Building Your Organization - Adding Management Layers

By Tom Bixby, President & CEO, LEVEL Management Partners
Published May 20, 2016

In the previous article in this series, we examined the challenges in building your organization by focusing on attracting the best talent. In this article, we look at adding management layers to create organizational depth.

Key questions include:

  • What kind of organizational structure suits my company?
  • How much authority should I delegate?
  • How might we develop mutual trust?

There are many excellent reasons why you might want to delay adding management layers into your company. The most prominent is your need for control and worry that anyone between you and your team could lead to chaos. You may also be concerned about your company culture as you grow into a larger enterprise. Both are valid concerns.

Regardless, you must get past these concerns if you are committed to growth. Otherwise, you will quickly become your company’s bottleneck-in-chief. Your lack of courage could result in you and your corporate culture burning out as you try to handle far too much. Get comfortable with delegation, and if you struggle, seek out a coach or mentor to help you through it.

LEVEL Expert Network™ member Mark Clare is the Founder of the Human Capital Discovery Group, LLC, an Atlanta consulting firm with a focus on employee and team performance improvement.

Clare suggests, “Introducing a new management layer can truly help a company reach their strategic goals and growth targets. Those management and communication practices that focus on alignment between senior leadership and the front line manager and their teams will be critical to the overall execution of the plan.”

What kind of organizational structure suits my company?

If you are adding your first manager, a formal organizational structure is not required immediately; however, you should quickly define a structure that maps into your growth plans so your new manager and others will understand how the company will evolve.

Determining which structure best suits your company comes down to matching your company’s strategy to the organizational construct needed to execute your growth plan.

There is no one-size-fits-all structure, and most importantly, you must continue to review and evolve your organizational structure as your firm grows, making adjustments addressing the competitive landscape as well as return on investment.

Common Organizational Structures:

  • Functional Structure - CEO has direct control over all facets of the business.

  • Functional Structure - CEO has functional staff (i.e. HR, Legal, R&D, Sales, Operations) to manage their respective businesses and support the main core of the business. This is a more centralized approach in executing company strategies.

  • Divisional Structure - Firm is divided into separate business units with their own respective hierarchies (President / VP / Director, etc.) with each executing the strategic plan of the company. This decentralized approach facilitates value creation that can be realized through internal competition between divisions.

  • Matrix/Team Structure - This structure demands collaboration across the whole organization and is often used in highly innovative and competitive industries where the landscape is constantly changing due to product and technical innovation.

Organizational structures are designed to facilitate implementation of controls, daily governance, and delegating authority. Whichever structure you choose, success will be dependent upon effective leadership, communication at all levels, and execution.

How much authority should I delegate?

Avoid the trap of making people responsible for something without providing the authority needed to accomplish it. In such cases, operating efficiency is compromised and the subordinate will feel frustration and resentment. Yet, recognize that delegating authority permits the recipient to legally bind the company, potentially carrying an element of risk.

Whether the authority is financial (spending, pricing, etc.), legal (hiring, firing, contracting), communication (external or internal) or other forms, conveying that authority must be done formally with due care to maintain sound business controls. Never forget that delegating authority and responsibility to someone does not mean you are no longer accountable for any actions taken under that authority. You are still on the hook if they mess up!

How might we develop mutual trust?

Successfully delegating authority requires trust. You must trust your subordinate manager in making good decisions, observing company policy, understanding their authoritative boundaries and knowing when and how to seek your advice. Your manager must feel that trust from you, and know you won’t undermine their authority or send them packing when they make a mistake.

As Patrick Lencioni cites in the learning model, "The Five Behaviors of a Cohesive Team", enabling trust within your organization is easy in concept, but executing on establishing trust at its foundation is extremely hard. Leaders must be courageous and committed toward enabling trust.

Implementing trust-based learning models like The Five Behaviors of a Cohesive Team or applying Servant Leadership principles will help create a solid foundation of trust within your organization.

In the final article in this series, we focus on the important role internal communications plays in defining a growing company’s culture.

View Part 4 - Building Your Organization - Keeping Everyone on the Same Page
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