Businesses just grow organically – there’s no need for structure, surely…

In my last article I wrote about the trap of over-engineering your organisation as it grows, in the mistaken assumption that people and systems designed for third generation (3G) organisations will automatically be right for your larger 2G organisation. Equally however, some business leaders fall into the trap of under-engineering their organisations.

Very often these are business leaders who worked for many years for 3G organisations, then left to start up their own small business. They became fed up with the limitations of corporate life, from being tied to office hours and team expectations, to irritating bureaucracy and what seems like endless form-filling and reports. “When I have my own business” they vow, “we won’t have rigid systems and limiting structures. Everybody will be treated as an adult and allowed to deliver their work in their own way, as they think fit.”

The start-up bit

So, they start up their own business and for a while it goes swimmingly. Everybody is excited to be in at the beginning of this new venture, so there are no problems with motivation. Communication isn’t a problem either – everybody sits in the same room anyway and can hear what everybody else is doing. The business starts to grow, and shortly there are more people involved, who weren’t in at the very beginning. The company has moved to larger premises, too, which has given people more space.

But subtly, the atmosphere has shifted. The business owner puts this down to no longer being in an open plan office – in fact, he even starts to plan to move everybody back into a bigger open-plan space. He has also realised that the team at the very beginning all knew each other – so he thinks, “maybe we need some social events to break the ice.” He organises for everybody to go bowling and for a meal together, but though they all seem to enjoy this, the communication problems at work don’t get any better. People start making mistakes, finger pointing, and blaming each other.

Resisting the next step

The owner calls in some advice, and the consultant tells him that the organisation has turned a corner. It’s no longer a first-generation (1G) organisation which can be managed by having huddles with the team, and by overhearing what’s going on over the desk in the office. It’s bigger now and there are many more lines of communication in the organisation. Even if they did put all 20 or 30 or 40 people in one room, the old informal way of communicating would no longer work. So, the consultant suggests putting in some simple management structures:

  • clear roles and accountabilities which dovetail neatly together, leaving no gaps and no overlaps;
  • teams of people with clear reporting lines to one designated team leader;
  • a meeting structure, including both team meetings and one-to-one meetings between people and their team leaders;
  • and a performance management process to make sure people know exactly what they are paid to deliver and are supported to achieve it.

And the business leader turns round and says, “I didn’t leave corporate life to tie myself down with management structures and bureaucracy,” and resists everything the consultant is suggesting they do!

What’s gone wrong?

People, especially owner-managers of smaller businesses, tend to think of organisations as falling into one of only two boxes – small, vibrant, fun (albeit chaotic!) start-ups (1G), and big, well-resourced, structured (even bureaucratic) big businesses (3G). What they don’t always realise is that there is another category in between (2G), which in our view, when well-run, combines the best of both worlds.

You get all the advantages of small businesses – fun, dynamic, flexible, friendly – with the best of the big guys – structured, streamlined, responsive. These are the 2G organisations.

However, to have them work well, it helps if you accept the need to streamline and systematise the way the organisation works, at least in a small way. Too often, business owners hold onto the first-generation cosy, ‘family’, home-grown style of running the organisation for a bit too long. Nobody is trying to turn your baby business into a bureaucratic monolith, but everything will work better if you accept a certain amount of straightforward and simple structuring of your working practices.

This is what distinguishes the 2G from the 1G business: simple, elegant structures and processes will allow your organisation to grow, let you make the best possible job of serving your customers, and provide a nurturing and inspiring environment for you and your staff.

Kate Mercer has recently been writing about how your organisation changes as it grows, from an energetic toddler stage (first generation, or 1G), to the moody teenager stage (second generation, 2G), before it reaches (if it ever does) the relative calm and maturity of the adult stage (third generation, 3G). It’s a way of looking at your organisation that is unfamiliar to most business leaders, especially professional services experts who are hugely trained and experienced in their professional skill, but generally not experienced or trained as managers. It’s why keeping tabs on everything often seems to get harder over time as your organisation grows. Perhaps the answer is to make some simple changes to your management style? Kate has written articles on the most common mistakes people make in running 2G organisations, and how to start to change your thinking. This is the seventh in the series – read the first ‘Do you assume the organisation is ‘yours’ and running it is all down to you?‘ and second ‘SME with big business aspirations? Don’t put the cart before the horse‘.