Business Structure

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Business-level strategy, short-term objectives and the preferred corporate structure all impact on the choice of business structure. Different businesses within the same company can and do face very different marketplaces and therefore have a need for different structures rather than complying with a decreed model. A good business structure will reflect and be driven by busines strategy rather than management preferences.

Regardless of what structure a business ultimately takes, it’s vital that information gets shared and knowledge gets transferred right across the organization. Without this kind of ongoing communication, it is highly doubtful any commercial strategy will work.

Information sharing can be enhanced by the availability of both formal and informal tools. Some of the more common tools are:

Create and maintain company-wide databases and IT systems where knowledge can be first captured and then shared with others who need it.

Create formal teams or committees with responsibility for enhancing the flow of information.

Create opportunities for employees to meet informally and chat. This is particularly important in the sharing of tacit knowledge that cannot effectively be written down.

Publish a directory that lists key personnel, their geographical locations, their responsibilities and specific areas of expertise.

Allow everyone to approach anyone else in the organization for help without needing to get their boss’s approval.

Create a common language that everyone uses, regardless of their area of specialization, language skills or technical capabilities.

Create a culture of trustworthiness so people feel confident about acting on what others are telling them.

Encourage everyone to take note of new information and assimilate it into what they do.

Regardless of which specific tools are used, its important that you clarify who is responsible and accountable for information sharing within the organization. If this is left up in the air without anyone being made specifically responsible, everyone will assume someone else is already doing this.

To make this happen:

1. Develop a chart that lists all the major tasks, activities or decisions which must be made in order to achieve a strategic goal.

2. List the key decision-makers for each of these tasks or activities. Designate each person’s degree of responsibility in this way:

R–full responsibility to make a decision.

C–must be consulted prior to a decision.

A–the person who is ultimately accountable for result.

I–those who must be informed after a decision is made.

?–When you don’t really know the degree of involvement.

3. Circulate the chart to all managers and have them designate what they feel their most appropriate responsibility code should be for each task. This may highlight some problems.

4. Combine all the participants’ responses on one chart and get together a management group to discuss the responses. It’s likely there will be all sorts of disagreements about who is responsible for which decisions within the organization. This is to be expected, but the group should work together to come up with a single chart everyone can live with. Expect some heated debate before any kind of consensus is reached.

5. If no single chart of responsibilities comes together, split the larger group into two or three small groups and have each group prepare their own idealized version of the chart. Then let each group present their version, arguing its merits. A facilitator or senior business leader can then create one chart openly by reaching agreement with the people who will be responsible. It’s important that this be done with the input and agreement of everyone involved.

6. It’s a good idea to then put together and circulate a manual or handbook that sets out what will be done, by whom, when and who is responsible to check the work is done.

This process clarifies roles and responsibilities as they lead to the desired outcomes of the strategy. In the absence of this kind of detailed clarification, strategy execution won’t happen. Everyone will assume it’s the other person’s responsibility, and major problems will arise.

Business structure should reflect, and be driven primarily by, the nature of business strategy. Structure does make a difference to business performance. It does affect costs and other outcomes.

–Lawrence Hrebiniak