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The Real Reason Most Companies Never Scale – It’s your Org Structure and Senior Team
August 25 - 2022 - Insights

The most important part of scaling a business centres around the need to build a solid and scalable organisational framework that supports great communication, responsibilities, and accountability.

It sounds simple but it’s the only route to truly scale.

I know, it’s obviously at first sight isn’t it; in order to grow an organisation past 50-70 people you need a well thought out structure.

The reality of auditing what you have, designing what should be and then implementing those changes in a framework that consistently holds the key people within it to account is the magic fair dust of building a truly valuable business.

The question is how do you get there? Having made more than my fair share of mistakes in this area I’ve learnt (the hard way) a process that gets you there most effectively.

And it starts with what you have right now.

Auditing your Org Chart

To understand how effective your current organisational design is you must start, like all things, with a solid audit process. The idea here is to achieve two things:

  1. Get an understanding of the current organisational framework and where the current weaknesses lie.
  2. Take an honest view of each individual employee within it to understand where changes may need to be made.

The org itself

To get a better view of how well the current structure is managing it pays to run some qualitative but anonymous surveys across teams to get a real time view of how well things appear to be working and where there are opportunities for improvement.

Anonymity is helpful to give you the truest lay of the land as it allows those on the ground to give their honest view without fear of reprisal. However ‘good’ and open your culture may appear, to those in junior positions there is still a perceived threat in sharing too much.

Running an online survey asking questions around each team, the various management levels as well as the central functions give you a clearer view on where the strengths and weaknesses are and this is often supported by findings in the individual employee analysis stage, which I often run as follows…

Employee auditing

To then run a deeper piece of analysis on individuals I like to start with a full list of employees and classify them into three distinct piles as so. This can and should be done with senior managers to get a clear view of current performance as you will find that employees that were once ‘indispensable’ can fail to keep up with the progress and size of the business.

  1. Round pegs in round holes

The first ‘pot’ is one where you put the people you see universal positive reaction to. ‘They’re brilliant’, ‘I love her/him’ are regular reactions you will experience. This is the ‘green’ group, the must keep and promote. Pathways should be built within their PDPs to ensures they are supported to achieve their aspirations.

2. Square pegs in square holes

Pot two is less clear. In a team environment you may see opposing views, but the overall sentiment is that they are brilliant, with flaws. The rough diamond and mavericks often live here, they offeer significant strengths in one or more areas but may require work in others. Those that end up here need solid development plans and, perhaps, larger raining budgets, to round off the edges. Often the challenge is they are not (quite) in the correct role for them or require plenty of training/coaching to get to where the business needs them to be. Make sure you deliver it because future leaders can come from here!

3. Who’s not on the (new) bus?

And then we come to the ‘red’ pot. This is where feedback points to a lack of engagement and energy. The people here deserve to be communicated with openly and fairly to see if they are enjoying their role and to see if they still want to be part of the journey. Feedback will suggest they are ‘not interested/performing poorly/negative’. Any of these should be met with immediate support and management to either help them find a role they enjoy outside the organisation or run a fair performance process to ensure the employee/s in question are aware of what good should look like and how to get there.

Lay out your colours

Once you’ve completed the process you should be left with a long list of colour coded employees, with every single person accounted for. The next job is to then overlay every person, complete with their green, oranges and red coding against your current org chart.

In doing this it will paint a vivd picture of exactly where the weaknesses may lie from a team or organisational perspective. Often, you’ll find a correlation between underperforming teams or departments and your new chart, and such insight can then help you understand how best to change its trajectory.

But real change. The real velocity changing stuff, comes from a top-down approach to organisational design.

Top-down org design

The answer to what ‘good looks like is very much dependent upon the size of your business and its sector of course, but the same basic principles apply if we strip back the layers to what really matters, irrespective of whether you sell handbags or cutting-edge services to business.

Back to basics

To get it right requires a ‘stripping back’ exercise, focusing on the key pillars of success outside of your proposition, go to market strategy, marketing, and sales and so on.

Do this and for a large percentage of businesses the answer to scaling success comes down to three areas of focus:

  1. Sales
  2. Operations
  3. Communication

Broken down a healthy business will be great at doing this trio of things. It will be able to exhibit a great and well thought out sales and marketing strategy and delivery process and will have a P&L and/or pipe that proves it out.

Operationally day-to-day processes will run smoothly and those in charge of the function will be able to share key KPI data easily and efficiently on performance across such key indicators as utilisation, capacity, margin and so on.

And communication will also be effective, both internally from an employer brand and general cultural perspective, but also, critically with customers and clients. Detailed processes will exist to prove how this works and why.

If it doesn’t then your first focus has to be on understanding current organisational design to ensure that the right people are in roles to deliver these critical functions well and that they have the responsibility and accountability to do so – well.

Who’s missing from your SLT?

It’s critical to ensure that the business, at a certain level of scale, has a ‘general’ in each of the positions discussed, or a senior, experienced person with oversight of that area of the business.

For those running service-based businesses my view is always to design an org structure with a Chief Operations Officer, Chief Commercial Officer, and Chief Client Officer in place to oversee these things. Generally speaking, internal comms comes from the CEO down through ALL key personnel.

There will be further roles of course and the timing and prioritisation of when to bring them in depends on growth velocity, weakness within existing structure, strategy importance of certain areas and more.

When is right?

Many founders and CEOs I work with ask me when this structure should be in place and the simple answer is that ‘it depends’. Each business has a different path to growth and a different set of product or services. They also have a different founding team, and all of these variables impact the answer.

That said the generic view is that for a service business you should have senior leadership across the three disciplines by the time EBITDA crosses around £750,000, or head count is more than 35 people.

For product businesses the answer is more nuanced as the amount of automation, length of sales cycles, average order value and so on can have a massive effect on people requirement.

That said you should be specialising in these key areas sooner than you think you should. Defining ownership, focus and process across the three pillars means you will move faster through the painful ‘start-up>scale-up period’.

What about middle management?

At a certain point of scale, and certainly once you have your senior leadership team in place, focus should turn to pushing further responsibility and accountability down into the ‘middle management layers’.

Given that each people manager should have no more than 6 direct reports its imperative that whatever vision, targets, and budgets are set at top level filter down the chain so that everyone is aligned.

The big mistake a lot of businesses make is they believe that by hiring a small handful of more senior, experienced people the job is done but in reality, it is only just beginning.

Each of those hires must work to ensure that the team/s below them are then structured in a way to further split out responsibility and ownership.

Target setting and communication

That target setting starts at the very top of course and drips down through an effective and efficient organisational structure that increasingly splits out functions as specialisms the larger you grow.

That planning process must be owned by the CEO and senior leadership team, advised by external advisors where possible to both question decision making and ensure targets are realistic and stretching.

Ideally, they are set and approved a month ahead of the new year, giving the business time to present the new plan to all for the sake of transparency and a shared sense of ownership across every rung of the business.

As par of that process, it can be a brilliant exercise to challenge each team manager to play their part too, giving them a framework within which they can set their own aligned targets and softer goals for the year. Ownership comes from involvement!

Responsibility and accountability loops

And of course, target setting is useless if it isn’t kept front and centre. This means designing a process for regular check ins and iteration.

That starts with a top-level quarterly refinement process, turning your annual Budget, into quarterly Forecasts, based on the latest performance data. This means you’ll have a better idea of just how far away you are from hitting those key KPIs and have an ability to adjust them as you go.

And alongside this its importance to create regular face-to-face check ins from the top down to ensure information of actual performance is filtered effectively and efficiently upwards and that the focus on delivering those targets stay front of mind through a process of constant reiteration.

Where to start?

All in all, there is a lot to build in a short period of time to ensure that the glass ceiling that exists for many in between start up and scale up is shattered. It’s certainly not an easy process but by starting with organisational audits and a thorough design process you’ll soon find that it’s a lot more straightforward than you thought to get to 200+ people.

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