How to Structure When You are Small

I am looking for some good examples of organization structures for very small companies - less than 35 people or so. I want to make sure I am considering what is state of the art for today.

I am working with a client and the topic of organization alignment came up. The challenge with doing a realignment for a tiny company is that the current make-up of the organization makes it tough for the senior team to step back and determine what alignment looks like.

Here's what I mean. I you have a company of 30 people, your options on how to organize are different than they would be for a 1,000 person office. If we come to the conversation with a mindset that fits larger companies, that will likely get in the way. Also, I think it is tough for a senior team to evaluate its own structure without first shifting a few assumptions and mindsets.

The struggle I see in a lot of small companies is that they are always short on resources at the "get it done" level of the organization. What's the best way to plan for growth and how might a small company best organize to meet today's and tomorrow's potential revenue flow?

I see a lot of small companies organize in traditional ways with a president and then department heads for the usual business functions. For very small companies, this approach can lead to being top heavy. But the question is, when and how should these changes occur, and if the company is top heavy, what's the best path to readjustment?

I understand the challenge that small companies have, too. They are playing in a market with competitors who have more resources and positions to dedicate to each function. So how can you - from the eyes of the customers and key partners - be a strong company but resist building companies with too many chefs and not enough cooks? We need sales leaders to create a sales strategy and represent the company at trade events. We need marketing leaders to build and represent our brands. We need operations leaders to ensure the products and services are delivered well. We need R&D leaders to help us stay competitive. We need finance leaders to manage our growth and financial health. We need HR leaders to keep our butts out of court (although the mission statement focuses on "great place to work" this is really the unspoken focus). We need an IT leader to help us capitalize on technology to deliver products and services in a more cost effective manner.

But here's the rub - A company that generates 20 million dollars on the top line cannot generate good returns if too much is spent on salaries and benefits. There's an acceptable amount for SG&A - a percent of sales or net revenue. Once we plug in all these "needed" functional leaders, what's left for the people who need to get it done?

And the alternative is not easy either - if you pump most of your SG&A budget into "get it done" folks, then where are you going to find a couple leaders who can meet all the needs of a growing company?

Outsourcing is certainly one option - but that's not cheap either. Mergers attempt to create synergies, but we know from business histories, that mergers often fail to produce projected economies.

And just to be clear, I am not thinking about small companies that plan to grow to be big in two years, either. There are plenty of small companies who plan to be small a long time - perhaps growing by 10-15% per year.

It's an interesting challenge to think about.

Let me know of any models, articles, books, or contacts you think I ought to check out or leave a comment with what you think. We are a nation where small businesses dominate, but I don't see a lot of innovation or fresh thinking with regard to organization models for this segment of business.

Comments

[Terrence Seamon]

Hi Lisa,

How to structure when you are a small organization? Good question. A few general thoughts...

- Form follows function
- Focus on your customer
- Keep it simple

Perhaps the most common small organization on Earth is the family. By analogy, what structures help most families to hum along?

Over at ryze.com, there are a few small business forums, e.g.

Minding Your Own Business
http://myob-network.ryze.com/

Small Business Resource Center
http://advertising4less-network.ryze.com/

What Small Businesses Want
http://wsbw-network.ryze.com/

By the way, I tagged you:

http://learningvoyager.blogspot.com/2007/03/meme-tag-your-media-consumption.html

Regards,
Terry

[Lisa Haneberg]

Terry - Thanks for your input and the links! I will have to check out this tag. :-)

[Mark Shead]

Checkout a book called "Creative Company" by Andy Law. They have a very innovative open structure that might work well with that size organization. (I can't remember how big they actually are.)

Personally I think that a small company that is established can do a lot to reduce the management overhead by creating really good metrics that get measured automatically. If everyone's performance is easy to see and open for all to see, you can minimize the amount of time managers need to spend managing.

This type of autopilot management won't work in an organization that is constantly changing, but if things are somewhat established, it can really help relieve the managers, so they can focus on doing actual productive work and only act as managers when something needs attention.

[Lisa Haneberg]

Mark - Thanks for the book recommendation, I will check it out! I'm with you that small organization ought be able to function well with less supervision - with the right people and good systems and processes.

[Dissertation Structure]

Blogs are so informative where we get lots of information on any topic. Nice job keep it up!!