Is the “Structure – System – Staff” and the Role of the Chief Entrepreneurial Officer (Business owner) all aligned for optimal delivery?

Structure of an organization allows defining of who does what. Most small businesses operate with little or no structure, and roles and responsibilities overlap. When there are only few balls bouncing, all the balls may be handled well. But when the business grows, and there are too many balls to handle, the play becomes inefficient and more time is spent picking up the fallen balls than keeping all the balls bouncing. Having a well defined structure allows for role clarity and definition of competency needed for each role. This allows for division of labor and co-operative functioning within an organization, resulting in operational efficiencies.

Systems within an organization define how the work should get done for the best possible outcomes. Most work flow in a small enterprise is intuitive - therefore not very organized - resulting in suboptimal performance. When the business is small this will do but as the business grows, the operational complexity grows too. The enterprise needs business process organization and the systems and processes have to be put in place.

Staffing becomes critical to keep pace with the growth of business. Issues like staff adequacy, competency and compensation need to be addressed strategically and professionally and cannot be done in an emergent manner.

Role of the business owner (Chief Entrepreneurial Office) changes over the life of the business. During the early stages, there is very little middle management and the business owner plays many roles and does most of the thinking, managing and doing. As the business grows it is impossible to continue doing this. Business owners need to let go and must allow others employees to take over many things they are used to doing.  Most business owners fail to do this and come in the way of their organization’s success. They become the bottleneck that prevents the business from making the transformation from being small to becoming big.

The role of the CEO, organizational structure, presence of standardized processes within a reliable system and competent staff that has well defined roles and is high on energy; create a potent interplay that enables an enterprise to gather the right momentum to make the transformation from being small to becoming big, by breaking through the phantom ceiling effect to create a scalable enterprise. Such a scalable enterprise travels on the autobahn to unlimited growth. Growth now happens because you have created a system that allows growth to happen, and the CEO is not a bottleneck but the engine for growth.

The next blog will address how the organizational structure of small business can be amended to facilitate its growth.

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To get the full picture please see the following links –

The Phantom Ceiling Effect

How do you recognize the phantom ceiling effect?

Breaking through the Phantom Ceiling

Review your Revenue Model

  

Review your Revenue Model

Are some products/service or customer groups keeping you too busy for your good?

It is important to have a very serious look at the revenue stream. Most enterprises never have a product-wise P&L, therefore do not realize that they may, in fact, be using up too much of organizational time, effort and money on a product or a service that is not as profitable as they thought it to be or that some customer segments that use their products or service may be too resource intensive to be serviced profitably at the current pricing levels. Most entrepreneurs consider maintaining a product-wise P & L as too much effort and this action may be making their company look busy and hardworking, consequently delivering products that they must not be focusing on. Sometimes an unprofitable product is retained on the list because it was the product that the company began with or because the business owner has invested a lot of emotional energy in taking it to the market. Being emotional doesn’t work well for the business. This aspect is valid even in case of a single product business.
It is important to  separate the expenses that can be allocated to the product and the overhead costs of managing a business enterprise. Managing the cost of the product and managing costs of the enterprise should be looked at separately, although all revenue is generated from a single product. The efficiencies/inefficiencies may come either from how the cost of the product is managed or how the cost of running the enterprise is managed, or both.

It is easier to have a P&L for a product than for a service. Costing the time spent on a service is not easy; this makes it harder to determine whether we are individually profitable in each of the services the enterprise delivers and how some fastidious customer segments may keep us very busy for relatively low returns.

The next blog will take a look at the interplay of the “Structure – System – Staff” and the Role of the Chief Entrepreneurial Officer (Biz owner) and the need to align them for optimal delivery.

Photo Courtesy: Stefano Vallei, FreeDigitalPhotos.net      

To get the full picture please see the following links –

The Phantom Ceiling Effect

How do you recognize the phantom ceiling effect?

Breaking through the Phantom Ceiling