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Should I Create an Organizational Chart for My Business?

Q. I own and run a business with about 20 employees. My people are after me to draw an organization chart. I think that would be a waste of effort and would probably only serve to make some of my employees mad when I show them reporting to someone they consider to be a peer. I’m against org charts. What do you think?

A. Thank you for the question. We’re sorry to disappoint you, but we side with your employees on this one. However, this is one of those situations where the reason we think as we do is much more important than what we think.

We don’t care about boxes and lines on a chart. It’s obvious you don’t either. What we care about is that small businesses operate as successfully as possible. Your business will be more successful as it grows, if you communicate to your employees exactly who is responsible for what with crystal clarity. Anything less than this leaves room for problems. The purpose of an org chart is to help you communicate this.

You say you have about 20 employees. Assuming there is no reporting structure, they all, in effect, report to you. If your business continues to grow, you will soon reach the point where you become overwhelmed. In fact, that may have already occurred. It would certainly explain why your employees are clamoring for structure. When your personal capacity is exhausted, you’ll face two choices.

If you continue to operate as you are, your company’s growth will grind to a halt. Even though you are working very long hours, because you don’t have sufficient capacity things will start to fall off of your plate. Eventually your customers will begin to leave because they are fed up with the things that aren’t getting done. You’ll have arrived at the unhappy equilibrium¾the point where for every new customer you acquire, you lose one that is unhappy. Growth will stop.

You don’t have the capacity to do it all and people do not manage themselves -- they can’t. They need someone to establish goals, measure their performance and hold them accountable for results. This is the reason that companies employ managers. It would certainly be cheaper not to pay managers, but without them larger companies could not possibly function effectively.

The alternative to the unhappy equilibrium is to put managers in place -- people who have responsibility for only a piece of your business, a manageable chunk. You might have a person responsible for operations, another responsible for sales and a third who heads administration.

It is critical that you are clear about how responsibilities split between your managers. For example, will your head of operations or your head of sales be responsible for customer service? An organization can operate effectively either way, but it can’t function if the answer to this question isn’t clear. Creating an organization chart is an effective way to communicate your answer to this question.

We understand your reticence to layer some of your people under others that they may consider peers. These can be gut-wrenching decisions, but if you are committed to successfully growing your company, they are decisions you’ll have to make.

Another possible reason that you are hesitating to designate managers is that you don’t have anyone with that skill set. Why would you? That’s not why you hired these people. If this is the case, you may need to go outside your business to hire the managers you need. Worse than not designating managers is designating a manager who doesn’t have the skills to succeed. That’s not fair to you, your customers, your other employees or ultimately to the manager that you set up to fail.

Org charts are not about boxes and lines. They are about clearly communicating which manager is responsible for what. For your business to continue to grow, you’ll need to be willing to make difficult decisions.

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