I work with a lot of small business owners. When I say small I mean as small as 1 employee to around 30 employees. Larger yes, but my focus here is on the smaller businesses. As you can imagine, the diversity of that range, coupled with the differences in industry, can be interesting in the best of terms. A common theme among them all is their challenge with getting things done. As they grow, people challenges become part of the mix along with the more common issues of marketing/sales, production/production management, waste management/team building, and customer service/customer retention.
If the company continues to grow, the owner, or leaders, start developing the infamous pyramid. You know the one….the business owner/leader sits at the top and under that is a row of direct reports and under that is another row and then another and so on. You know how it looks and if they are really attentive they can make it rival the best of the pyramids in Giza. Organizations that are creative or claiming to be modern in their approach will invert the pyramid placing the leader on the bottom and stating that it is the leader’s job to support the workers. It’s supposed to make the people under (or is it above in this case) feel more important, more valued. All creative ways to say somebody is in charge and to create channels of communication that eventually impede communication by their embracing of the infamous “chain of command.”
“…the infamous pyramid. You know the one….the business owner/leader sits at the top and under that is a row of direct reports…”
There is a better way, especially for small businesses. Let’s begin with a stunning revelation. Small business is by name small. Again, we are primarily talking about businesses of up to 30 employees. Small businesses cannot do everything internally nor can it be all things to every activity. Like all businesses, it is in business to make a profit. It must be efficient, it must be functional, it must be balanced in its approach. It doesn’t need a CFO or Controller, it doesn’t need an HR Manager or Director, it doesn’t need an IT leader, it doesn’t need a lot of things. Those positions, if done right, require costly talent, especially costly for a small employer. So the simplest solution here…outsource those functions. Oh someone internal still touches the issues but the actual hard work, grunt work as some call it, is done externally.
So how should a business organization be structured?
I like a slightly modified Venn diagram. Instead of 3 circles overlapping, I use four. I then put a single one, right in the center, overlapping those four. What you are now looking at is the perfect organizational chart for a small business of up to 30 or so employees. This can work with businesses of up to approximately 100 employees but the qualities of a business once they go beyond approximately 45-50 employees can create change issues within an existing structure.
Let’s add identities to each of the circles. Functions and functionality if you will. At the top is production and production management. The right is marketing and sales, The left is waste management and team development. The bottom is customer service and customer retention. Guess who is in the middle? That’s right…the business owner or leader. The beauty of this diagram is that it clearly illustrates that all of the 4 key areas of the business are equal and they touch each other. All are touched by the leader. Communication is streamlined. All business issues are addressed holistically and the business leader interacts with and coordinates their efforts together. It becomes very obvious that no one area can operate without the other 3 and no single area can on its own drive positive business outcomes. The common goal is advancing the business and no one is more important than the other.
“For a small business, if the function or work isn’t in these four circles then strong consideration must be given to outsourcing them.”
Each has a financial measurement as well. The two areas on the lower right, Marketing/Sales and Customer Service/Customer Retention are responsible for increasing revenue; the other two, Product Management/Production and Waste Management/Team Building, are there to reduce costs. Together they improve the business’s gross profit (margin) without overburdening one area or any other. For a small business, if the function or work isn’t in these four circles then strong consideration must be given to outsourcing them.