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Authors: Charles
L Stewart and David J. DePorter
Brio Consulting Partners, LLC
Here is a
situation we, as consultants, see all the time.
Business
owner, Mr. Smith, has all sorts of bookkeeping problems. He used
to do the bookkeeping when the business was small, but he got so
busy that he wanted his wife to take on the bookkeeper role on a
part-time basis. His wife wanted the business to succeed, so she
agreed to come on board. With no training in accounting or
bookkeeping, and because of children, she refuses to spend more
than 12 hours working. She enjoys working in the business and
fits her work schedule around the children’s schedule. She often
works less when the children are out of school. Mr. and Mrs.
Smith agree that Mrs. Smith should spend as much time with the
children as possible. Mr. Smith often hears other employees
grumble about her, “boss’ wife” mentality, but he just thinks the
employees are just jealous. Mrs. Smith is unhappy because she
feels Mr. Smith spends too much time at work doing everybody
else’s job.
The company
has grown to a two million dollar business and Mr. Smith is a
poster child for disorganization. Now, any consultant worth his
or her salt ought to identify two problems. One, Mr. Smith needs
help with business processes; and two, a trained bookkeeper is
needed to perform these processes for more than 12 hours per
week. Mr. Smith is aware of both sets of problems. He is also
excited to hear the business solution and ready to roll with it.
But, the owner takes a big gulp because he doesn’t want to deal
with the second issue.
According
the U.S Census Bureau, businesses with nine or fewer employees
accounted for 77.6% of all business firms in the United States in
2001. Small to mid-sized businesses are the foundation of
American business; and, if you look at who is working in these
companies, you will often find the ranks filled with the family
and friends of the owner(s) of the business. As management
consultants working within this business segment, we find that
there are two distinct sets of problems that frequently plague our
clients.
The first
set is those associated with business processes such as sales,
accounts receivable, accounts payable, cash flow, inventory
control, production and quality of service or product. These are
the issues that we typically hear about when we sit down with a
client.
The second
set of problems is more covert and insidious: family and friends
working in the business. There are a number of positive steps
that you, as a business owner, can take when bringing family and
friends into your business; however, this rarely happens because
the business owner is frequently too busy trying to run the
company. These problems transcend the normal employer/employee
problems found in business because owners often find themselves
thinking about the difficulty of dealing with the need to
discipline or terminate: a spouse, children, some other relative,
a friend, a spouse’s friend, a congregation member…and most
difficult of all, possibly even the owner him or herself.
While
virtually always unspoken, these are the some of the real issues
why a company retains our firm. There is always another agenda
besides the obvious. The quicker a business owner becomes aware
of this issue, the quicker one is able to respond to all the
issues impacting the business.
What’s the solution to the problems identified above?
Remember to
deal with issues and not emotions. This is the most important
rule you can learn in business; however, it is easier said than
done if the issues are not identified.
One step to
help you avoid the issues described previously is to create a
Functional Organization. A Functional Organization is one in
which each function that needs to performed within your company is
identified as a position, not as a person. Think about the
position as a bookkeeper, not about Bob, Jim, Mary, or Sue. What
are the necessary qualifications to think about when considering
the bookkeeper position? If your organization is built around
people and personalities with no clear lines of authority and
accountability, the structure of your company is not functional.
Every
company needs to have a Functional Organization. That goes for
all companies without regard to employment of family and friends.
History would indicate, however, that businesses employing family
and friends are quite prone to becoming a “personality-based
business.”
Additionally, many companies do not function well because they are
built around the knowledge, abilities and interests of one or two
individuals. Positions are molded to fit people who are already
in the company, or easily hired, rather than being defined by the
needs of the company. You probably bring in family or friends for
a variety of reasons, but quite often, the hire is not based upon
a person’s qualifications for a position. With families and
friends operating a business, lines of authority are ruled by
personalities, all of which cause a lack of consistency and
accountability.
Responsibilities for accomplishments, performance evaluations,
lines of authority, etc., change from day-today, and sometimes
hour-to-hour. It is impossible to exercise any consistent control
in this type of organization. When there is no control, there is
no accountability. The inconsistencies of a non-functional
structure cause poor morale, loss of motivation, and a decrease in
productivity and profitability. We have heard the following
statement frequently: “Well, the boss’ son/daughter doesn’t work
hard, comes and goes as he or she pleases and doesn’t get
reprimanded or fired, so why should I bother to work hard.”
Again, no company is immune from having a non-functional
structure; however, it is prevalent in family businesses.
Organizations should be structured by functions, and not by
individuals, be they family or not. Major company functions
should also be clearly defined in terms of requirements,
authority, duties, responsibilities, accountability, and methods
by which performance can be measured. Personnel should be
selected to fill positions based solely upon their ability to
perform the duties, to assume the responsibilities, and to be
accountable for those functions. If family or friends do not have
the qualifications, they should not be hired. If they are already
on board and cannot fulfill their obligations with training or
coaching in relatively quick order, they probably should be ”let
go.”
Your role as
owner in a Functional Organization is to make certain each
individual in your company is given the authority and
responsibility for a function and always held accountable for the
performance of that function. (Delegation does not mean
abdication on your part!) This promotes the development potential
for all employees, which is needed to provide the best services
and products to your customers.
Value is
created in an organization when there is an organizational
structure that creates a framework upon which the business depends
for its reliability (i.e., doing the same things the same way
every time) and efficiency. Structure, even in its simplest form,
provides the strength needed to accomplish functions and achieve
success. This statement is as true to businesses as it is to
buildings, bridges, bodies, or honeycombs. The structure of a
Functional Organization can reduce overload, stress, error and
other maladies facing small to mid-sized businesses. And, it will
increase your Fun Factor at work and at home significantly. |
