You have successfully set up your business and have started acquiring customers. Initially, as an entrepreneur, you would do everything – right from opening the business to closing for the day. Or if you are an online seller, from setting up shop at the marketplace to sending out orders – as they say, one leg kicks all.
As your business grows, you would find that some help, any help would be gratefully accepted. Some entrepreneurs would rely on family and friends to assist, but remember, people would only do so much, even if it is family. It would then dawn on you that you will need more people in the business – employees. People who could perform specific functions to smoothen the operations of your business for, a price.
Setting up people’s functions within a company is not only about paying people to work. It has many components to it which start from designing job roles (job description), staffing or recruitment, setting up salary and benefits structure, determining performance measurement and management, compliance to legalities, employee development, keeping employees engaged and at some point, off-boarding. Mind-boggling? Worry not. We will take this step by step.
Despite the list of people-related functions above, as an entrepreneur you will also need to complete other important variables as your company grows – organisation design, automation of processes and perhaps, adopting best practices like Six Sigma, and Kaizen 5s.
Some of the words may seem bombastic but the functions are the same. When you pay a salary that is compensation and benefits. If you need to tell an employee how to do something better, that is performance management. So, for now, do not worry about those terms.
The important thing is once your people challenges are managed well, other components would fall into place one by one. All entrepreneurs love to have smooth operations and it begins with the people who are boarded on.
When you start thinking about bringing people into the business that you have built, the first step would be to determine the design of your organisation – organisational design. Sounds big? It is just the act of determining who does what.
Believe me, at some point you would wish you had done this even before bringing the first person in to assist you. Designing your company organisation chart would mean determining the core business functions that you would focus on to ensure revenue flows. In other words, what does not bring in the cash, should not be the main focus.
Let me explain through a small example. You have started a small factory producing bottled sambal hijau (green sauce) which is in trend now. As the entrepreneur, you have determined the processes that would bring the raw ingredients (green chillies) to the final product – green sauce, which would be marketed around the locality that you are in as well as online. Now, apart from production and marketing staff, your factory would need a security guard, cleaner and delivery person, too.
If you set up an organisation chart with roles for security guard, cleaner and delivery person, you are including ancillary services – a security guard and cleaner, which do not contribute directly to the revenue. The delivery person would be part of the value chain as without the delivery function the products will not reach your customers. But the security and cleaning services can be outsourced which would allow your operations to focus on the core business of producing and selling the sambal hijau.
Outsourcing of an ancillary service function would also be merciful on your accounting books because that would become a fixed overhead where you need not worry about absenteeism, overtime payment and other employee management matters. As long as the company that had taken over the outsourcing for security guards sends a guard to man the guard post and keep your premises safe, you pay them. The same goes for the cleaning services. In fact, these days, there are many such services online where the quotes could be way cheaper than hiring directly. As an entrepreneur, it is up to your ingenuity to seek out those deals.
Traditional organisational designs were very function-oriented. You will probably see one pillar which focuses on the acquisition of raw materials – procurement, another pillar – production and then probably one which focuses on selling and delivery.
Other designs could be team based but this may apply to those businesses which operate based on projects like IT firms. Project A may have a specific team, Project B another team and the buckets go on.
Then we have the matrix organisations where people perform functions related to a few pillars. You can see this in businesses that have gone regional. One who reports to the Country Manager may also report to the Regional Finance Head.
If you are a small budding entrepreneur, you may want to keep your organisational design functional, for now.
There are other reasons, too, why a formal organisational chart is needed. Every business needs to have a hierarchy of command and reporting structure to ensure a sense of responsibility and accountability is upheld.
Should there be an issue with the procurement of materials, the issue should be escalated through the right functional channel before it reaches you, the business owner. Sometimes, employees could solve the issues at their own levels instead of bringing everything to your attention.
Given below is one sample of a functional organisation chart.
Let’s see a sample situation where problem-solving is done based on hierarchy:
The delivery person runs into an issue where the Purchase Order (PO) generated by the customer did not match the Delivery Order (DO) because the customer had increased his order right before the delivery vehicle left. Instead of producing a new PO, the customer amended the original one.
This problem can be solved by the Sales and Marketing Assistant and Finance Executive without referring to the business owner. A call by either one of them to the customer explaining the correct way of raising the PO would solve the issue.
The business owner should ideally focus on high-payoff tasks instead of solving issues that could have been avoided in the first place.
Great, now that you have decided how your business will function, you will need an organisational chart to formalise hierarchy and accountability. The formal hierarchy and accountability are documented through Job Design.
Job design means the act of determining the tasks that will be part of the work cut out for a specific role within a function.
Let us look at the job design of the delivery person mentioned above. The tasks that may fall under this role could be checking and loading packed cartons of sambal hijau, securing the cartons in the vehicle, fulfilling delivery according to daily delivery order (DO) documents, obtaining a signature from the customer upon delivery on the DO, returning the signed DO to the finance department and completing any other assigned tasks.
The outcome of the job design will be the Job Description document which would determine the levels of responsibility for each task. This is a document that will be shared with the employee for clarity on the performance of the role and the expectations of the management.
See how one document could address a few areas of people management.
Some of the people’s issues arise because expectations were not set and agreed upon from the beginning. Clarity on what is expected of the employee would enable more focus on the completion of tasks, which would add to productivity and allow revenue realisation on time.
Let us see the following example of a Job Description:
Sample Job Description for the Delivery personnel
Here are some pointers when writing the Job Description – full responsibility-related tasks should not exceed five. The reason is that employees have their own level of optimal performance. Burdening them beyond their ability to perform would reduce productivity, increase errors and may affect the bottom line of the company.
Partial responsibility tasks can be as many as the employee would accept, however ideally, not exceeding three.
Another tip to consider is the workflow process or work design. As much as a possible accumulation of low payoff tasks in a Job Description should be avoided. Low-payoff tasks are generally routine in nature and do not add value to the overall work process. Sometimes, these could be avoided using a small amount of automation or change in the work process.
So, ideally, full responsibility should be used for tasks that have a direct impact or could somewhat affect the bottom line of the company.
The next question would be who writes the Job Description (JD). Generally, JDs are written by the department head or the business owner himself. Some businesses allow employees to write their own JDs.
Any of the above approaches are acceptable, but it must be ensured that the JDs are uniform to enable other functions like performance management or recruitment to be implemented smoothly.
With the organisational chart and job description in place, the next important component should be the salary structure. A sassier term would be compensation but as an entrepreneur, start by setting up a salary structure. This would be covered in the next part.