Organisational structures for SMEs

Why is structure important in a small business?

- Employees need to know where they and others fit in an organisation. Lack of clarity can be confusing and de-motivating
- Growing and changing the business will be simpler if you already have a disciplined and open approach to reporting lines and responsibilities
- The process of formalising an appropriate structure will force you to address inconsistencies, gaps and duplications – and to consider how effective your people and processes really are

How do you decide on an appropriate structure?

- There are some basic principles that you need to embody in your structure

    o Single reporting line – every employee should report to one and only supervisor. (Do not confuse reporting lines with providing a shared service; for instance an administrator can support several managers but should only report to one person for pay and rations issues). Avoid dotted-line reporting lines
    o Division of labour or specialisation – group similar activities and skills together in departments or sections
    o Each post should have clear responsibility for outputs or results which is matched with appropriate authority over the resources necessary to achieve this
    o Span of control – no more than eight direct reports to each position
    o Lean organisation – keep the total number of levels including the leader and the front line to a minimum – in most SMEs this will be between two and four

- Start at the second level with three main responsibilities

    o Winning business
    o Delivering the product or service
    o Getting paid and admin tasks

- There should be one position responsible for each of these roles (but this may not be three separate people in a small business)
- Almost all small businesses should use this functional structure. Larger business may adopt a divisional or matrix structure
- Do not design a structure to cope with or work around individual inadequacies or historical accidents – deal with them
- Generally, but not always, a superior should be better rewarded than their employees. It is worth questioning why if this is not the case

Implementing the structure

- As with all HR-related activities, the process is as important as the result
- It is an opportunity to communicate with (ie listen to) your employees. Effective consultation will achieve a better result and more buy-in
- It should be done in conjunction with job descriptions and, if relevant, the incentivisation scheme
- The structure should be published as an organisation chart and kept up-to-date

My workshop programme covers this and every other key part of running a business, from strategy through to invoicing. For more details of this comprehensive and affordable course visit my business advice website.

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