What Is the Right Organizational Structure to Grow Your Business?
- EOS Process
- January 6, 2020
Google is worth around $300 billion at the time of writing this article. While you may not agree with everything Google does, one thing is indisputable — their success as a business. What has contributed to their massive and continued growth?
A lot of Google’s success can be attributed to how the organization is set up. Google clearly understands its business objectives and has structured its organization to reach those objectives. Their business structure is characterized by three main features:
- It’s function-based
- It’s product-based
- It’s flat
Let’s focus on what the first feature means for Google. The fact that they are function-based means that resources (including team members) and processes must be focused on a specific business result. Instead of focusing on titles, they care more about results and placing people in the right roles to achieve those results — and Google’s success speaks for itself. Why should business owners copy Google’s emphasis on results when setting up their organizational structure?
The right organizational structure helps you take your limited resources and use them in the best way possible. Think about your marketing team. Without clear direction, marketing might think your sales team needs a list of 5,000 prospects and put together a generic list that doesn’t fit your target market. Instead of supporting your sales team, this only wastes a lot of their time.
In contrast, a marketing team that has clear goals and understands what sales is trying to achieve will understand that sales only needs 500 prospects that fit the framework of your ideal buyer. The end result of such clarity might be that your sales reps have a 25% higher conversion rate and spend 45% less time on bad prospects.
It’s obvious that the right organizational structure makes your organization more efficient, but it can be hard to define. What typically comes to mind when business leaders think of organizational structure?
Accountability First, People Second, and NO Titles
Typically, organizational structure is about who’s who — it’s about titles. If you’ve ever seen an organizational chart, you’ll know that it looks like a pyramid with the most important people higher up on the chart. Titles bread dysfunction, a culture of who’s-who, over who-does-what and it doesn’t work well for the smaller entrepreneurial company. In contrast to this norm, in EOS®, the business structure is about who does what.
Organizational structure should start with accountability. In other words, getting your people to do what needs to get done. Leadership needs to be clear on what matters at a high level and who will own which roles. They also need to define the outcomes that must be obsessed over to make sure employees are contributing to the company’s success.
In a startup, it’s common for a business owner to say that everyone does a little bit of everything. But, this isn’t a sustainable way of doing business and is impossible to scale this way. Does this mean leaders must immediately change their entire business structure? No. The effect of abrupt and unplanned change can have disastrous effects.
So, how can you begin implementing changes? First, you need to help your organization shift their mindset — starting from the top down. Leaders must first understand what they need from the business and then communicate this to managers who then communicate it to employees. How does this shift impact the mindset of employees?
Organizational Structure Gives Your Team True Accountability
Accountability is important because when everyone believes they are accountable for something, no one is truly accountable for it.
Assigning roles brings efficiency to your business. Once employees understand what they’re accountable for, then they can own that role. A team member’s owned role may be sales. Regardless of whether or not they enjoy that job, they understand that they are committed to sales. When all critical functions in the organization are owned by someone, it helps you build a healthier business.
Another benefit of ensuring every critical role is owned is that leadership can see gaps in your team. When everyone did a little bit of everything, it falsely appeared like you had every role filled. It was eye-opening once you understood this wasn’t the case. But, this clarity can lead to resistance.
Business owners resist because it’s hard to accept that you need to fill 15 roles or that you have 13 people doing work that’s not contributing to the company’s high-level goals. It isn’t that your employees can’t do those jobs. So what’s the problem? Let’s look at a couple.
- It isn’t the role they want to do. Your engineer wasn’t hired to lead a production team, and all they want to do is build products.
- They don’t understand their role. Leadership hasn’t given them the clarity they need to understand their responsibilities, and they are failing to meet these invisible requirements.
A common reaction to this reality is business owners blaming their employees. However, the problem lies with them because they didn’t give their employees clear expectations. Why do business owners carry on like this?
Business Owners Are Stuck Acting Like a Passionate Employee
Think about the day you started your business. You weren’t excited about doing your taxes, hiring employees, or any other normal business function. You were excited about getting to work on something you loved. This passion drove you to grow a successful business. But, as you grew, new business challenges arose that couldn’t simply be solved with more passion. You needed business fundamentals to keep growing.
The problem isn’t that business owners don’t understand how to run their business — after all, they’ve taken it this far. It’s that they’re so focused on their product or service that they can’t think about business operations. They adopt the mindset of an employee instead of an owner. It’s not hard to imagine how this happens. To gain an advantage in their market, owners are always trying to improve their product.
Ironically, success is another reason business owners fail to see the problems with their business. They’ve grown their business to a million in revenue, so clearly they’re doing something right. To overcome being blinded by success or a lack of focus on business operations, business owners need to step back and look at every part of their business. This helps them adopt a business mindset and make hard decisions, like letting go of people who don’t perform critical functions at the company.
What business issues show that you have an organizational problem?
What Problems Show That a Company Needs to Change Their Business Structure?
One major issue that businesses face is that leaders can’t see the functionary need of the business, they can only see the people they’ve employed. Ask them about their business structure and they’ll give you a list of names. They see people, but not functions and roles. This makes it hard to see the high-level value of the different functionary needs within your organization.
It’s a scary thing for business owners to see functionary needs because it means change. It means they’ll have to make the hard decisions in order to fill the right roles and create a healthier business. As the business grows, this can lead to the following problems:
- They’re no longer profitable. As owners scale a business built around people, their payroll will grow faster than production. The eventuality is an upside-down payroll where you’re bleeding cash.
- Failing to hit sales numbers or deliver to their clients. The gaps in roles mean the business is always at its production ceiling, and it’s frustrating. There’s also a lack of clarity and communication. Since no one really knows what they do, the company can’t build traction.
- The owner feels like they’re spinning their wheels. They are personally putting in a lot of effort and money but not getting the return they should.
In these cases, the business owner has to decide whether they are going to look at this problem from a business perspective or keep trying to do everything themselves.
How Does EOS® Take the Pain out of Setting up the Right Organizational Structure?
It doesn’t. EOS® is like having a personal trainer. They don’t take the pain out of working out, instead, they help you get through it. They do this by helping you focus on the end result, helping you see that the pain isn’t as bad as it seems, and giving you the support you need. Similarly, EOS® helps you see your future after you’ve made the tough decisions and gives you the support you need to do it the right way. Let’s look at a few of the ways EOS® helps.
- EOS® helps you simplify the problem. Instead of viewing the problem as you always have, it helps you put on a business lens and make decisions that build your business.
- EOS® brings clarity. With tools like the accountability chart and the vision traction organizer, EOS® helps everyone in your organization understand the company vision and the roles that will help it reach that vision.
- EOS® provides systems coaching. EOS® helps get the right people in the room to analyze your current systems. Your people have a lot of knowledge, and when someone can help them focus that knowledge on improving business systems, everybody wins.
EOS® helps entrepreneurs take business concepts that are uncomfortable and helps them implement these concepts at a sustainable pace.
The True Value of Clear Roles and Responsibilities for Your Business
When everyone understands their roles and responsibilities clearly, the business runs like clockwork. Let’s look at a few of the business benefits.
1. Employees are able to prioritize the right type of work. Imagine a team member from sales is asked to help with a production problem. Because of their priorities, they understand that they can’t take on tasks that may help with the production problem but would hinder them from completing their most important objectives. This mindset isn’t anti-collaboration, it’s about everyone understanding their function, how they contribute to the business, and doing that to the best of their ability.
2. Clarity when business problems arise. As a growing business, you will face challenges. Clear roles and responsibilities help you see the way forward. If you have a problem with marketing, you know exactly who to talk to, whose eyes you need to look through to figure out the solution.
3. Clarity in the roles brings ownership to different departments. Think about the business owner. They’re so passionate because they own the business. If the employees don’t have ownership over anything, how can they be passionate about their role? While you can’t expect your employees to have the same vested interest as the owner does, you can motivate them to work harder by giving them ownership over certain functions. If a team member understands their entire job is dependent on the performance of marketing, they’re going to work with a purpose and singular focus that boosts performance and drives the results the company needs.
Start Changing Your Organizational Structure by Adopting the Right Mindset
Recognizing the changes your organization needs is hard. Executing those changes is even harder. Business owners can find the motivation they need by adopting the right mindset.
First, business owners need to focus on the value of doing the right activity. They need to do the math and figure out how the right activities will better their company’s future and, by extension, their own.
Second, it’s important for them to take responsibility for the current state of their business. It’s easy to blame our issues on not having the right people, but accountability is a byproduct of management and leadership leading their people the right way. They have a direct impact on how simple and clear employee roles and responsibilities are.
Third, business leaders need to be really clear about what they want. Only when they understand the vision for their business can they devise a plan and the organizational structure they need to get there.
Finally, they need to be open-minded. However well they prepare, business owners won’t be completely prepared for the changes they’ll need to make. They’ll have to think differently and be flexible in order to make the necessary changes to fix their organization.
Are you tired of working ten times harder than everyone else in your business? Learn how to stop doing everything and start running your business. I can help you set up business systems that will bring clarity and accountability to your company. Set up a time to chat with me today.