Whether we know it or not, every business has an organizational structure. Some form organically over time, and some are intentionally created. No matter which it is, a weak one can derail your entire enterprise.

Here we’ll explore how to improve your organizational structure, and look at some problems that can arise from lacking one.

What Is Organizational Structure?

An organizational structure outlines the way that activities within an enterprise are directed. It includes roles, responsibilities, and rules, and determines the flow of information between different levels of the organization. Ideally, that structure will be clearly outlined, easy to understand, and include efficient communication channels.

Think of your firm’s structure as a skeleton, or the scaffolding of a building. It’s the processes and procedures that everything else is built on. Those processes and procedures need to be driven by the policies you set.

As you grow, that scaffold should grow and adapt. Allowing your structure to grow organically, cobbling it together as certain needs arise and the company grows, can only work for so long. Eventually, loose policies, processes and procedures will cause things to unravel.

Creating a set structure that everyone can refer to keeps the entire organization on the same page, adhering to the same set of rules, and ultimately increases the capacity of the organization. That uniformity helps to prevent breakdowns and creates a level of efficiency. To better illustrate this concept, let’s look at a real-world example of what can happen without that structure in place.

A large business came to us for help with complaints that they were constantly losing money, even after generating millions in revenue. We investigated and eventually discovered this company had several buildings full of expensive equipment. Many of these items were duplicates that didn’t need to be bought — but no one knew that because there was no structure in place to categorize what they had, or provide a check-in/check-out process. Instead, if someone needed something for a project, they just went out and got it.

A lot of money was lost from that lack of structure. By helping this company implement sound policies and procedures, we realized that we could rein in that spending and ultimately reduce the negative effects on their bottom line.

The Perils of Poor Organizational Structure

Not having a structure in place, rapid growth, or reorientation within the enterprise can all cause misalignments. And when that happens it has a negative ripple effect throughout an organization.

Here are a few signs that your organizational structure needs some work:

  • You have gaps in procedures and processes. This can become evident when employees leave or are eliminated and someone else at a lower organizational level has to take on their work. That person may have had to take on new responsibilities in a hurry, and without a solid structure in place, won’t fully understand what’s expected of them or how to communicate in their new role.
  • You’re seeing diminished agility, capacity, and/or capability. When people get thrust into roles they haven’t been fully trained for, and there’s no process for training them, they won’t be able to perform as well.
  • You notice unexplained costs. As with our real-life example, lack of defined policy and processes can result in financial losses. And those losses can add up to be significant.
  • You have declining engagement. When people have to operate in unfamiliar roles without guidance it can feel like they’re flying blind, without any help from management. This leads to dissatisfaction with and disengagement from their jobs.

When these symptoms are allowed to persist, or addressed without fixing the root cause, they snowball into a self-perpetuating loop that looks something like this:

  1. People work jobs with little guidance and vague expectations, with little idea what they’re actually supposed to be doing, so they quit. 
  2. That attrition leads to a desperate need to hire more people. 
  3. There’s no time to adequately train the people you hire, so they’re dropped into the same situation as the people before them. 
  4. They become dissatisfied and leave, and the cycle continues ad infinitum until it’s corrected.

Luckily, it doesn’t have to be that way.

Strengthening Your Skeleton: Better Policies and Practices

Ideally, you should implement a good structure from the beginning, but it’s still possible to bring one in later on. If your company is growing, it’s an especially good time to look at your existing structure and see how it can grow with you.

Planning organizational structure involves looking both ahead and behind. Future growth and contingencies should be planned while keeping in mind the things that haven’t worked in the past.

When building your organizational structure, you want to consider what your goals are as a business — how do you want to serve your customers? What is your long-term vision? What kind of culture do you need to create to bring about the best working environment for your people so your enterprise reaches its objectives?

New hire onboarding is a critical place for establishing structure. Employee handbooks provide people with guidelines on the responsibilities of their job. Even if an organization is too small to have a human resources (HR) department, there still needs to be a defined hiring and firing process that includes onboarding, because it outlines job responsibilities and the processes for following them right from the start.

While there are many elements that make up organizational structure, these five essentials are significant principles of good structural design:

  • Job design: The details of each role
  • Departmentation: How roles are structured to coordinate work
  • Delegation: Assigning responsibility according to department and skill
  • Span of control: How many people report to a single manager
  • Chain of command: The line of authority within an enterprise

These principles are your building blocks, and it’s your job to use them to create a structure. Keep in mind that policies and processes have to feed into one another. The core of good structure is good, well-documented policy and procedures that people know how to act on. The best policies don’t mean a thing if no one follows them.

Going back to our earlier example: even if that client implemented a policy that only certain people could purchase equipment, they’d still have a problem if everyone ignored that policy and kept buying things on their own. 

Bringing Your Business Into Alignment

Take some time to inventory your business. Have you noticed any of the symptoms we’ve discussed here? Do you have documented policies? Are you undergoing a reorganization or period of growth where you should update your organizational structure?

Sketch out a quick outline for your structure. It doesn’t have to be incredibly complex, just something to serve as a base. Try to see where areas could be improved. And if you decide to make changes, bring everyone to the table and communicate your new structure effectively — no one likes being left in the dark.

Oftentimes, the best way to streamline and strengthen your organizational structure is to bring in an expert. Bellewether can provide your enterprise with practice structures, including strategic role definition and organizational structures to help get your business on track.

Reach out to us when you’re ready to make your business better.