Management 101: Creating Structures

The basic principles of management are the same, regardless of the organization. I learned a lot of what I know serving in the East Berlin, Conn. Volunteer Fire Department.

by Jason Zigmont HowToSell.net [August 6, 1999]

There are many facets to business management. For our 101 course, we'll concentrate on management structures.

Centralized vs. distributed
Most small business owners, ISPs included, start off small, with just about everyone answering to them. If the business survives and grows, this usually means—at some point—a shift jump from total control to a more distributed management scheme. This change can be difficult to get used to from a control and productivity standpoint—difficult for everyone involved.

The person who previously exercised full control needs to understand that s/he is going to have to relinquish that control and can no longer have her/his fingers in everything. (This is key. I've seen some rather large companies whose CEO/president still wanted to okay everything.) Employees, on the other hand, need to realize that they may not be able to get a decision as quickly as they might have in the past.

Good management is based on stable reporting relationships. On a day-to-day basis there should be no reason for an employee to go to his boss's boss for answers.

The point of departmentalization is to increase productivity, not decrease it. But if they're designed incorrectly, management structures can quickly put up too many hurdles, and slow a company down. Managers need to be empowered to make decisions—within defined limits—without checking with the next in rank.

Keeping the chain intact
It's important to respect the chain of command (responsibility, reporting). In a three-level chain of command, with Employee, Manager, and Manager's Boss, you want to make sure that any work that tasks Manager's Boss wants Employee to do are actually assigned to Employee by Manager, not Manager's Boss. Manager is responsible for Employee's time, and unless s/he knows what Manager's Boss wants to have Employee do, Manager's time lines and requirements may clash with Manager's Boss's projects. (Sound confusing? Point is, employees shouldn't take orders directly from their boss's boss, and the boss's boss shouldn't delegate directly to the employee. All of this is in an ideal world of course.)

Not too big, not too small
When you set up distributed management structures, you need to think about span of control. It has been proven that in most cases, management works best with a smaller span of control. ("Span of control" is how many people report directly to a given manager.) At upper levels of management, the optimal number is five to seven. That doesn't mean that people can't manage more then that, but we're talking textbook theory here.

Functional organization
Companies need to be split into logical groups. It doesn't (in most cases) make sense for someone in IT to report to someone in sales. Logical groups in most ISPs would be: Tech, Sales/Marketing, and Customer Service. The larger you get, the more you have to break down the groups.

Of course, business functions never divide up perfectly. You will always have some cross over, and consequently, some leeway in organizing them into logical groups. For example, Technical Support could go under Tech or Customer Service. If the company is large enough, Tech Support would probably become a group on its own. In smaller companies they would probably go under Tech but close to Customer Service.

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