Every night along the tidal rivers of Malaysia, thousands of fireflies congregate in the mangroves and flash in unison, without any leader or cue from the environment. Fireflies have a survival strategy and an organizational structure to work in synchronization. Understanding the relationship between your business strategy and organizational structure is critical to the success of your business. How your business is designed determines how it performs.
A business strategy is a plan of action focused on reaching specific goals while maintaining strong relationships with internal and external customers. A business strategy defines how companies will use their major resources to achieve their goals and objectives.
On the other hand, an organization’s structure is the way the pieces of the business fit together internally. It is the way businesses think about hierarchy, how they assign tasks to personnel, and how they ensure people work collaboratively to achieve common goals. The goal is to avoid task overlap and workforce confusion, especially when it comes to laying a strong foundation for long-term productivity, profitability and employee engagement.
For businesses to deliver on their plans, their business strategy and organizational structure must be woven together seamlessly.
DESIGNING YOUR ORGANIZATIONAL STRUCTURE
If you want to improve your business’s performance, change the design of your organizational structure. Think about a flock of geese in flight. What happens when they need a course change or when a goose falls behind? They adjust, and course correct, just as you should. When your business strategy changes, your organizational structure should change as well so that functions and positions align with your new goals and objectives.
When designing your structure, allocating responsibilities for optimal results maximizes employee potential and creates high levels of employee engagement. Organizational structure is all about the people, positions, procedures, processes, culture, technology, and other elements that comprise your business. It is not simply an organization chart. It defines how all the pieces, parts, and processes work together to achieve the business strategy. Aligning your organizational structure with your business strategy is key to achieving your business’s mission and goals.
When a business changes its strategy, it must change its organizational structure to support the new strategy. When it doesn’t, the structure acts like a bungee cord and pulls the business back to its old strategy.
Once you understand what functions need to be performed by your business and where authority will reside in those functions, you can work on an organizational chart. Start with a blank piece of paper. Try to ignore naming the people in specific positions but rather identify the core business functions. Once you have identified the functions, you can then create roles and responsibilities. Remember that you are designing a structure to support your business strategy, not designing jobs to fit the current people in your business.
As you create your organizational chart, it is important not only to identify a position’s key responsibilities and tasks but the types of decisions the person in the position will have authority to make, and how they will be held accountable. Be clear and intentional with your team about the types of decisions you expect them to make. Listed below are five types of business decisions you can use to further clarify a positions’ responsibilities:
- Programmed Decisions: Standard decisions that always follow the same routine.
- Non-Programmed Decisions: Non-standard and non-routine decisions. Each decision is different from any previous decision.
- Strategic Decisions: Decisions that affect the long-term direction of the business.
- Tactical Decisions: Medium-term decisions about how to implement strategy (e.g., what style of marketing to use or how many extra staff members to recruit).
- Operational Decisions: Short-term decisions involving day-to-day operations.
Finally, it is important to identify key metrics that are tied to performance for each position. This provides a clear line of sight on the outcomes the position is responsible for achieving and how the individual is performing toward those goals.
After you have clearly identified the functions, position roles and responsibilities, decision making authority and performance metrics for the organizational structure you can add names to the positions on the organizational chart. Not before. Don’t get stuck designing your structure around your people, and their circumstances.
WAYS TO ENHANCE YOUR ORGANIZATIONAL STRUCTURE
There is an optimal organizational structure for your business. It should reflect the business strategy you have chosen, and it should support the capabilities that differentiate your company. That means that the right structure for one business will not be the same for another, even if they’re in the same industry.
When was the last time you took a critical look at the effectiveness of your organizational structure? Does it support your business strategy and the people you employ? If not, it may be time to take a fresh look. Here are six things you can do to enhance your organizational structure.
- Entrust Your Leaders
Regardless of what your present organizational structure looks like, its functionality should entrust its leaders. Successful leaders thrive in an organizational structure that nurtures creativity, unleashes potential, and doesn’t choke progress. This happens when less emphasis is placed on the hierarchical structure and more emphasis is placed on entrusting the right people in the right places. Entrustment elevates the performance of leaders and encourages behavior that earns the respect of followers. This respect allows leaders to build partnerships within the business that encourage open, two-way communication and foster a sense of loyalty.
- Commit to Ownership
Ownership occurs within your organizational structure when there is buy-in from everyone. If ownership is not shared or given, then the structure is self-serving. People want ownership and a sense of belonging. Ownership holds everyone on the team accountable for their decisions and actions. For employees to take successful ownership of their work, they must clearly understand expectations. They must also have milestones where progress is evaluated. Ensure that employees are in the right roles, give ownership, and celebrate their accomplishments.
- Expand Your Boundaries
Organizational structures don’t define you, you define them. Your structure should be a blueprint of open boundariesto grow and succeed. It should not box employees in but free them to do what they do best. As your organization grows so should your structure. Provide employees with the opportunity to be more flexible about how, when, where, and with whom the work gets done. Employees want to be involved in designing and managing their work tasks. Offer employees choices and the ability to personalize work. Allow employees to share ideas and be involved in the implementation of these ideas. As you expand your boundaries, provide opportunities for employee growth and focus your energies on the results that matter.
Employees need to have a level of control over their work tasks to be engaged. A top-down organizational structure hinders the ability of decision-making at the lowest level possible. Using the five types of business decisions, define what types of decisions employees can make. Decision making on the front-lines allows issues to be identified and addressed quickly. In a lateral structure, employees understand where they fit and how they impact the success of the business. It allows employees, at all levels, to be entrusted and given autonomy over their work. This structure allows for flexibility and promotes a feeling of equality and inclusiveness. When lateral thinking is put into action, it allows for quick response times that can translate into happier guests, home owners, employees and a thriving bottom line. Lateral thinking is empowering, efficient, and very effective.
- Give & Gain Trust
Develop relationships based on trust and commitment to gain the support needed to successfully achieve business goals. Your structure can enhance or hinder areas such as open communication, management follow-through, accountability, consistency, and concern for employee interest. Building trust is a deliberate action. It happens as relationships are given priority, it grows in an atmosphere of community, and it pays huge dividends when everyone is engaged. Without trust you have nothing. With it your potential is unlimited.
- Build Community
Community is developed when the structure provides an inclusive environment with common goals. Employees prefer to work with others who are like minded. Finding and developing a basis of mutual interest and agreement helps in the successful pursuit of shared goals. Create a shared purpose so that employees understand why the business exists and why they do what they do. Building community is a fundamental factor of your success. You need to define it, share it, and work it; mostly, your team needs to own it.
High-performing leadership teams spend nearly 20% more time than low-performing teams defining strategy, 12% more time aligning the organization around that strategy, 14% more time checking progress against strategic goals by reviewing key metrics and shifting resources accordingly.
Does your organizational structure support the goals you’re trying to reach? Start giving people a clear sense of your organizations business strategy, its’ purpose, priorities and principles. Providing this framework to your employees helps them to develop a deeper understanding of your business which can boost company performance and improve employee engagement, innovation and creativity, operational excellence and customer service.
Just like the fireflies, synchronization occurs after the relationship between your business strategy and organizational structure is aligned, well-defined, well-communicated, and collaboratively implemented.