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Sunday, 11 January 2015

Got a Feeling That You Need to Change The Company Structure? It’s Called the Seven-Year Itch!

One of the very early speakers to my Vistage CEO peer group was discussing problems arising out of any restructuring of the business and he made the point, very forcibly, that the only valid reason for restructuring a business is to improve the service to the customer.

I wouldn’t disagree with the importance of that but with the small caveat that it isn’t the only valid reason.

Restructuring is like the seven-year itch.  When a business is in start-up mode the only valid reason for doing anything is to make certain that the product or service gets into the market as effectively and as profitably as possible.

In these early stages the structure of the business tends to emerge according to the experience and expertise of those involved in the start-up.  Formal structure is usually not high on the agenda.

As the business develops and grows, it becomes increasingly noticeable that there can be overlaps of responsibility, gaps here and there where nobody wants to take responsibility and a glaringly obvious lack of processes and procedures.

However, events take over and it becomes blindingly obvious that unless there is some sort of formality then chaos and anarchy will reign.

Now comes the big problem. What sort of structure do we want? 

Very often the classic structure of the triangle, apex upwards, with the business owner at the top, seems to be the most obvious.  It leads inevitably to top-down management and lots of upwards delegation.

The big danger is that the layout is frequently determined by the currently available people in the business and this can lead to real problems in the future.

How often have I heard the wail of distress from a CEO whose friend, in the early stages of the business, “helped out” in some way. Now look – ten years on and he is still there probably now in a senior position and nobody knows what he there to do, least of all the incumbent himself.

NOTE: the worst solution is to design a structure around the existing people in the business.

The best way is to analyse the route forward for the business to decide where it intends to be in the short and longer term.

This should lead to a more considered shape for the business with proper lines of communication and reporting together with a listing of what sort of individual will be needed to deliver the objectives.

More often than not he classic shape of a business is determined on a functional basis; what functions will be needed to cover such as operations, marketing, sales, finance, technical and so on, and then design the structure on this basis.

For obvious reasons this can lead to a silo mentality with everyone defending their own patch and the people it.  It can work effectively, of course, but it demands a high level of understanding and trust at the top level.

In general the matrix/customer led structure is better.  This divides the business according to the market sectors in which it operates and then designs an appropriate layout with departments operating like miniature businesses.

Whichever method is decided upon, as long as the customer is at the heart of the decision making process then there will be an enhanced likelihood of success.

Remember the seven-year itch?  It usually is around the mysterious sever year mark that someone suggests that if we change the structure things will be even better.

Beware!  Remember that t’s not about the people currently in the business.  It is about recognising that we must understand that the customer and his/her needs are paramount and everything and everybody in the business knows and is dedicated to that purpose.

Product, service, marketing, sales, finance, technical all contribute to the customer led experience.  Everyone in the business has the responsibility of delivering it.

It’s called the Pursuit of Excellence with the customer at the heart of it all.

Without the customer there isn’t a business whatever the structure may be.

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