By: Don Shaughnessy
If you expect to sell your business one day, the shape of your ORG chart will matter. The wrong shape is not salable at all.
In classic organizational theory an organization chart shows how different functional positions relate to one another and how they communicate. It is a simple way to describe how decision making, responsibility, and authority is allocated.
Many are hierarchical. Think of the Catholic Church or the army. It is like a pyramid. As you go up, there is more authority and responsibility. The decisions become strategic. Lower levels are responsible for methods of implementing the strategy and the doing of day-to-day deeds.
Sometimes an entity, (more likely part of it) can have a matrix form. In these, skilled people report to their pool manager but also to others who are in charge of a particular project. Software engineers frequently work in this form
Lastly, there is the flat organization, where all the people are closely involved in decision making. It works when the communication network allows it, but this form tends to go away as the entity grows. It becomes too difficult to see the overall picture from every position within the organization.
Many family-owned businesses have another structure. If you draw it out, it looks like a garden rake instead of a triangle.
In your business, does only one person:
• Know the goals of the business?
• Know most of the important information?
• Make most of the decisions, (important or otherwise)?
• Provide leadership?
• Control customer, employee and supplier relationships?
• Provide financing or guarantee support for loans?
If yes, that person is like the handle of the rake.
Notice that removing the handle will have the same effect on the business as it would have on the rake. Make it useless or at best ridiculously inefficient. You cannot sell that.
If you want to be able to leave some day, build middle management and insure your life and health against the possibility that the handle could fall out prematurely.
Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. firstname.lastname@example.org
By: Don Shaughnessy