20 Dec Why Having and Following Organization Structure is Essential

Why Having and Following Organization Structure is Essential

Don’t get surprised to know that, out of total industrial units in India, 90% are SMEs, with the whooping employment they are generating of around 100 million, which clearly indicates their contribution to the Indian economy.

In our engineering & consulting divisions, we come across many SMEs and yes some large organizations also, as customers. Specifically in consulting we have a few customers, whom we are guiding for business transformation. Through this experience and my past 27 years of experience, where we use to deal with the SME sector as a customer, one problem I have observed that

• “Organization structure” either does not exist, or
• it exists but it’s not followed or it’s not working.

When I try to discuss with the owners/senior management, they either do not believe or do not know the benefits of having a structured organization, let it be of 20-30 employees or 100—200 employees.

The negative impact of this is

• Owners or Senior managers are overloaded, so not able to work for development or the future.
• Owners or senior managers become constrained and most of the things get delayed at their end.
• High attrition rate and attracting talent is a big challenge for them.
• Middle or junior level team is always confused and demotivated and they always look for opportunities in MNCs or large organizations

We can completely understand the challenges of the SME sector, where cost pressures are huge, as comparative competition is enormous, but this same sector has issues on manpower retention, attracting talent, unclear working environment. To curb all these issues, the most important step is to establish a structured organization.

Many of the entrepreneurs feel that establishing a structured organization will lead to working in Silos and then they lose flexibility, which is essential in the SME sector. But, this is quite the wrong impression. Having a structured organization is nothing but to have an SOP for “Quality management”, “Write what we do and do what we write”.

One can have multiple responsibilities, and those can be defined in the organization structure. For example, a “Commercial officer”, can handle, admin, purchase,  finance, and can have MULTIPLE responsibilities clearly defined/delegated, but cannot have INFINITE  responsibilities undefined.

You can start with the Flat organization structure, where you can finish the structure in min 1 or max 3 levels, and as the business grows, the levels can be increased, the matrix can be implemented.

Another problem we see is, though the structure is defined, it’s not followed, either by senior management or by owners themselves. I interact with many mid/junior employees, who leave such organizations because, they do not know who is their boss and every SO-CALLED boss, expects them to perform in a different way (this is the scenario even in large businesses ).

So once we define the structure, it is essential that there has to be clarity, of who is whose Manager and this needs to be followed, especially when it comes to giving instructions.

One more problem, we see generally, that structure is in place, team members know their responsibility, but they are not EMPOWERED  to make decisions. We should not forget that, RESPONSIBILITY comes with the AUTHORITY, somebody TRUSTED US and gave AUTHORITY and that’s why we could GROW, we need to follow the same for our TEAM.

Author: Dr.Sagar Kulkarni

PS: This Article is written based on his real-life experiences while leading various organizations and now while consulting for SME sector