Small Business Organizational Management

When we talk about organizational management we are talking about how the leadership is organized to allow the company to function effectively and efficiently. You have heard it before: "I'm the President of the company because this business was my idea." "I'm the vice-President because I was the President's best man at his wedding", etc, etc.

Believe it or not, many small businesses start out this way, but they find it difficult to grow successfully. Don't misunderstand, larger businesses also promote from within. It's called nepotism and I have seen it in many small businesses and it exists in corporate America as well.

Business leaders should base the structure of their organization on qualifications and functionality of the position as it relates to the business.

There are many ways to determine how a company should be organized, but we take a unique approach in creating an organization by analyzing the 'functional' aspect of running the business. It's like what computer programmers use when mapping the needs of a computer network.

Start out with a blank sheet of paper and determine a starting point, calling it "A". Place it at one end of the paper. Next, determine an ending point and call it "Z". Place "Z" at the other end of the paper. In business "A" equals raw materials, and "Z" equals taking the revenue collected for "A" to the bank.

In other words, 'what does it take to make money?' We are trying to complete the alphabet by determining the next letter that will get us to "Z" from "A".

Some businesses may not be large enough to get to "Z" and some businesses will require more functionality and require two or three alphabets. What we want to accomplish is a review of business functions that will generate cash and identify those functions in a path format.

Once we have determined the function, we can look at who we will need to facilitate that particular function, the amount of time in a day the function requires for resolution, and the functional value to our business.

When we have viewed a business this way, we may actually see redundancies and functions that need attention.

For example, let's say that for us to generate cash we need to get sales reps into the field. We know, though, that sales reps can be more productive if they are not cold calling. So, we might consider telemarketing.

We think about telemarketing from our offices, and we determine that by mapping the sales cycle, we need three telemarketers and each should produce a particular number of warm leads.

By mapping the sales function, we can determine the number of telephone calls required to generate one warm lead. Mapping functions also creates job descriptions and criteria for each position.

So, if we hire a telemarketer, we know that we want this person to make 100 telephone calls in eight hours, of those 100 telephone calls we want to generate 5 warm leads per day. Our sales reps will then be asked to close at least two warm leads a day.

We can take this information and determine other criteria for each employee and the business itself. Now we are looking at 500 telephone calls per week per telemarketer, which should produce 10 new sales a week. Multiply that number by the sales price, remove labor burden and other expenses, and you've got yourself a sales model. This is not, however, what you should be doing with your sales. It is just an example.

Your business is unique, and I'm trying to get you to think about the functions your business requires being successful.

By this example, we can also determine that maybe we need one sales manager, three telemarketers, and two sales representatives. The team will be effective based on the information provided to them by management through meetings and sales goals reports.

This team will also be effective based on the information the team provides to management, such as the competitive nature of the industry in the field, success stories, and customer needs.

I call this "pushback". Some larger businesses frown on this procedure but I believe it to be the best market research available.

We need to analyze each of those steps to determine what it takes, to produce the materials and sell the product. We should not look at our business and determine that we need another sales representative because our current sales representatives are generating enough sales revenues that we can simply afford another sales representative.

Instead, we need to analyze how the current sales representatives are going about their day, how effective they are, and how effective they could be if they had the right direction, goals, and objectives.

This takes us into analyzing the structure above the sales representatives and their managers. Here we analyze the same areas as we did the sales representatives. What are the direction, goals, and objectives? Should the direction, goals, and objectives be restructured?

When we look at sales, we must also review marketing efforts to see if marketing is ahead of sales in determining expectations or assumptions that marketing efforts should produce a particular result of sales.

If we analyze marketing we also must review operations and production as it may produce an inordinate amount of product based on marketing assumptions.

One of the most common errors I find in small businesses is that they tend to hire relatives instead of qualified people or experts to facilitate a specific function of the business. This really is not in the best interest of a growing business.

If you have hired relatives in the past, you may understand my concern. Large businesses do it, too, and it really doesn't help them, either. When we review our business from a functional perspective, we find it difficult to make changes when we have to let a brother-in-law go, for example.

But management decisions must be good for the business if the business is to last into the next generation.

Organizational management is a tricky aspect of business in that it must remain flexible enough to change whenever necessary.

Organizational management does not necessarily apply to the people in the company and what they do in the course of a day, but it does apply to how the different departments function around each other and within each other as a team.

Organizational management is the function of all these departments as a team where one department doesn't out do the other, for example, the production department producing too many finished goods, based on marketing's assumptions.

Failure to manage your departments' functions can get a business into financial trouble; you may have to decrease prices or spend money on rebates to sell the excess inventory. You may have to lay off employees if the revenue stream has been negatively affected.

Organizational management takes in to consideration the human resources of a business as well as the functional requirements of a business. It also incorporates aspects of sales and marketing and operations and production. If you can manage the operational portion of your business, the human resources portion should be easy.

But, remember, the operational portion of your business must be derived from a functional review of what it takes to go from A to Z.