands careful attention. The risk of a mismatch can be high; the cost of failure, insolvency. It’s not a part-time job for an inexpert staff member.
By definition managers at all levels direct people. Each one must structure the activities within his sphere of influence to accomplish assigned tasks effectively. Organizational skills are a trait of a good manager no matter the rank. The exposure of mid-level managers to strategic thinking and organizational design also improves their qualifications for the next rung up the org chart.
Bottom Line: The test of an organization is to achieve exceptional results from ordinary people. Start by crafting a strategy that defines success, enumerates the activities in which excellent performance is required, and quantifies those results. Follow by fashioning a collaborative structure of human resources that achieves the target outcomes. Review regularly; modify as needed.