Does Your Company Structure Support Your Revenue?

Recently a colleague of mine on the Turnaround Advisory Board asked me what was the ideal revenue size that my consulting company chooses to work with: under $10 million, $10 million-$25 million, or $25 million-$100 million?

My answer was that it wasn’t a direct response tied to a revenue number, but rather a correlation between an organization’s internal structure and the scale of the business they service.

When an organization is in growth mode, one of the first challenges it faces is how to grow its labour pool and what sort of individuals and positions are required. Labour needs are not a curved demand arch, but rather stepped. So when a position requires approximately 30 hours of labour per week and we hire full-time, we have an excess of labour for the job function.  There is one position for 0.75 work load.

As growth continues, work load increases, and the fit between labour and efficient productivity narrows to become one position for 1.0 work load.  As expansion continues, however, the relationship between people and internal processes can become strained.

If this sample job function evolves into a 1 position/1.5 work load situation, then stresses, overtime costs, productivity, and other workplace problems emerge.

The time-cost to manage this position also increases, and errors may result in customer issues, lost invoicing, delays, and inaccuracies. Managers get pulled downward, which is initially acceptable as a byproduct of growth.

Until it isn’t.

Structure Supports Strategy

The answer to my colleague’s question was that any organization that has grown in scale past a structural checkpoint may develop problems.

When starting out, key staff wear many hats. Over morning coffee, sales, finance, operations, and management may all be represented, but the meeting may only have only two attendees.

As companies grow, individual departments expand, and the effective morning meeting may disappear. At risk is effective communication, alignment of goals, and, occasionally, significant underperformance.  When a single job’s work load no longer matches the process or labour, expenditures can be at a far larger scale within the department than necessary.

And these symptoms are systemic and critical to the company’s profitability and growth.

As an owner, ask yourself one question: Am I too busy working in my business to work on my business?

It is a key question that all owners and presidents face because it is so easy to get drawn into fixing the problems of growth and daily functions that there simply isn’t time to look months down the road. In these situations, the seeds for stalled growth and dysfunction are rooted.

A recent prospective client is a good example of this. This company recently had experienced sales declines of more than $10 million.

During due diligence it became apparent that the owner was a highly effective sales leader for the company, but she had not built an effective head office team to support and facilitate the sales growth she generated.

Her structure was not aligned to support her strategy or revenue. Each new sale further stressed the dysfunctional operations team. Her response was to pull herself out of the sales role and go build an effective head office.

Her strategy essentially was to remove her best sales generator and place herself in a job function with which she had absolutely no expertise. What results should we expect?

The better option would have been to hire a consultant that could build an effective operational team for her, one aligned to her sales pace and excellent at management of her accounts.

The first point of reflection is to look at yourself and your senior managers and ask how they are spending their time. Dr. Larry King, CEO of King Strategic Development, sums it up nicely as six key roles: coach, student, innovator, strategist, ambassador, and investor. Any activities outside of these roles should be delegated.

The second point of reflection is to recognize that to grow any successful business, several core skills are required. Building efficient, effective, and aligned sales, operations, field, finance, and senior management functions, coupled with targeted strategic planning, brand development, and competitive advantage development, requires a broad set of business skills that no one individual can be reasonably expected to hold.

It is to be expected that as your organization evolves and grows, you need to attract external professionals to help you constantly evolve the internal structures in support of your new and exciting strategies.  But limiting yourself to the team that got you there will never thrust you forward to get you there.

Andrew Wood is managing partner, Relevant Perspectives, andrewjwood@changeagent.ca.