‘Business Structure’​ vs ‘Organisation Structure’​, knowing how to make the connection and use it to your advantage.

Business is always driven from the top, whether it is a success or a failure, the person with the highest responsibility is ultimately in control. Having a clear and defined management structure that ‘drives responsibility’ and ‘defines task ownership’ through proper delegation is the principle behind good management.

However, this can be daunting, it can be one of the most complex obstacles for any growing business to get right. It is NOT a ‘1 Answer Ticks all Boxes’ solution, and often, if this isn’t completed correctly, it has a precarious nature which can cause unnecessary trouble in the future.

The business structure is what will enable the business to (1) make decisions, it can (2) affect the manner in which a business is taxed, (3) how it is insured, (4) whether it has contractors, or (5) decides upon implementing an advisory board etc. etc.

Additionally, the business structure may affect how investment or divestment is undertaken, and in times of struggle and hardship, how the business is empowered to overcome difficult situations.

A well defined Business Structure that owners want to know about will identify:

• Ownership
• Chain of Command (Organization Structure)
• Assets
• License Agreements
• Lending Agreements
• Intellectual Property
• Managed Liabilities
• Financial Arrangements
• Security Arrangements (Bonds, Retention, Guarantees etc.)
• Any Personal Guarantees

Personally, as a 20 year old start-up business person, I learnt this ALL the hard way…. when I started in business, I began my own sole trader organisation; when after 14 years I had reach a workforce of over 300 people, I can look back and see I had worked through a horrendous ‘end to end’ assault of learning things the hard way. I learnt that you hardly ever get things right the first time, but if you are fortunate enough to learn from somebody else’s mistakes, then that opportunity should be taken with “2 hands”!

When time requires it, you will know that changes need to be made; the stupidist thing that people often do is they wait too long. Start early.

In the following points I have simply addressed the 3 most connected organisation issues….

• Organisation Ownership,
• Organisation Structure, and
• Organisation Leadership.

Organisation Ownership

How is the business owned? Is it a company, partnership, trust, limited by shares etc.

Is that ownership complimenting the ongoing concern of the business? Assets protected, tax efficient, beneficial to owners, business viability etc. are all issues that need to be identified.

Is the business controlled, and how does that control benefit the ownership structure? What happens if the businesses management make decisions that could harm the ongoing concern.

Ownership is the complete realm of ‘Business Control’ and managing affairs in a prudent and efficient manner in order to minimize any company risk and personal risk.

• Ownership must attain to the commercial framework of a legislatively compliant business undertaking and ensuring the corporate responsibilities are adhered to in strict compliance.
• Every Decision is made to Benefit the Best Interests of the Business, but Without Taking any Purpose of Defeating any Creditors Interests.

It is essential that the priority points listed above are identified and managed so that a clear and concise understanding of the overall business ownership structure can be addressed.

NOTE: Where there are better options for business investors and owners, those options should be addressed in a structured business remodeling strategy. That strategy is required to ensure business owners are not adversely affected by poor business ownership structures and/or are ultimately protected in the event that any damaging event put the business viability in jeopardy.

Organisation Structure

The “Organisation Structure” is the formal document which is created to convey the regular ‘Chain of Command’ throughout the regular business operations. Commonly referred to as the ‘Org Chart’, because it resembles a diagrammatic representation of how the business is managed, it helps people that work in the business understand who they report to and how the flow of business is managed in a diagrammatic form.

The Org Chart also enables people with particular tasks to efficiently coordinate with the correct person without taking time away from other positions that otherwise don’t require being affected.

In business, everything is “driven from the top down” through the applicable Organization Structure. In principle, combing the Org Chart with well defined Position Descriptions will ensure clarity, responsibility and define task ownership. These are regular business tools.

The purpose of implementing business tools are for enabling management to make decisions and put in place responsibilities for those decisions to be completed.

It’s not a difficult task until such time that ‘single people wear multiple hats’; that means, that one person may be assigned multiple roles. In that circumstance, identify the separate task (for example accounts payable and payroll) and list the person in the each assigned role.

Everything is driven from the top – if the business is going well, go straight to the top. If the business is going backward, go straight to the top.

I will now talk about Organisation Leadership… without great leadership, the organisation will feel distressed.

Organisation Leadership

It takes a strong leader to grow a business, there are always going to be highs and lows, times of reflection and times of challenge. When the Organization has a Structure, it makes the flow of information, the communication of business affairs and the regular business operations much easier.

Nobody ever starts a job to fail; employees and contractors like to know who they have to communicate with, having a clear set of rules and being able to achieve what is within their responsibility.

Where a clear and concise organization structure has been established, it can help middle management direct projects, coordinate business activities in order to meet their deadline requirements and redirect other personnel to the appropriate person in order to improve business efficiency.

The Business needs proper leadership, driven from the top, otherwise the effort to implement a ‘fit for purpose’ organisation “Business Structure” will fail.

 

Written by Geoff Pike, Entrepreneur, Speaker & Business Mentor

LinkedIn: https://www.linkedin.com/in/geoff-pike-australia

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ABOUT GEOFF

Geoff founded a sole trader plumbing business in a remotely located and vastly underpopulated location in outback Australia. Starting business with only enough money to pay 4 weeks wages, Geoff persisted by growing the business into a multi-disciplined trade services company. Over a period of 12 years, the company Geoff established grew to employ a workforce of over 300 personnel covering an area almost half the size of Europe, receiving international award recognition with an annual revenue of over $30mil. Geoff knows what it takes to overcome adversity.