February 29, 2024

Small Business Advice

How to know if your business needs a new, more functional organization chart

Jerry Osteryoung | 12/30/2016

"Do you know what amazes me more than anything else? The impotence of force to organize anything."

~ Napoleon Bonaparte

When growing your business, reorganizations are periodically necessary. After all, an organization chart for a business that is just starting up cannot possibly be the same for an organization with 500 employees.

Though it can sometimes be a painful process for employees because reorganization can require significant changes, a business cannot grow without it.

I often find roles and responsibilities just sort of morph into what they are today rather than being planned that way. For example, positions may be assigned to a manager because they do not have many people reporting to them rather than because that is the best place in the organization for the position to be. I have even seen the collections function being put in the sales department rather than in the accounting department because the sales manager wanted to control that task.

For this reason, every business must revisit its organization chart every year, especially when they are doing strategic planning. One of the critical functions of strategic planning is to make sure the organization chart aligns with the business and its goals.

When I am helping firms in the process of reorganizing, I always have them develop a new organization chart that is functional, leaving out names at first -- specific employee names will be added later. Basically, we start with a blank slate and develop a structure that will serve the needs of its customers, staff and stakeholders.

The reason I have them go through this process without putting names in is because it is much easier to develop the structure the business needs if you are not worrying about who will occupy each position.

The process gets much harder when trying to plug people in where they do the most good for the company. However there is value in this process despite the difficulty. Entrepreneurs frequently discover they have people in the wrong positions and sometimes even identify positions they do not need anymore. These kinds of revelations can lead to dramatic improvements in the business.

So often, when I lead companies through this process, they discover how blind they have been to necessary changes. They tend to come in reserved and hesitant about upsetting the apple cart, but after going through the process, they see so much value.

Reorganization is also important when adding another level of management, acquiring a new business or downsizing your business. Basically, you must consider reorganization any time you change the structure of the business.

Now go out and make sure you set aside time every year to evaluate your organization chart and see where it might need revision. The absolute best time to do this is when you are doing strategic planning.

You can do this!

Dr. Osteryoung has directly has assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is a bestseller on Amazon.com. He can be reached by e-mail at jerry.osteryoung@gmail.com.

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