Business organization

7 steps in organization structuring no one takes

Thought Leadership on an Execution Planning presented by GetBusinessMomentum.

To take your company up to the next level requires strengthening each of its Six Key Components. That is exactly what we do throughout the EOS® Process. Your people are fundamental to your success. They are the source of many difficult Issues entrepreneurial companies face. Early on in this process, we focus on designing the right structure for the organization. To do that, we use a tool called the Accountability Chart™.

Most companies use org charts to describe their structures. While it may look a bit like an org chart, an Accountability Chart is fundamentally different. Org charts depict hierarchy, rank, titles and a “reporting” structure. In contrast, Accountability Charts focus on depicting the answers to three fundamental questions:

  1. What needs to get done?
  2. Who is going to do what?
  3. How is accountability flowing to ensure that it happens?

Yes, to answer question (c) we end up with a kind of a “inverted tree structure” similar to org charts. To answer question (a) we end up with boxes that describe Functions. They do so by showing not just the Function’s name, but also its top 5 or so Roles and Responsibilities. Any line connecting Function A to Function B means “A holds B accountable for B’s roles and responsibilities.” To answer question (b) we end up with names in each box—most boxes hold one single name.

Creating an Accountability Chart is an iterative design process. It takes many passes to reach a solid, stable design. It also never ends: we regularly revise it, as our thinking about the business evolves. This way, we always have a clear picture of what organization we will need to enable and sustain growth.

The process of constructing an Accountability Chart involves the entire Leadership Team. To end up with the right structure, there are strict rules to follow. The role of the facilitator is key in enforcing these well-proven rules.

Here is the story of the birth of the Accountability Chart we built with one of my clients. This is a transportation company, currently about 100 people strong. Let’s call it “TransCo.”

This part of the process consists of answering seven questions, in sequence. It starts with a fundamental premise. Every organization in the world must fulfill three generic Major Functions:

  • Sales & Marketing: The organization must create demand for its products or services. It also must convert prospects into customers.
  • Operations: The organization must create its products or services. It also must deliver them to its customers.
  • Finance: The organization must manage its resources, mainly the flow of money.

Additionally, every organization in the world must fulfill one more generic function: Integrator. This function handles the proper and smooth integration of all other functions.

Thus, we started the process from the generic structure shown in Figure 1.

Figure 1

Figure 1

  1. What Are the Major Functions? What are TransCo’s specific major functions? For example, will TransCo need a Sales function separate from a Marketing one? Or will TransCo fulfill several Operations-like separate Functions? As you can see in Figure 2, it turns out that we ended up with 7 Major Functions. We identified five of them as aspects of the Operations-side of the organization. They are Safety, Operations, Dispatch, Legal, and IT Facilitation. Neither Marketing/Sales nor Finance needed expansion.
Figure 2

Figure 2

  1. Will We Need a Visionary Separate from the Integrator? About half of entrepreneurial organizations also need another generic function called Visionary. Visionaries are the originators of the company’s main vision for the future. They hold the major relationships with the market. They are the spokesperson for the business. They are the Integrator’s complement. Rocket Fuel is a book dedicated to the differences between Visionaries and Integrators. Here, Gino Wickman and Mark Winters considerably expanded the topic briefly covered in TRACTION.

At TransCo, we had some spirited back-and-forth debate on this question. In the end, we decided that TransCo would not need a Visionary function in its next stage of evolution.

  1. What Are the Roles & Responsibilities of the Major Functions? It is now time to put some “meat on the bones” here. We needed to specify in more depth what each of the Major Functions means. We did that by identifying five or so Roles and Responsibilities for each Function. What is that Function responsible for? What role will it play in the organization? These are brief (1-3 words) bullet points. We placed them inside each of the Function boxes in the Accountability Chart. You can see the end-result in Figure 3.
Figure 3

Figure 3

Note that we identified some of these functions to likely have sub-functions supporting them. These were the Marketing/Sales, Operations, Dispatch and Finance functions. In all these cases, the first Role and Responsibility is “LMA.” This stands for Leadership, Management and Accountability. That function will be responsible for leading and managing the sub-functions. It will also be responsible for holding these sub-functions accountable for their responsibilities.

  1. What Are the Integrator’s & Visionary’s Roles & Responsibilities? Similar to the work we did in Step 3, we needed to flesh out the Integrator’s Roles and Responsibilities. Obviously, the Integrator’s responsibilities always includes the leadership and management of the Leadership Team. Thus, the first Role is LMA! Figure 4 shows the resulting Accountability Chart so far.
Figure 4

Figure 4

Note that had TransCo had a Visionary, we would have done the exact same work for its box.

  1. Is this Structure Optimal? This is a fairly complex question. There is both a science and an art of refining the structure towards optimality. There are general guidelines to follow. Yet there are considerations that are specific to the nature of the business. The reality of TransCo as a business comes into play. Here are two examples.

One important principle is that accountability must be singular. That is, one and only one function must be accountable for any responsibility. When more than one is responsible, no one ends up taking responsibility. In Figure 4, both OPERATIONS and DISPATCH are responsible for Customer Support. We decided that only DISPATCH must be accountable for Customer Support. Figure 5 shows the modified version.

Figure 5

Figure 5

Another important consideration is the number of Major Functions the Integrator must integrate. The ideal number is usually in the 3-7 range. There are psychological and cognitive reasons for it. Most importantly, there are practical considerations. What functions must the Integrator have direct visibility to?

After some debate, we concluded that DISPATCH was better suited as OPERATIONS’ sub-function. Figure 6 shows the next incremental version of the Accountability Chart.

Figure 6

Figure 6

  1. What Are Each Function’s Sub-Functions? Next, we unfold the Accountability Chart until it depicts all functions of the organization. For each Major Function: What are the sub-functions required to fulfill that function? In developing it, we follow the same Steps #1, #3 and #5 above at each level.

Figure 7 shows the end-result. For simplicity, we are not showing here the Roles and Responsibilities for all the functions. The picture just shows the functions.

Figure 7

Figure 7

  1. Is the Structure Complete? Now that we have the entire Accountability Chart, we must make sure that it is complete. Is there anything the organization must get done that no function is accountable for? For each of the Core Processes of the business, is it clear who’s accountable for each of their major steps?

It took several iterations for the TransCo’s Leadership team to answer this question definitively. In the process, we added a few new Roles and Responsibilities to certain Functions. We added no new functions, but in other cases that can be a natural outcome.

Where Are The People?

So you may now be wondering: OK, we got this structure, but where are the people? How come we didn’t place them in these boxes as we went along?

A core principle of the EOS Accountability Chart is “Structure First, People Next.” We design the structure with no consideration to WHO will fulfill each function. This way, the result serves the greater good of the company, not the interests of individuals. One of the graves mistakes managers and leaders make is designing organizations around people. Instead, we strive to place people into well-designed organizations. People serve the organization’s needs. They fulfill the organization’s functions. Not the other way around.

Here, we designed the right organizational structure. To use Jim Collins’ famous metaphor, we designed the Right “Seats” for TransCo. We’ll leave the process of placing the Right People into these seats for a future article.

>>> NEXT STEPS:

  1. Learn about EOS. Learn how the EOS model helps you manage accomplish your vision as its manager. Here is a series of 3 short videos.
  2. Learn about The Accountability Chart. Learn further nuances of the Accountability Charts from Gino Wickman himself, in this 3-minute video. Then construct yours with the team you directly manage.
  3. Get It Free! Request a free 90 Minute Meeting. In 90 minutes I will show you and your entire Leadership Team what the EOS is. I will demonstrate how it works. Finally, I will show you how I go about implementing it for businesses like yours.

The Entrepreneurial Operating System, EOS, The Accountability Chart are trademarks of EOS Worldwide LLC.

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