OrgStructure_body.jpgby Erin O’Donnell.

Your business might be small, but the way you structure it is a big deal.

Organizational charts aren’t just for big companies. Defining the structure, roles, and processes in a small business can make it more efficient, clear up communication issues, empower employees to make decisions, and keep the team accountable.

That’s certainly been the case for Sara Sutton Fell. She started from her home in Boulder, Colorado, in 2007 to create a better resource for freelance and telecommuting jobs. Today, the company has 40 employees who work virtually, just like their clients do.

Yet, even with such an unconventional arrangement, Fell realized her growing business needed some basic structure. Today, FlexJobs is organized functionally. The company has a layer of directors in areas such as client services and job research, with employees like writers and researchers reporting to them. “As entrepreneurs, we’re always wearing most of the hats,” Fell says. “I needed to have other people help me with the hats, or take over the hats. When you’re used to having your hand in everything, it’s hard to delegate.”

Define roles

Creating structure allows business owners to institutionalize the things they take for granted and the expectations they may not have expressed, says Dr. Michael Woodward, an organizational psychologist who coaches entrepreneurs and executives. “You can’t just tell somebody ‘Your job is everything,’ because then it becomes nothing,” says Woodward, author of The YOU Plan: A 5-Step Guide to Taking Charge of Your Career in the New Economy.

Woodward says structure provides clarity, consistency, and certainty. Your employees trust you when your expectations are clear and you’re consistent with them. Uncertainty is a hallmark of small businesses, but “as the owner, it’s up to you to shoulder that and create certainty for your employees,” Woodward says.

Types of organizational structure

Most businesses organize in one of four main ways:

  • Bureaucratic: The classic org chart setup, with top-down authority and one or more layers of managers. Most large businesses are still structured this way because their hierarchy is very tall, flowing from the CEO, COO, and CFO.
  • Functional: Employees are grouped by their functions, such as production or marketing. This works for small companies that specialize in a single product or service. The functional units aren’t accountable to each other, only to the top authority.
  • Divisional: Teams are organized by product lines or markets. Each division is somewhat independent, and the company has flexibility to create new products or expand into new regions and markets.
  • Matrix: A blend of functional and divisional. Employees are grouped by roles and divisions in teams that work on a project basis.

The risk of no structure

Business coach Mandi Ellefson says organization flows from your mission and values. Make sure both are well defined and known to all. “It empowers your employees to make good decisions based on your value system,” Ellefson says.

The biggest mistake you can make is having no structure at all, Woodward warns. Your staff might be small, but is your customer base? What about your vendors? Organization makes things clear for your external audience, too. They’ll know who to contact in any situation, instead of getting passed around. Says Fell: “It can be very disconcerting when it looks like you have too many cooks in the kitchen.”

Business structure experts recommend that small business owners put functionality ahead of personality. “Don’t mold things around people too much,” Woodward advises. “People gravitate to what they like or what suits them. And then you have a lot of things fall through the cracks because nobody owns it.” Without a structure for accountability, all decisions have to funnel through the boss, and that causes efficiency to plummet.

A process for everything

The proper organization also helps to define the processes that run your business. That, in turn, can make you more efficient. When Paul Kortman started digital marketing firm ConnexSocial three years ago, he employed a handful of contractors, but was still heavily involved in the day-to-day operations.


After listening to a podcast about creating strategic operating documents and processes, he changed his whole approach. “It warmed me up to being strategic about my business and having processes in place to have people do these things for me,” he says.

With Ellefson’s help, Kortman began writing processes for everything, then delegating those tasks. Within six months, he had 40 processes, and a staff of eight people following them.

Ellefson says the role of the owner or president is to build the structure and then hire the right people.  “It’s not the owners’ job to do the processes, but to understand them, so they can create the structure,” she says. “Business owners need to get out of the mindset that they are going to be doing the work. That’s micromanaging.”

Coach or quarterback?

Woodward says business owners must also accept that they’re no longer the star players of their team; they’re the coaches.

“It’s rare you will find a great coach who was also a great player,” Woodward says. “There’s a reason for that. Star players get their glory out of scoring the goal, being the one to do what they have to do in a clutch situation. Coaches enjoy seeing people go out and do what they taught them.”

Leanne King faced that choice in the early stages of her human resources firm, SeeKing HR. Founded in 2007, the San Antonio-based company provides third-party HR to other small businesses.

“I had to figure out, did I want to be a business owner or an HR consultant?” King says. She chose to be the president and stick to the numbers side of the business. Then King hired a second-in-command who is strong where she is not, in roles such as networking.

Today, SeeKing HR has 15 employees in three divisions: HR program management, employee development, and employment service. As the company grew, King knew she had to honor the structure she had imposed, which meant she had to redefine herself to her oldest clients. “They still think of me as their rep, and I can’t be,” King says. “I can’t be the point of contact for every single employer, but I’ve been the constant.”

Structure can be flexible

Woodward says structure doesn’t have to be rigid, as long as it provides a reliable framework.

Tennis friends Jayne Drew and Kelly Daugherty started Smashing Golf and Tennis in 2009 because they couldn’t find athletic clothing with built-in shapewear. Both came from industries that organized around projects, so that’s how they structured their company.  But they had never mapped out their organization until they decided to seek funding. “Our lines were going everywhere. We realized we were doing a classic matrix management and we didn’t even know it,” Drew says.

Smashing has about 10 employees who come together in teams around projects, then reform to work on others. They report to whichever partner oversees the type of work they’re doing. Drew says they have learned to be very detailed about assignments. An employee juggling multiple projects, for example, will be told how many hours to spend on each.

“I’m sure a lot of small companies have figured out how to make it work with a more traditional structure,” Drew said. “We look for people who are more willing to work in this kind of environment.”