Every business has an organizational structure. Sometimes it evolves haphazardly, and sometimes you design it deliberately. Yet other times there is a blend between the two. Regardless, the effect of the organization’s structure on the business is immense. At every stage, the organization’s structure either enhances or hinders that business’ movement forward. It either accelerates or slows down the momentum needed to break through any ceiling it may have hit. It either functions well or it becomes dysfunctional.
There are many ways in which we represent our business’ Organizational Structure. Most tend to be some variation of an inverted tree. Organizational charts are ingrained in our business practices. Yet we rarely have full clarity about what the boxes and lines connecting them really mean. Here, we’re taking the functional approach Gino Wickman describes in his book TRACTION. An Accountability Chart is a “supercharged organizational chart.” It helps “leadership team members grasp their own roles and responsibilities.” It then does the same for everybody else in the organization.
Reality is that most businesses don’t design their Organizational Structure. Instead, they “evolve” them. Those few who do, end up making lots of mistakes when defining and using it. These mistakes prevent them from being optimal for the next stage in its evolution. It’s like designing a car with lots of wind breakers. The drag slows everything down adding fuel consumption. At times, it may even stop the business in its tracks.
Here are the top seven mistakes, and how to fix them:
- Structuring around people. At the end of the day-long sessions, we share “Aha!” moments. One leader had realized that he had been structuring his Functional area to fit him and his needs. Instead, we redesigned the structure afresh, without specific people in mind. This approach revealed to him how limiting the previous organizational structure was. The principle is always ‘Structure First, People Second.’ Here is the fix: Design the organization as if everybody had been fired. Design it as if you had no people currently involved in the business. Once you arrive at the right structure, then and only then start placing people in various seats. Fair warning: if done well, the process can get emotionally taxing for some. Consider engaging an outside facilitator to help the team navigate through this.
- Designed by leader alone. During a check-in call, a client said he made some changes to the organizational structure. He asked me how to present them to the rest of his Leadership Team during our next full-day session. I asked: “How do you think the rest of the Leadership Team will react when presented with a “done deal” re-design?” He paused, and then he mumbled something to the effect of “not too pleased.” Here is the fix: Always tackle changes to your organizational structure together with your Leadership Team. Do it that way no matter how hard or emotionally charged the topic becomes. Approach the need for change from a “greater good” perspective, that is motivated by getting the business to function better. When you engage all the leaders in finding a solution, two important outcomes emerge. First, you’re likely to come up with a better new structure. Second, you’ll get the buy-in from the team. You need that unity to navigate the rough waters of organizational change.
- Shared seats. We arrived at the point where we needed to place people in the seats. One of the major functions we identified was Marketing. I asked: “Who is accountable for the Marketing function?” The answer came: “Well, this is kinda shared between Joe and Ann.” This is when all hell broke loose. Everybody started pointing out how “discombobulated” Marketing was in this organization. Bottom line: when an issue arises, there has to be only one pair of eyes we all look into! We must hold accountable one person for each functional area of the business. This includes both successes and failures. Here is the fix: Always place a single name in each seat, never more and never less. Accountability “by committee” never works. Teamwork and collaboration? By all means, yes! Yet there is only one person who must call the shots.
- Too many reports. I took a quick look at the organizational structure we had just laid out. This Leadership Team’s main structural problem was staring at us right there. They had designed ten functional areas that reported to “The Integrator.” The problem is that no one can lead and manage well 10 areas, represented by ten people. There are human capacity limitations at work. When ignored, they lead to teams that don’t function well. For example, no one can hold 10 different concerns in their mind. Here is the fix: Always construct structures that limit the (sub-)functions reporting to a single “seat” to 7. For example, even at the top Leadership Team level, there must be no fewer than 3 and no more than 7 such functions. If you allow more than 7, I will predict that everything will slow down. Everything.
- Titles, titles. At the start of my first session, I always ask the Leadership Team for introductions. Specifically, I ask for their name and their function. I always go out of my way to point out that it’s not their title that I need to know. Yet the vast majority respond with “I am the Vice President of such-and-such.” Or they may say “I am the Chief so-and-so Officer.” The culture of titles is so embedded in our general business culture, it’s hard to dislodge. Yet, it’s so damaging to the health of the organization. Why? Because titles focus on rank and privilege, instead of on service and function. Here is the fix: The industry may demand that people introduce themselves to customers, vendors, and investors by “title.” Inside the organization, just go for the radical solution. Abolish their use. Instead, refer to functional seats people occupy. Someone could occupy “the head of such-and-such function” seat. For example, “the head of Sales.” Over time, this will start changing how people think of themselves within the organization. That change will bring more alignment and more health.
- Responsibility everywhere. When I asked a Leadership Team which of the major business functions we had identified is responsible to responding to customer service request, the answer I got was “Well, sometimes it’s Sales, sometimes it’s Engineering, and sometimes … well, we don’t exactly know. Some customers clearly don’t get the right service!” No one person was held accountable for this key area of the business. There was a lot of finger pointing. Bottom line: when everybody is responsible for something, nobody is. Here is the fix: Accountability must be Singular. For every responsibility, there must be only one person accountable for fulfilling it. Often, the people who carry out responsibility, cross organizational boundaries. Yet, the “buck must stop” at one single seat (function). Furthermore, exactly one person must occupy that seat. Not zero. Never more than one. Just one.
- Hanging on to the past. A client I’d just started working with called me to say that she was uncomfortable with the organization structure she and the rest of the Leadership Team had created. She described for me a different structure that she was accustomed to. She kept asking why did we need to change this so radically. She sounded very upset over the phone. I asked her whether she believed the structure they’ve had in place for the past two decades was working now. She admitted that it was not, and that the company was stuck. Her reaction was not uncommon. Change is tough, and even tougher when it comes to changing how People are structured in an organization. Bottom line: If nothing changes, nothing changes. Here is the fix: Go back to Mistake #1. Seriously. Resistance is often minimal if the team sharply focuses on functions, roles, and responsibilities. The moment people are brought back into the picture, discomfort sometimes shoots up through the roof. To tame it, we simply must go back to the structure and re-affirm that it is what the business needs in order to move forward. That is the greater good.
>>> NEXT STEPS:
- Learn about EOS Accountability Charts. They are a tool that helps your business get healthy so it accomplishes your vision. Here is a series of 3 short videos.
- Get professional facilitation. Turn your organization into a “well-oiled execution machine.” Do it the right way: better, faster, easier.
- Learn even more about EOS Accountability Charts. Chapter 4 of Gino Wickman’s book TRACTION focuses on this topic.
- Get It Free! Request a free 90 Minute Meeting with me. There, I will show you and your entire leadership team what the Entrepreneurial Operating System is, how it works and how I go about implementing it for small-to-midsized businesses.