DO NOT RUN A COMPANY WITHOUT AN ORGANISATION STRUCTURE

Some Business Owners and Employers hold the view that when it comes to running a company, it is better not to have a written and approved organisation structure (Structure) in place.

The arguments are that when there is a Structure, it starts to create bureaucracy and starts to limit the employer's powers.

Please be advised as follows:

#1. ALIGN STRUCTURE TO STRATEGY

If your business has a Strategic Plan (Strategy) in place, you have to ensure that there is a Structure in place which is aligned to the Strategy.

Even where you do not have an approved Strategy in place, the business still has those areas you are focusing on. Your Structure, therefore, should speak to the direction the business wants to take.

A professionally designed Structure is done based on the principles of Structure development and various other considerations including but not limited to the following:

(i). The Strategic Plan. The Structure you should have is one that is aligned to the Strategy to help the company have positions and employees to deliver on the Strategy.

(ii). The Departmental Ratios. That is how many employees should be in the support/non-technical departments compared to employees in technical departments/core business departments. You need more people in departments that are core to the business.

(iii). The Management Ratios/ Span of Control. That is how many employees should one manager oversee. You have to look at your type of your sector, your business, and the type of work employees do as well as benchmarked data from comparator organisations.

(iv). The Labour Cost Ratio. That is when you calculate the total cost of filing all the positions on the Structure, how much will be the total cost to the company compared to the revenues of the company.

You cannot be having a Structure that provides for all your revenues to go to labour costs without leaving enough revenue for reinvestment. Look at the benchmarked data for your sector and generally approved percentages for many businesses.

#2. STRUCTURE DEFINES FUNCTIONS

You cannot run a company with everyone doing everything. That is a recipe for inefficiency, wastage of resources, confusion, and lack of accountability of who is supposed to do what.

The Structure, therefore, should group jobs according to specific functions such as production, sales and marketing, finance, IT, human resources and administration, procurement, internal audit, and so on. You have to see what works for a small company.

Grouping of functions increases the company's efficiency and puts an end to duplication of roles.

It is important to take note that because the Structure provides for specific positions, those specific positions then get to be filled through recruitment. When you recruit people and give them those positions, you should not just be changing their roles anyhow.

Remember, each position comes with specific salaries and conditions that are then embedded in the contract of employment signed between yourself and the employees.

The Employment Laws in many countries prohibit employers from effecting adverse alterations to an employee’s conditions of service to which the employee has not consented as the same is considered as termination of employment by redundancy.

Do not find yourself in the Courts of Law because you are doing something wrong which you could have avoided.

#3. STRUCTURE DEFINE AUTHORITY

Professionally done Structures show the specific level or grade a particular position falls in and who reports to who which then shows who has authority over who.

You cannot have a company where anyone wakes up and starts issuing orders to everyone even in departments or units where they do not belong because they feel entitled to do so.

Being related to the owner of the company or being close to the CEO/MD should not be a prerequisite to having all the powers to order everyone around in the company. Employees should know who they are exactly answerable to.

Professionally designed Structure not only show the positions but also the level/grade which helps in showing which position is in management and non-management.

It is important to pay attention to levels of authority as the Employment Law specifies the responsibilities places on those in management as being employers.

An employer by law is any person who, in return for service enters into a contract of employment and includes an agent, representative, foreman, or manager of the person, who is placed in authority over the person employed and employee, follow it.

Therefore, a Structure is not just something you just wake up and say this person shall be called this fancy title and so on giving them the authority that is not well defined.

A Structure should be well thought through because it empowers a person occupying a particular position to act in a particular way which could land the company in court over the negative actions of the managers.

#4. STRUCTURE PROVIDES PROGRESSION

Companies with no defined Structure make it difficult and almost impossible for employees to see clearly what positions are above them to which they should aspire to occupy in the future.

A well-prepared Structure allows employees to have clarity of how they can grow with the company and get promoted in due time if they meet the parameters required for a higher position.

The Structure, therefore, plays an important role in staff motivation and retention that helps the company to reduce its staff turnover rates.

#5. STRUCTURE ENHANCES INTERNAL CONTROLS & ACCOUNTABILITY

Due to the fact that every company no matter how small or big it is there are inherent operational risks and threats, it is important that the Structure that the company is using does not increase the risks rather helps to reduce the same.

A professionally done Structure therefore should be assisting the company with certain controls from the preventative angle.

One of the most important control activities that employers are advised to pay attention to which a well-designed Structure sorts out is the segregation of duties.

That is, you cannot have the same position requesting, authorising, and recording a transaction. When you have such a scenario in your company, you should simply know that you are setting yourself up for failure no matter your reasoning.

Yes, segregation of duties may be a challenge for small companies but still, there is a need to look into this matter without fail. There should be proper oversight on how transactions are conducted in the company to avoid losses that you may only detect when it is way too late.

A company where everyone has the power to request and authorise anything is not a well-managed company. The Structure should therefore allow for someone to request and another one to authorise at an appropriate level.

All in all, ensure that you have in place a professionally designed Organisation Structure with clear reporting lines, positions showing who is who, and grouped according to division/departments with further grouping according to appropriate levels/job grades.

When you have a professionally designed Organisation Structure, ensure that there is place a proper Performance Management System that allows for you to ensure that each employee in each position is assigned performance targets o work towards the goals of the company.

What are your views on this matter? Feel free to share your thoughts in your comments section and share with others in your network.

Contact your trusted Advisors where you might need assistance.

Owen Katongo Kabanda

Management and Leadership Advisor

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