In last months” blog I looked at how job specialisation can help overcome the issues of scaling a company. This time I?m going to look at the next step to consider. The first rule of designing an organisational structure (also known as an organigram) is that the result won’t please everyone. Don?t despair!
With any structure you will optimise communication within some parts of the business at the expense of other parts. For example, if you put product management in the technical department, you will improve communication between product management and engineering, but at the expense of links between product development and marketing. This means that as soon as you roll out the new organigram, people will find fault with it and they will probably be right.
Still, at some point, the monolithic design of having one huge, flat organisation no longer works and you?ll want to split things into smaller departments, or even subsidiaries.
At the most basic level, you?ll want to consider appointing managers to departments that you’ve put into specialised roles as they grow. After that, things become more complex.
Do you separate your technical departments for internal engineering and client/project engineering, or do you do it on a use-by-use case with all the technical resources included Then, once you grow, it will get even more complex again. You?ll be faced with decisions on whether you organise the entire company around business functions (such as sales, marketing, support, etc) or setup separate product-based business units which contain all the functions needed for their particular market and product.
When you come to creating your organisational structure, try to think of it as a communications tree, rather than just organising people into departments by function. If you want your staff to be able to communicate, then the best way is to make them report to the same manager. On the other side, the more distant people are in the organigram, the less they will talk.
Your design will also become the blueprint for how you communicate with everyone else in the world. If you organise your sales team by product, this should improve the product knowledge of your sales team, but will make things more difficult for clients who purchase multiple products.
Five steps to get you started
With this in mind, here are some basic steps to organisational design:
1. Decide what needs to be communicated
Start by listing the most important knowledge and who needs to have it. For example, knowledge of the product design must be understood by the technical department, product management, marketing and sales.
2. Figure out what needs to be decided
Consider the types of decisions that must be made on a frequent basis, e.g. feature selection, product design and changes, how to resolve support issues, etc. You should then consider how you can put as many of these day-to-day decisions under a single manager.
3. Prioritise the most important communication and decision paths
Is it more important for product managers to understand the product design or the market” Is it more important for your technical engineers to understand the clients or the products” Keep in mind that these priorities will be based on the company as it is today. If you change the products or directions of the company, then you can always re-organise.
4. Decide who’s going to run each department
Note that this isn’t the first step. You want to keep the company designed around the people doing the work, not the manager. In my opinion, the worst mistake you can make is to put the individual ambitions of your managers above the need for clear communications with the people at the bottom. This will probably upset your managers, but they will live with it.
5. Identify the paths that you did not optimise
Just because you have prioritised some communication paths doesn’t mean that they aren?t important to your company. You need to be aware of them, ignore these entirely at your own peril!
As your company grows further you?ll need to consider more advanced organisational design (or get someone else to do it), and start looking at things such as speed versus cost of communications, how you roll out the changes and how often you change.
David Barker is technical director and founder of the green colocation and connectivity supplier 4D Data Centres.