06/30/2020 entrepreneurs

Organization Structure: Considerations for Small Businesses 

A Tried-N-True Framework for Talent Planning

Many startups and small companies need help formulating a model to support a growing organizational structure.

Here is a talent planning framework that we have developed through our consulting work with startups and small companies, specifically designed to help them weigh the benefits of different organizational structures. These considerations apply to companies ranging from the "idea" stage (or conception) through to maturity and stability.

This information is particularly useful for talent planning, and in times of rapid or sustained growth.

  • Organizational Framework: A framework for organizational stages, so that founders and investors can have a general idea of what types of skill sets are generally added, and when.
  • Positions by Stage: Typical positions so that founders and investors can build the talent model into financial and strategic planning. 

Organizational Framework

While each organization is unique, there are different stages of business growth - from the idea or hobby stage where a founder is trying to create something commercially viable - to the mature company stage, where the company is a category leader and focused on success maintenance.

Each of these stages has different skill and experience needs. Some people can come in and grow with the company through the various stages, while other people are best at a particular level of the journey. 

Here are the generalized stages that I come across through our work with small businesses. 

Organizational Framework for Talent Planning

Stage What is it? Key issues facing the team: Skills needed to move to the next level:
Idea  An inventor or small team think that they are onto something!  Does this solution address a need in the market? Is there a viable business model?  Making the MVP. Finding potential customers.
Early Startup There is a small team and equity/ownership interests are formalized.  How can we find customers and grow? How can we fund our plans? How can we make an MVP?  Selling the product. Raising money.
Later Startup The team has grown and there is revenue - yeah! How to commercialize the product? How to sell more and/or increase market share? How to scale manufacturing? How to improve product and make good decisions regarding product features?  Sales growth and customer retention. Product development and production refinement. 
2nd Stage, Growth  You are starting to put resources into support functions like project management, HR, finance, purchasing, etc. How to understand and manage supply chain issues? How do we increase market share? How to retain customers and decrease customer acquisition costs? How to build an organization beyond the founders? How to put in place HR/People processes, systems?  Process documentation and development. Project management.  Building an organization beyond the founders. Caring about and influencing culture.
Stable/Mature You are the dominant player in your target product and geographic category.   How do you reduce costs? What are the trends/competitive factors that could disrupt our position? How do you plan for leadership transitions? How to build a pipeline of talent? How to expand geographically? How to develop career pathways and succession plans? How to improve quality? How to optimize product development? How to launch additional products or related services? Should acquisitions be considered? N/A

 

Positions by Stage

Positions/ Stage Idea Startup 2nd Stage Mature
Leadership Co-founder, Co-founder CEO, CTO CEO, CTO, VP Sales CEO, COO, CTO, CFO, VP Sales, VP Marketing, VP Human Resources, VP Manufacturing
Product Development  (Done by Co-founders) CTO CTO, VP, Engineering, Engineer (2) CTO, VP Engineering, Director Engineering, Manager Engineering, Engineer
Sales/ Business Development/ Customer Success (Done by Co-founders) (Done by CEO) VP Sales VP Sales, Sales Manager, Sales Representative, Customer Service Manager, Customer Service Representative
Marketing (Done by Co-founders) Contractor/ Consultant Marketing Leader VP Marketing, Director Marketing, Marketing Manager, Marketing Specialist
Finance N/A Contractor/ Consultant Finance Leader, Bookkeeper CFO, Finance Director, Controller, Accountant
Manufacturing/ Production N/A Contractor/ Consultant Plant Manager, Production Operators COO, VP Manufacturing, Plant Manager, Production Supervisor, Production Operators
HR N/A Usually Ignored Outsourced, Done by Office Manager VP HR, HR Manager

Operations (IT, Office, Purchasing, Building)

N/A Usually Ignored Office Manager COO, Director of Operations, Office Manager, Administrative Assistant

Structure

As discussed above, structure needs to evolve as the company grows. During times of growth, it can be easy for an organization to approach structure as one-off issues when you need to hire. Sometimes a founder might think, okay, here are five things that aren’t getting done, let’s create a job description and bolt it onto the organization somewhere. My recommendation is to periodically invest time thinking through the organization and how things are supposed to fit together. The process that I like to follow is:

  • Principles - What are the key strategic differentiators, goals or areas of focus? 
  • Processes - What are the processes that drive those principles? 
  • Roles & Responsibilities - What are the tasks and activities associated with these processes? Use lots of sticky notes to capture what people are doing. Then, group the activities if they are related. These “buckets” of similar activities can then become job descriptions, or departments, depending on the size of the organization.
  • Structure - Connect the activity buckets into departments and reporting relationships.    

Common Growth Structure Issues

Accountability/Lanes

There is a concept of accountability that needs to be included in your structure. There need to be clear objectives/ goals/ KPIs that have one person in charge. One person can be responsible for multiple seats/ lanes /buckets/ departments/ goals/ KPIs, but you should not have two (or more) people responsible for key areas.  

These key areas include:

  • Vision - Who has overall responsibility for setting the vision and aligning the organization around it?  
  • Sales - Who is responsible for revenue growth?  
  • Customer Satisfaction - Who is responsible for delighting the customer? This can be divided up by customer segments.
  • Finance - Who is responsible for setting the budget, managing cash, providing reports and analysis?
  • Operations - Who is responsible for the internal workings of the organization? This could include office management, IT, insurance, purchasing, HR?
  • Manufacturing - Who is responsible for producing the product or managing service delivery? This can be divided up by products, customers or geography.
  • Product - Who is responsible for determining the products that will be provided to the market? This responsibility can be divided into different product lines, market or geographic segments.
  • Marketing - Who is responsible for managing the brand, determining messages, advertising spend?

Common Structures

Visionary/Integrator

Gino Wickman, creator of the Entrepreneur’s Operating System, has promoted the concept that an organization needs a visionary and an integrator. The Visionary understands where the organization is going and the Integrator helps align the resources to ensure that the vision is executed effectively. A common way to implement this approach is to have a founder/CEO that is responsible for setting the vision, communicating the vision. Then, there is a COO that is responsible for ensuring that everything gets done. This “strong #2” is someone that keeps the CEO from getting into details, and allows the CEO to work “on the business” instead of “in the business.”  Everyone, or almost everyone reports to the COO.

Functional Organization

The CEO has key leaders with clear functional expertise and ownership. These 6-10 direct reports could draw from:

  • Finance
  • Operations (IT, HR)
  • Sales/Marketing
  • Product Development
  • Manufacturing/Service Delivery

Geographic or Product Line Organization

The CEO has key leaders that own a variety of functions, and each have responsibility for a specific product line and/or geography. Sometimes the functions, like marketing, are shared across these different departments/products/geographies. Some issues that can crop up are how to cost the shared services and how to allocate resources, among others. 

Conclusion

We hope that you have found our talent planning framework to be helpful in thinking through different organizational structures and stages as your business grows and thrives! Please reach out to us for further support and information at Info@AmyCellTalent.com. Enjoy!