A major part of creating an organizational structure depends on the current size of your company, the size that you want to take it to, industry, category, business model, investment/ cash flows, immediate goals, long-term objectives and so on. There is no formula for creating the perfect organizational structure, but here are a few suggestions that can help most start-ups:
How to create: An organizational structure should be created from the topmost employee/ level. The best way to do so is on Microsoft PowerPoint, using one of the pre-fed Smart Arts for Hierarchy. It helps you view the complete team along with the reporting structure. It might help to have two organizational structures, one which is the desired one with vacant positions and another which is the actual one.
Continuing improvement: Creating an organizational structure is not a one-time activity. It is a continuing process as your company grows and changes. Almost all factors mentioned earlier will change how your organizational structure should be. But, too many changes in it could also be harmful in more ways than one, the biggest being lack of focus and ownership. If the roles and the responsibility of employees keep changing frequently, so would their ownership of delivering something. Many large organizations have failed even after years of existence because of these issues. If you plan to run your company on an AOP for a financial year, then the organizational structure should not go through any major changes during that year, unless you change the AOP too. The main reason is that any change in the organizational structure could affect cost, revenues or profits and they, in turn, would change the AOP.
There is no formula for when and how an organizational structure should be reviewed or changed. If it is not working, it should be changed asap. My suggestion is that the CEO/ entrepreneur should review the organizational structure frequently by checking work efficiency and employee happiness, but make any major changes only at the start of a new financial year and AOP.
Vertical structure: A fundamental and important step in making an organizational structure is to understand and decide the verticals and sub-verticals of the company. A vertical is a department which segregates a certain number of employees, who would broadly do the same kind of skill-based work, would be comparable to most companies and allow someone outside the company to understand what they do.
Your business model and industry will help you figure out the verticals and then the sub-verticals. It is essential that the right set of people is in a vertical. Some examples of verticals are finance, HR, sales, technology, operations, product, facilities, legal, strategy and customer support. A vertical structure will help you separate people from the top and then into smaller teams as sub-verticals. It will also help you give designations and chalk out a hierarchy in the teams. Every person, except a consultant, should be part of a vertical, which can also consist of one person alone.
In many start-ups, entrepreneurs do not place much importance on designations and hierarchies. This is fine if the interaction of your start-up with the outside world is restricted to customers through marketing channels. Designations are needed for outsiders to know who is doing what in the company.
Honesty: The organizational structure should be created with honesty and not be based on who is employed in the company and what he is capable of doing. When you create an organizational structure keeping the existing employees or the co-founders and their capabilities in mind, then your thoughts get biased towards them and accommodating them. Roles will get created on the basis of what they can and can稚 do. Similarly, it should not be made depending on what the entrepreneur wants to do.
An organizational structure should be drawn up keeping in mind only what is needed for running the company, not any particular person. People should then be fitted into the roles after it is complete. One of the reasons for carrying out this exercise early is to know what you and your co-founders can do in the company. Even while changing the organizational structure, you should not consider the people you already have in the company. Learn more about organizational structure only at the University Canada West, one of the top-notch universities in Canada.