Every employee at a small- to mid-sized company should have tangible and measurable tasks that they alone are responsible for. Roles overseeing others’ tasks is not a viable enough responsibility, beyond three or four general managers.
As articulated under discussions about corporate strategy and strategic planning, the path to sustainable growth is through organizational efficiency – i.e. allocating investment optimally. To be absolutely clear, this is not a cost play. This is an investment trade-off. Every company, especially a smaller one, has to work with the constraints of cash on hand. Every dollar that is inefficiently spent is a dollar that is not driving sustainable growth. So, what does an efficient, streamlined organization look like?
Employee compensation is the biggest ongoing investment in most rapid-growth, small- and mid-sized companies (exceptions are companies in asset heavy industries). Every company is different; so, drawing an actual organizational chart isn’t meaningful. However, the conceptual diagram below illustrates how one should think about resource efficiency: focus exclusively on what each resource does. Although this illustration is simplified to only include employees, the same thought process is applicable to technology, equipment, or any other investment.
At a small- to mid-sized company, three or four highly visible roles such as Chief Executive Officer, Chief Financial Officer, Head of Revenue Generation, and / or Head of Products/Services will likely remain as general managers, because someone has to choreograph company-wide efforts.
However, every single other resource in the company should have a discernible accountability to perform either frontline, day-to-day tasks (sales, engineering, marketing content development, accounting, etc.) or actively work on time-bound, major initiatives to improve the maturity level and capabilities of the organization. In turn, this improves productivity of frontline resources. The approach to structure such an effective organization is strategic planning. Here, we will stay focused on the properties of this mindset.
Layers of managers, senior executives, or support roles that do not belong to any of the three boxes in the figure above are likely to be investment misallocations. This conceptual discussion is not meant to say that an organization shouldn’t hire other general roles (e.g. executive assistant); but that consideration should start with the following questions:
- What are the tangible operational processes or strategic initiatives that the role will perform?
- Are they top organizational priorities that aligns with strategic planning outcomes?
- Can short-term sourcing mitigate the need to acquire the resource in perpetuity?
Let’s get a bit deeper into the two major resource categories.
Frontline ‘Variable’ Resources
Essentially, these are the roles that perform all the day-to-day operational processes and are directly responsible for all measurable leading indicators. They are also the same roles that appear in a company’s process design. This group is meaningful because volume of work completed by these roles can be scaled up or down by adding or eliminating resources linearly. These roles include:
- all sales representatives that have revenue accountability (quota carrying)
- engineers or builders that create the product
- marketers with day-to-day commercial lead generation or content creation responsibilities
- owner of periodic financial reporting
Additionally, one supervisory layer, for core frontline groups with many similar resources, can also be considered a frontline ‘variable’ resource. This supervisory layer helps frontline resources meet the quantifiable goals for the group. However, there are two major risks to highlight here.
Risk 1: Too many supervisory layers
In a small- or mid-sized company, there should be no more than one supervisory layer between frontline resources and head of function (likely a general manager).
For example, one sales leader coordinating and supporting the selling efforts of several sales reps on a day-to-day basis, and shares accountability for the revenue targets of that group can be considered a valuable Frontline ‘Variable’ Resource. In an organization that has reached “insightful” Objective & Analytical Culture maturity level, this group can have a ratio of 8:1 sales reps to sales leaders. However, additional frontline supervisory layers between such a sales leader and Head of Revenue is an organizational inefficiency at such companies.
Small- to mid-sized companies aren’t powerhouses with the scale to hire and train inexperienced employees. So, such companies should hire experienced, self-starters in frontline roles, which means that multiple supervisory layers are unnecessary.
Risk 2: Resources with decreasing responsibilities aren’t reallocated
In an effort to ensure that every resource in a company is optimally deployed at all times, it is important to consider whether frontline tasks become easier over time. If this is the case, all or a portion of these resources should be reallocated. Hypothetical examples of such scenarios include:
- If a frontline resource executes on marketing lead generation or content generation, it is critical to assess whether the work is front-loaded, with minimal ongoing effort. If this is the case, these employees or related investment should be reallocated to other strategic initiatives or operational processes.
- As a company matures, the product suite should mature as well. It implies that roles that directly work with new or active customers should become more efficient over time. i.e. their tasks to help each customer become easier and thus each of those frontline resources should be accountable for more customers over time.
Overhead “Fixed” Resources
All resources that doesn’t fall under the general manager and frontline resources categories are organizational enablers who own and execute time-bound, enablement initiatives. These resources conduct research, develop forward-looking insights, create documentation, and socialize outcomes of these initiatives. Such initiatives are generally identified as part of strategic planning and improve organizational maturity by improving components of leadership approach and objective & analytical culture, or improve organizational productivity by fine-tuning corporate strategy and operational processes. These roles should be filled by highly motivated, self-starters with deep subject matter expertise. There are key risks among these roles as well.
Risk 1: Imitating other companies
Many organizations create such overhead roles looking at common job titles at similar companies, without tailoring the day-to-day skills and expertise required at the specific company to execute on its unique strategic initiatives.
Risk 2: Diminishing returns
Overhead ‘Fixed’ Resources work on strategic initiatives. An organization can only work on a certain number of strategic initiatives at a time, no matter how many resources are available. The reason is that many organizational problems can only be solved in a somewhat linear or triangulating manner. Too many overhead resources working on dependent initiatives in parallel usually result in misaligned solutions. So, companies should be very careful about adding overhead resources. Every single existing overhead resource should be vetted during strategic planning to ensure organizational momentum is not hurt by over-staffing, resulting in a ‘too-many-chefs’ problem.
In conclusion, deploying the components within the leadership approach, especially, the development of a Comparative Advantage Culture, results in a company that is capable of scaling up as an efficient organization with clear frontline or overhead responsibilities for every employee.