Time to get your small business organized? Creating an organizational chart may be the perfect place to make a big impact. Organizational charts can help build and design clear structure, define roles and identify who reports to who. Before you make your next org chart though, consider switching away from the traditional direct report Organizational Chart, towards a “Functional Organization Chart”. You are probably familiar with the traditional chart which plainly lays out the chain of command, and provides clarity to the team…for the moment.
Consider a Functional Organization Chart which displays the hierarchy of the functional areas of the business, identifying a management function for each group or area below it, regardless of whether you have an employee in that position or not. One employee may have their name added to several functional areas meaning he/she “owns” that area, even if their job title does not cover that functional area. When the business grows the names assigned to the functions change, but the structure does not change. Let’s take a peek…
Chain of Command Organization Chart (Example 1) below you can see the chart for this service business is demonstrating each person, their title and who they report to.
Functional Organization Chart (Example 2) below you can see the chart for the same service business displays all of the functions necessary to lead the organization.
Functional Organization Chart with People assigned (Example 3) below takes the same key 10 people in the Chain of Command chart and adds them to the functions they own.
The Functional Organization Chart differs (and I would argue is better for small business) from the a traditional Chain of Command organizational chart, in the following 5 ways. The Functional Organization Chart differs because…
- It’s Scalable – Small Businesses have a unique problem of having more to do than people to do it, especially when they start. As a small business grows you will have more people to spread the workload around to and with a straight people hierarchy you will have to make a new chart every time you add someone on. In our above example once the business grows large enough you will have 20 people covering these 20 functions, instead of 10, and the chart stays the same.
- It shows Workload Needs – Because the structure stays the same and people’s names are added to the functions on the charts, you can visually see which people are spread too thin and the chart itself demonstrates where you a workload need. Look at Example 3 and notice a few things…First, the owner, Karen has way too many responsibilities…no wonder she is exhausted. Next, we have some positions that are not owned by anyone, and lastly people assigned to functions that they are not that good at. Knowing all of this can help you decide who is your next hire, what qualifications they should have and what their role will be.
- It’s not People-centered – Traditional Organization charts are people centered. The structure itself is based on who works for you now, and who does what now, and sometimes it does not logically expand into management and oversight of functions. For example, Let’s say Janet is your Office Manager and she has been with your company since the beginning so she is at the top of the hierarchy. You now have a new Administrative Assistant, Mary, who works in the office and who does various administrative tasks and helps with accounting tasks. On the chain of command organization chart Mary directly reports to Janet, but Janet does not really have any accounting experience or oversight responsibilities for accounting tasks. The company does not have an Accounting Manager, so when Mary has questions she goes to the owner, but the owner answers questions or points Mary to an outside accountant but does not really “oversee” Mary’s accounting work. Two problems…(1) the chart does not show this workaround relationship between the owner and the Administrative Assistant (see example #1, where you cannot see this), and (2) The chart does not show who “owns” the results of the accounting department. This structure has the potential for poor compliance, management and results for the company’s accounting.
- It Highlights Functional Relationships –Business owners should always be alert to “garbage in, garbage out” syndrome. That is where the processes and methodologies of the business are more based on “because we have always done it that way” instead of the smartest processes and procedures for the achieving the company goals. With a functional organization chart the construction and review of the chart prompts introspection and discussion about what functions does the company really perform, what is the relationship between each and why do we have these functions and relationships. For instance take a look at Example #1, if your Supply Manager also writes newsletter articles because he likes that and you don’t have a marketing person in house, the functional chart makes it visually plain why the owner may be unhappy with the results and ability of the newsletter to win company goals. What really happening behind the scenes is there is an implicit role of Marketing Manager, but nobody fills that role except the owner who does not see that as her responsibility, so who sets the direction and gives oversight for the newsletter marketing? Jack thinks he is just thinks he is responsible for writing a few newsletter articles but in fact he is the whole of the marketing department.
- It Builds an Environment for Accountability – Small business owners want to pull their hair out when the company is facing a repeated problem that keeps rearing its ugly head and the team is finger pointing at each other, nobody will take responsibilities and because of this you know the error is bound to go unsolved and repeat again. This happens in companies with weak accountability. A company with limited or NO ACCOUNTABILITY is the result of companies assigning TASKS and not RESPONSIBILITIES. In a traditional chain of command organization chart functions are not clear and multiple people may “share” responsibilities. A shared responsibility means no responsibility. In a functional organization chart all functions must be mapped out, and one person can be assigned to multiple functions, BUT not multiple in one function. The reason is “ownership”. One person should own a function and its results. If the function is so large that you need multiple people, then the function should be divided or reduced into separate functions, where the assigned owner employee the results of that function. Remember if one person does not own it, then there is NO ACCOUNTABILITY. Due to our limited space our example of the functional organization chart did not have room to assign the detail of responsibilities in each function area, but given a full build out of the chart it would.
Once created the functional organization chart should be an everyday used document for the following purposes and more:
- Make roles and responsibilities are clearer
- Understand the relationship between business functions
- The job expectations are more easily measurable and better communicated
- Employees feel more secure about their value and work without fear
- Communication is clearer between departments
- No duplication of work
- Who the next hire should be is more obvious
- Required skills for each role are more apparent
- Overworked owners can see more clearly where they need to delegate.
Good luck creating your functional org chart. Feel free to send me questions and let me know how it goes.