Why Organizational Design Is Integral To A Company’s Success - Acquira

Why Organizational Design Is Integral To A Company’s Success

What You’ll Learn
  • Why it’s important to have the right people in the right seats
  • How to identify when the wrong people are in the wrong seats
  • What to do when you find the right person in the wrong seat
  • How company culture can help ensure the right people are in the right seats

No one builds a business by themselves. A company needs the right people to guide it in order to flourish. That’s why successful business owners are always surrounded by smart and capable individuals.

Crafting a Leadership Team is one of the most effective ways to ensure that an organization can grow and succeed even when the Acquisition Entrepreneur steps away from the day-to-day operations. When you have the right people overseeing the objectives and Key Performance Indicators (KPIs) for each department, the company is more likely to succeed.

While properly built systems help us declutter the workflow of a company and provide a solid foundation to meet goals, you need to ensure that those goals are communicated to each individual within a company and they are aware of how their daily actions can help the department achieve those goals. 

We created the ACE Framework to help businesses become more efficient, with an eye to enhancing post-acquisition growth. In the ACE Framework, the design of the organization is paramount in ensuring that communication flows in the right direction, ideas are listened to, and people are properly rewarded for their effort. For all of those things to happen, you need to ensure the company is properly organized.

The Right People In The Right Seats

But finding capable people is only the first step. For a company to truly thrive, the people it employs at every level must be a good fit for their jobs. That means putting the right person in the right seat.

It’s entirely possible for someone to be a strong worker with a critical mind, but have their talents and abilities wasted because they’re doing the wrong job.

This is an idea that has been promoted by folks like Jim Collins in his book Good to Great and Gino Wickman in his book Traction: Get A Grip On Your Business.

As Wickman says, The right people are folks who share your company’s core values. They both fit into and thrive within your company culture. They should be people you enjoy being around and who make your organization a better place.  

The right seat, on the other hand, means that “each of your employees is working within his or her area of greatest skill and inside your organization.” It also means that the roles and responsibilities they are tasked with are complemented by their own unique skillset.

In the book Unique Ability, Catherine Nomura, Julia Waller, and Shannon Waller explain that everyone has a Unique Ability® (“Unique Ability®” is a trademark of The Strategic Coach Inc.). When a person is using their Unique Ability®, their talent and skill are noticed by others. As a result, they experience continued improvement, which energizes them and fuels their passion to do the job better than anyone else could.

It’s a powerful cocktail that combines passion and talent.

The Importance Of A Good Job Description

One great hindrance to placing the right person in the right seat is a poorly defined job description. When responsibilities and expectations aren’t clearly stated it is usually due to a structural issue. Nebulous structures are often created by leaders looking to accommodate people. They mold the organizational structure to ensure that people they like stay around. However, this often results in a mismatch between person and seat.

These mismatches are usually one of three things: the right person in the wrong seat, the wrong person in the right seat, or the wrong person in the wrong seat.

The right person in the wrong seat is often someone who shares the company’s core values but isn’t operating at their peak ability. Maybe they’ve been promoted to a position that they’re not qualified for because you want to keep them around or perhaps they’ve outgrown a role and have become over-qualified for the job. Ideally, you will move this person to another position where they can make full use of their skillset. But if such a position doesn’t exist, you may have to make the difficult decision to let this person go.

When the wrong person is in the right seat, they may be helping your business in the short term, but having a negative effect on your business as a whole. These people, while good at their jobs, don’t share your core values. They can chip away at company morale and ruin potential relationships with clients. If you have the wrong person in the right seat, you need to get rid of them, even if they’re helping your business’ bottom line.

The wrong person in the wrong seat is a much more obvious issue with an even more obvious solution: they need to be let go for the good of the company. 

Oftentimes, how this person got into this seat isn’t as obvious. Wickman uses the example of a CFO who had been on the job for more than 20 years. In the beginning, he shared the company’s values, he was talented, and he was in the right seat. But the business and industry changed and he didn’t evolve with them. As time wore on, he became resentful and less friendly, making him the wrong person in the wrong seat. Wickman says the owners hadn’t noticed a problem until their core values and the right structure were clarified and put in place. When they eventually replaced him with a new CFO, the difference was like night and day, according to Wickman.

The Perfect People

The ideal goal is to surround yourself with the best people all of the time. However, don’t get bogged down trying to find a completely perfect team.

The ideal goal is to surround yourself with the best people all of the time. However, don’t get bogged down trying to find a completely perfect team. As they say: shoot for the moon, even if you miss you land amongst the stars.

If you notice someone is falling below expectations, Wickman recommends communicating the results to the individual in order to give them a chance to improve their performance. “He or she will improve almost all of the time,” Wickman writes.

If they don’t improve, Wickman recommends a three-strike rule. After the initial analysis, sit down and discuss how they can improve and give them 30 days to do so. If they don’t improve, have another conversation with the individual and give them another 30 days. If they don’t improve a third time, you need to let them go.

The Right Seats

There are four major functions in every company: Sales & Marketing, Operations, Finance, and People & Culture. If one of those functions is weak, it will have a negative impact on the others.

Under the ACE Framework, only one person is in charge of each major function within the  organization. One person is in charge of Sales & Marketing, another in charge of Operations, another is the head of Finance, and another is in charge of People & Culture. This creates ownership and ensures discipline.

The levels of structural organization within larger companies will likely be more fine-grained.  For example, Sales & Marketing would be divided into its two constituents; Operations would be broken down into Project Management and Customer Service; and Finance might have subdivisions like Finance, IT, and Administration.

Once you’ve defined each function and its sub-divisions, you know what the right seats in your company are.

After that, it’s a matter of determining whether the people currently in those roles are the best fit for the position, whether you need to move people around, whether you need to let some people go, or whether you need to hire more people.

Employee Ratios

A crucial aspect of ensuring a business is organized is making sure you have the right ratio of front-end to back-end employees.

With many of the companies we work with, the service technicians are those who bring in the money and that makes them integral to the business’ growth. However, they can’t do their jobs alone, so the ratio between support staff and technicians is very important.

For example, the ratio between Customer Service Representatives (CSRs)/dispatchers and techs must be carefully managed. If the positions of CSR and dispatcher are combined into one role, ideally there should be one person in that role for every six-to-nine technicians.

If the roles are separated into one CSR and one dispatcher, we recommend that there should be one dispatcher and one CSR for every ten-to-15 techs.

When making new hires, we recommend 70 percent of people should be technicians. The other 30 percent should be support staff.

Many of the companies that find they aren’t profitable are just not hitting that ratio. And they’re not hitting that ratio because they’re simply too busy doing work instead of spending time hiring the technicians they need.

Other companies simply don’t want to spend the money to hire more technicians. Even if their gross profit per tech is $170,000, they are often unwilling to spend more money than their competitors to attract and retain talent. But retaining employees is important. Indeed, one study from the Center for American Progress found that, when it comes to highly-skilled employees, the average cost of replacement was 213% of their annual salary.

Ensuring you have proper ratios also ensures that communications within the business are as efficient as possible. The more management levels through which a message passes, the more likely the message is to get confused.

Dedicated People and Culture Manager

When it comes to the ACE Framework, we put a lot of stock in the People & Culture (P&C) Manager. While many of the responsibilities for this role typically fall under the purview of Human Resources, we don’t like to think of employees as resources. Moreover, there needs to be someone in charge of cultivating a shared company culture – both internally and externally – in order to attract and retain the best talent.

The People and Culture Manager’s chief role is recruiting, onboarding, training, and cultivating company culture. At times they will also need to deal with insurance claims or other HR matters.

Employee Retention

According to the 2020 State of Retention Report from the Work Institute:

“Turnover affects productivity, increases training time, increases employee selection time, and decreases efficiency. It also affects longer/more frequent training times, interrupted schedules, additional overtime, increased mistakes, increased frustration with not having skilled, knowledgeable, and experienced employees in place, and negatively impacts existing employees.”

Employee turnover is so expensive because businesses need to pay the direct exit costs when an employee leaves on top of the additional costs associated with recruiting and training new employees.

Direct exit costs might include payouts for unused sick time, contributions to healthcare coverage, accrued vacation time, severance pay, or unemployment taxes.

This doesn’t take into account more intangible costs like knowledge loss, decreased productivity, and lowered morale.

The P&C Manager can help mitigate many of the costs associated with employee turnover by managing the people within the business.

In order to do this, the P&C Manager must ensure that one-on-one meetings are never skipped, quarterly performance reviews are never missed, and training and onboarding are rigidly adhered to. 

All of these responsibilities ensure that people are happy and fulfilled in their position, have clearly articulated career goals and feel acknowledged for their input and ideas. They are also the first step to ensuring that the right people are, indeed, in the right seats and that a business is properly organized.

Conclusion

No one builds a business by themselves. In order to see a company grow and become more efficient, they need to ensure that they have talented, capable, and motivated people at all levels of the organization.

While this begins with the Leadership Team, it cascades throughout the organization. If a company finds itself with the wrong person in the right seat, the right person in the wrong seat, or the wrong person in the wrong seat, it has the potential to create inefficiencies. By ensuring the right people are in the right seats at all levels of the organization, you can ensure the business will grow and succeed while attracting top talent. 

Everyone can think of an instance in their professional careers when they noticed the wrong person was in the wrong seat at work. These often make for some pretty entertaining stories. We’d love it if you could share them with us in the comments below.

The above article is taken from the training for the ACE Framework. If you’d like to learn more about the ACE Framework and how it can help with post-acquisition growth, schedule a call with us.

If you’re just beginning your acquisition journey, we recommend the Accelerator Program. If you’d like to learn more about that, schedule a call with us and someone will be in touch shortly.

Key Takeaways

  • A poorly defined job description can often lead to the wrong person in the wrong seat.
  • When a person’s talents and skills are noticed by others, they tend to improve at their job.
  • Don’t get bogged down trying to find a completely perfect team.
  • The ratio between support staff and technicians is very important.
Accelerator

Leave a Reply

Your email address will not be published.

if you’ve spoken with us before, use the same email address you used in the past.

You already filled out our onboarding form, please select a date to join us on our business call.
You already filled out our onboarding form, please join hundreds of entrepreneurs on our private Facebook Group!