Profits are down, morale is low, and something just seems off—sound familiar? This could be a sign that your company’s functional structure needs to be examined. Switching official tax structures—from a sole proprietorship to a corporation or something similar—is essential for legal and tax reasons, yet rebuilding that internal foundation of your everyday workflow is just as important. Deciding which steps to take during a restructuring can be complex and delicate, yet how to know when you need to make an organizational shuffling is just as difficult. Here are a five signs to look for in your business that could indicate you should consider changing your company’s structure.
1. A partner has a changing—or disappearing—role.
Many small businesses are started when partners come together for a common purpose, each with a specific strength. But what happens when one partner’s expertise is no longer needed? “One of the most popular, but less talked about reasons [to change your company’s structure] is the changing roles of early partners. This is most common in tech startups, where one person brings the development skills and technical expertise and the other brings more of the executive or marketing side of the business,” says Ron Rule, CEO of Coracent, an e-commerce firm. “Down the road, after any necessary software has been developed and tested, often times, the original deal no longer makes sense as the developer's role is complete and the burden of running and managing the company is on the other partner,” he explains. Changing the organizational structure can impact the day-to-day operations, as well as the interest of outside investors. Perhaps that other partner moves on or takes on different leadership roles, such as in research and development. Though it may be a hard and emotional task to do, re-evaluating a partnership is essential, especially in the early days of a company.
2. Your growing team demands more and more of your time
TeliApp Corporation, a high-tech startup that builds new smartphone apps for mobile devices, went through a major expansion—a good sign of growth and success, yet the company’s organizational issues also grew. “Prior to expanding, the company consisted of me, a CTO, a graphic designer, and a handful of programmers, all answering to me,” says CEO Josh Weiss, “As business began to pick up, we had no choice but to bring on more people. We added a marketing department, a business development/sales department, more graphic design personnel, and a social networking internship program. [However] every decision was still coming to me—and my email was flooded hourly with questions from my employees.” Weiss had to make a change. He drew up a flow chart, designating department heads (based on job performance and experience) to take on more responsibilities and is searching for a COO. “I could no longer be the only ‘go-to’ guy. Establishing a hierarchy is essential for a clear distribution of responsibility and to avoid duplication of work and enhance efficiency,” says Weiss.
You’ve hired hard workers who are good, solid employees and share your passion and drive…but they just aren’t delivering. A situation like this could make a small business owner wonder what he or she is doing wrong. Justin Hong, COO and partner of Highly Relevant, a digital marketing agency, focused on figuring out why his rock-star team wasn’t delivering as they well as they could. “Some clients weren’t receiving all of the attention they required, while other clients were receiving more,” he says. “We needed to hone in on why that was occurring to be sure that all of our clients get what they need.” Hong worked with his team to figure out ways to shift reporting methods and redefine expectations—and how results are tracked. “[We discovered] our team didn’t know what their priorities were. We had to establish specific key performance indicators—or KPIs—for what the team should be doing. Once you set goals and KPIs, it is much clearer from an expectation standpoint. You can’t hold anyone accountable if you don’t have clear expectations,” says Hong.
Although some restructuring and evaluation of KPIs may result in letting employees go, Mitchell D. Weiss, adjunct professor of finance at the University of Hartford's Business School, warns small business owners against making that move too quickly. “Just because the person you have in a particular position isn't hacking it there, doesn't mean he or she wouldn't be able to become successful in another,” Weiss explains. “Take the time to separate the people from the tasks required of them before deciding who stays and who goes.”
4. You are changing everything else.
Success isn’t a guarantee. When the opposite happens and your company faces massive difficulties, this is an opportunity to rethink your structure, especially before tackling a new venture. Melonie Boone, CEO of Boone Management Group and founder of the former Complete Concepts Consulting, didn't just restructure her company, she totally started over. “The bottom dropped out [of Complete Concepts Consulting]. My business partner took a full-time job with little warning, client turnover hit the company hard, and unbudgeted legal fees for the partnership separation and refunds to clients for service failures took a toll on the business,” says Boone. “Complete Concepts Consulting no longer existed, and [I went] back to square one. I hunkered down to rebrand and relaunch the company as Boone Management Group, which has been thriving.” The main takeaway? “You can't ignore organization problems when they are staring you in the face. You have to be humble enough to want to change and nimble enough to do it," says Boone.
5. You are holding back your own growth.
For many entrepreneurs, you are your company. But what happens when you realize you are the problem with your organizational structure? “For me, the decision point came when I became the rate-limiting factor in my business,” says Tara R. Alemany, best-selling author, speaker and owner of Aleweb Social Marketing, “I went from being a solopreneur to outsourcing some work to a dependable business partner [and] adding a part-time virtual assistant.” Letting go of control can be tough for an owner to do, however.
“I reflected on what aspects of my business needed to be done—and which ones needed to be done by me,” explains Alemany. “Anything that didn't need to be done by me became fair game for delegation. I started first with those activities where my clients would see great results if I hired a professional to do them, rather than muddling through it myself.” The free time translated directly to Alemany’s bottom line in terms of increased billable hours. “The additional billable hours gave me the resources to hire an administrative assistant who handles scheduling, booking events and doing research for me. Once again, that frees me up to take on more projects. I've seen more growth in my company since I started following this approach than at any other time in its history,” says Alemany.