• How-to

While wearing multiple hats is the forte of every entrepreneur, you need to allocate and organize your resources—both human and physical—to ensure your startup survives in the long run and can eventually be scaled up to reach newer markets and offer broader product ranges. Here’s how you can go about doing it.

Identify the core jobs and processes
Every venture sets out to achieve certain tasks. For these tasks to be accomplished, certain jobs need to be performed. For example, if you are running a lodging establishment, you need to welcome guests, maintain a logbook of rooms, clean and service the rooms, etc. These are various tasks to be accomplished. If you are running a software firm, your main tasks would be software development and sales. You need to identify the skill sets required to fulfill these tasks and assign the right people to the right task. Matching available resources to various job requirements creates job specializations and is the first step toward giving your startup an organization structure. The natural next step is to form departments around the core functions or tasks.

Establish patterns of authority and span of control
Pattern of authority determines the flow of authority within your organization. It clarifies reporting relationships so each worker knows exactly who he/she is responsible to. Delegation of control and authority is often difficult for entrepreneurs, who are used to being at the helm of decision making. However, a startup environment demands that innovation be fostered and authority be sanctioned to employees to take new initiatives. If such an environment is created, employees will more likely come up with newer and cost-effective ways of getting things done. A wider span of control (fewer supervisors with a larger reporting base) which eventually leads to a flat and decentralized organization is conducive to a startup environment.

Align the structure with strategy
If organization structure is the skeleton of the business, strategy is the soul that adds life to this skeleton. Here’s an example. If your growth strategy revolves around entering new geographical markets, your organization structure will also evolve in a similar manner. You will form new geographical units comprising functional sub units. On the other hand, if your growth is going to be fuelled by the launch of new products, your organization structure will involve more product teams. Communication among functional heads should also aim to put holistic organizational goals at the forefront.

Let leaders multitask
In a startup environment, resources are always scarce. Leadership needs within any business environment are both internal and external. As an entrepreneur, you should encourage your external/market segment leaders to also assume leadership of cross-cut internal functions like administration, HR, finance, etc. By doing this, your senior personnel can both stay in tune with changing customer needs in the world outside and operational challenges inside the organization.

Build a customer-focused organization
The organization structure you put in place should pass the ultimate test of being customer-centric. The primary reason your organization exists is to serve customer needs. In trying to build an internal structure that suits your convenience, don’t ignore the customer. Do what it takes to keep the customer smiling.

©Entrepreneur December 2010

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How-to, organization structure