Improve company value with an effective organizational structure

By Mark Wardell

organization chartIn my last article, I promised you a step-by-step guide to creating an effective organizational structure that will work for your business and keep on working. Not a small undertaking, yet one I guarantee will be well worth your time! A strong organizational structure really can be the single most effective way for a business to grow its value. Why? Because the way your team is organized dictates the way your business operates. So, if you can create a more efficient and effective organizational structure, you’ll have a business that is more lucrative, with a higher market value. The best way to represent this is through your company organizational chart.

  • Start with a reality check. If you already have an org chart, put it to one side for now. You'll want to work from a fresh perspective, one that takes into full consideration the breadth of the vision you have for your company, rather than simply expand on the way things are today.

  • Take time to review your corporate vision. Take a close, contemplative look at the vision you have for your company’s future. Consider all parts of your org chart from this critical starting point.

  • As you get started on developing your org chart, the following are some important guiding principles to consider. Even one of these changes can have a big impact on your company.

    • Organize your business around positions, not around people. How can you best organize the positions in your business so that accountability and authority issues make sense?

    • Cross-train your employees. A small firm, for example, may be able to get away with combining the role of receptionist and customer service manager. And having a team with diverse skills can be instrumental in keeping the wheels turning when a critical employee is away.

    • Flatten your org chart. Too many layers of management can slow things down by encouraging a "pass the buck" mentality, which can also slow down the decision-making process. If you’re not sure you’re getting real value from each of your management positions, there may be positions you can do without.

    • Make sure no one has more than one manager. It just confuses people and slows down productivity.

  • Next, develop a new, theoretical, organizational chart. Put your current employees out of your mind for a minute. How might you divide up the work differently to make things more efficient? Are there gaps in accountability? Would it make more sense for people to be working together in a different arrangement? There are many great computer programs out there to help you draft this  document. So you can move things around a bit before you get it right.

  • Begin at the top with the President or Chief Executive Officer (that will likely be you), and then decide what positions should report directly to you, and so forth.

Next, look at each position on your new org chart from a financial bottom-line perspective. Do they all provide a measurable return on investment (ROI)? If they don’t, how could you change things so that they do?

And finally, go back and take a second look at the people who currently comprise your team. How well do they fit in with your business as a whole? What are their skills? What do they do well? Where do they fit best in your new and improved org chart?

Some may need to be redeployed and some may even need to be replaced. But in my experience, the value impact of the right people in the right positions can be enormous!


clip_image004.jpgMark is President & Founder of Wardell Professional Development, an advisory group that helps business owners plan and execute the growth of their companies. The author of seven business books, Mark also writes regularly for several national business publications, including Profit Magazine, the Globe and Mail, and CGA Magazine. Email him at [email protected]

By Adam

December 08, 2010