Essentials of Organizational Structure: A Beginner's Guide for New Managers

There are a lot of things to consider when designing your organization. While a large firm may have folks in HR assigned to help you with organizational design, only some SMBs will have that support. There are several ways to think about the structure of your organization.

How is Your organization funded?

Are different teams funded via other clients? Some organizations (specifically contracting firms) must keep a detailed accounting of the time specific people spend on their projects. Typically, this relates to how the company bills. Keep all people billing to the same contract/client on the same team in those cases. Why?

1. It's easier to see spending for that client. For example, it's a clear explanation for billing if Team A supports Client A.

2. It also makes it easier to limit the blast damage if that client goes away. If Team A supports Client A, and Client A leaves, then Team A either needs to find a new Client B or the team will need to disband.

Span of Control

A span of control is how many people report to a given manager. For example, if you have four direct reports, you have a span of four. If you have four managers, each with four reports, you have 20 (16 people plus the four managers). As your span increases, you must start thinking about managers, leaders, purpose, cohorts, training, retention, and succession.

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Managers

One way to set up an organization is to specify a manager for every N person. It depends on the type of work and the firm, but there's usually a rough rule for manager spans (or the number of direct reports). For example, if you work in a unit with 100 people, and every manager should handle 10-20 people, you'd expect to have given to ten managers in the business unit. You may have less if some managers can take a large team, or you may hire if the managers can't span as much. You may have fewer managers in an org if you're dealing with:

• a large number of contractors
• You're lacking in internal leadership but don't have funding to hire externally

You may have more managers in an org if:

• you're expecting attrition in the management ranks
• You're expecting to expand the org and will need more managers to scale
• your teams require more supervision and a lower manager-to-IC ratio.

This can put you in a bind as a manager, especially as you try to grow leadership on your team. You may need more manager roles in the firm, so despite training new leaders, you need a place to help them do the job and get promoted. Huge spans also communicate that it's hard to grow into leadership at your firm, which means those people you want to advance (the people who can look into the future and determine what to do) are the ones who leave the firm first.

Purpose

Align your organizations by purpose and mission. For example, the purpose of this group is to increase our market share in the western sales region. That lets each team in this unit understand their override purpose, and they can form plans to achieve the unit's purpose. In this example, we could create four groups and assign each of them a mission:

1. Team A - your mission is to increase our inbound sales.
2. Team B - your mission is to create more content focused on the western sales region.
3. Team C - your mission is to capture more leads from outbound sales.
4. Team D - your mission is to attend every conference and networking event in our region.

You can create metrics to determine the success of each of those teams and then use those metrics to continually adjust to see if your unit is achieving the overall purpose.

Your business unit's purpose drives your thinking about team hierarchy because you'll use those teams to achieve your purpose. Be prepared to alter your teams to account for new data. You want to have a dynamic organization that can pivot based on data. You don't want a static organization that runs the same old, tired plans despite what customers tell you about the market.

Leaders

As you develop your organizational plan, you'll need to account for the leadership needs of the unit. You need to take into account:

• Purpose
• Span (described in a bit)
• Management
• Leadership

This book covers management in detail, so you're looking for folks who can learn from it and run this as a playbook for managing teams.

Leadership is an entirely different skill; managers often confuse the two. Leadership can convince or influence people to move in a direction to accomplish a goal. You may or may not have the authority to order these folks to follow your advice. Still, the best leaders can inspire people to want to follow their direction.

You're looking for a manager who is a leader or can become a leader with additional coaching and experience. What are you looking for to identify these folks?

• Overcoming adversity, especially in their personal life.
• Grit
• A unique perspective that can inspire people - this could be surviving an adventure, the ability

Cohorts

You need more than one leader or even one leader per team. You need to have a pipeline of leaders. Arrange each of these groups into a cohort so that you can talk to a group of people going through similar things with similar experiences.

Use the cohorts you have in the pipeline to set up a leadership development program so that you can promote someone from the cohort when you suffer from attrition. Weigh advancing someone from the cohort with the opportunity to recruit externally.

Attrition and Retention

You will have people leave the firm (attrition), and you'll have to deal with the loss when they do. You'll lose their expertise and knowledge, possibly losing time on your delivery and causing a higher delivery risk.

You need to plan for dealing with attrition, especially for high-impact positions. You may only plan a little because you're running a lean team.

Succession Planning

If someone leaves, is promoted, transfers, etc., who will replace them? Do you have a plan to promote someone already with the firm? Or do you have to hunt for an external candidate? Working through this type of decision-making is called succession planning. It's prevalent for managers to gloss over succession planning because they're not worried about what happens to the firm if they leave. It's an "if I leave, I don't care what happens" situation, and you need to encourage managers to think broader about succession planning. You may utilize these plans if you get promoted, if the firm snowballs, if you need a new lead in another part of the firm, etc. The "I'm leaving the firm" case is only one of many stages involving succession planning.

You need to consider it because the firm will spend training resources to ensure that person is ready to take over. It's much the same reason that so many people lack wills when they die. These folks think there's no future to worry about if they're not at the firm. Or they don't care about what happens to the firm if they're not part of it at some point. Both situations are easy to understand, but the firm shouldn't tolerate them.