Chepng'eno began her career with a small NGO engaged in economic development. The NGO, founded jointly in East Africa and the United States, commenced with only four employees.
The four often skipped paychecks as the organisation struggled to find its footing. They made the choices together as a group for every decision that faced the nascent team.
Everything from buying pens and other supplies to which organisations to partner alongside, the four members decided jointly.
As Kenya stands as a global hotbed of entrepreneurship, thousands of us reading the Business Daily can recall the thrill and excitement of launching a new business venture.
But in a new business, decisions are made by the whole small team that launched the new entity. Eventually, though, an organisation needs to divide the labour to enhance organisational effectiveness as the work grows and becomes complex.
How many of you desire to restructure your entity and boost efficiency? Start by deciding on the following four elements.
First, determine the span of control. The span of control assumes that coordination of activities must come through direct supervision.
Many of us throughout our MBAs constantly heard the term “flat structure” over and over again. So, we might internally respond in a Pavlovian reaction to automatically pursue a flat structure.
However, you must weigh the pros and cons of such a move. How much control should each manager hold? How many employees should report to the next level up? How many staff should each manager oversee?
If you desire a flat structure with fewer managers, then you must have more staff reporting to each manager. Retaining too many employees per manager may overwhelm the efficiency of each manager and department.
A wide span of control only makes sense in departments whereby all the employees’ tasks are similar, the tasks are routine, and other coordination methods, such as rotating team leaders, get implemented.
Second, what type of centralisation do you desire? Should all decisions come from the CEO or from headquarters, or, ideally, do you intend to empower those throughout the organisation to make their own decisions based on an approval matrix?
As you decide on centralisation, realise that most organisations tend to highly centralise following an organisational crisis or senior executives desire more control, increase in consistency or reductions in costs.
Forces advocate decentralisation when the firm exists as large, complex, and diverse, and senior executives desire empowerment and fast decisions.
Third, form your staff into departments. Unless you work in a start-up venture or start-up NGO, your organisation already maintains departments.
Should the departments get reorganised? Do the departments function efficiently? Forming into departments establishes work teams and supervision structures, creates common resources, measures common performance, and encourages informal communication among employees and sub-units.
Fourth, decide the degree of formalisation that you desire. Determine the standardisation of policies, procedures, formal instructions, clear goals, clear outputs, types and frequency of training, and direct supervisory authority.
While formalising your firm takes a lot of upfront work, it prevents years of firefighting without a plan and reinventing the wheel at every turn.
Now, on the flip side, do not take the route common in most large international NGOs in Kenya and over-formalise combined with over-centralisation.
Such a latter situation stifles creativity and efficiency. So, strike a balance among the above four organisational structure elements.
Once you determine the above elements, you must determine the structure of the entity’s hierarchy. You may opt for four choices: functional, divisional, matrix, or team-based.
Most of us in the for-profit arena operate with a functional organization chart. A functional system organises employees around skills (accounting, human resources) or resources controlled (such as sales, marketing, treasury, etc.). Inasmuch, a Chief Accountant reports to a Chief Financial Officer, who then reports to the CEO.
Then the Director of Marketing, Chief Operating Officer, and so on all report to the CEO based on their skill.
Alternatively, a company may align its hierarchy according to divisions. A divisional organisation structure places employees into departments based on geographic areas, clients, or products.
The firm could have the Executive Vice President for Africa, and then under him or her would report different country heads and skill-based positions, such as human resources, marketing, and finance.
Also, the company could form around different products, such as a Divisional Vice President for Technology Solutions, a Divisional Vice President for Agriculture Solutions and so on.
Each division would contain its own skilled-based positions without having to rely on centralised human resources and finance departments, for example.
Next, a firm might warrant a matrix structure. Employees temporarily work on a specific project team, such as new product development, while still maintaining their permanent function in finance, for example.
In a matrix environment, the employees report to two different bosses simultaneously.
Many international NGOs that operate in Kenya operate in a permanent matrix structure whereby employees might always report to two, three, and even four different bosses at the same time.
A Program Director might report to a Country Director, a Board of Advisors, a Regional Technical Advisor for the specific program type, and a Donor Rep all at once.
When different bosses give different orders, the employee suffers. Sound familiar to anyone in our Kenyan NGO community? The ambiguity often causes undue stress and low morale.
Since NGOs do not serve a profit motive, inefficiencies often exist for decades just as long as donors fund the inefficiency.
Finally, the best type of organisational structure revolves around self-directed work teams. Teams form themselves or get assigned based on work processes.
Google famously works with self-directed teams. Teams make decisions on their own workload, goals, and processes. A divisional structure often enables the team model to blossom and take over.
The team model enables a flat span of control since the firm requires fewer managers and very little formalisation.
Companies that require intricately detailed work often succeed best with a team-based organisation structure.
In summary, investigate which works best for your new company or a change in an established entity. Know the benefits and downfalls of each model.
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