One of the most often neglected steps in building a business is designing the organization and identifying the key management roles in a company.
It seems to make no sense: you start a business by yourself or in a small group: why would you need to “design an organization” you know what you do; just get to work.
“Getting to work” is fine if you want to work 20 hours a day, not have weekends off and skip holidays. If, however, you’d rather build a business machine, well, you must define the management roles.
Here is why: a machine (an organization) relies on different parts (people, systems) working together to achieve an objective.
From the smallest cog to the largest flux capacitor, you must define each piece’s (person, system) function and how the pieces interact. Without definition, you end up with many shiny pieces that could work well together but don’t. So they end up doing their own thing without achieving anything.
Most businesses are many pieces working hard to figure out how to make their piece of the business work. They are missing how to work together to make the whole machine work.
If you are starting, you may look at this and see a bunch of roles that you can’t relate to and wonder what this has to do with your business. It is all a part of building a business machine. Even if you are alone, you have to think from each perspective.
When you look at your product with just a marketing hat on, you only consider attracting and engaging customers. So the next step is to put on the operations hat (take the operations perspective) to figure out how to deliver the product.
And that is why we design the organization.Download the Workbook
This matters even if you are one-person or small group – so, hats.
There are probably more functions/positions in your organization than you have people to execute and fill them. In truth, this is almost always the situation, no matter how many people you hire, which is why we have the concept of hats.
Defining terms: what are a function, a hat, and a position
Your organization is comprised of functions. Each function exists to achieve an outcome that is important for meeting the objective of your business. Think of that function as a hat; whoever wears the hat does the work of that function.
One person can wear multiple hats. But you can divide hats into many positions.
If you are one person, you wear all the hats; if you are a small team, each member wears multiple hats. One critical MSP ownership function is to allocate hats to other people or organizations. You can wear them all initially, but as the organization grows, this becomes overwhelming.
MSP owners get stuck in the spin cycle by holding on to all of the hats; if you can’t let go and assign hats, then you will never escape the spin cycle.
As you continue to grow, eventually, you will realize that you need multiple people to do the work of a role, so more than one person will wear a hat. Think of sales: you may need 10 people wearing a sales hat. So each hat can have multiple positions.
- A function = a hat
- One person can wear many hats.
- A hat can be divided into many positions.
- Only one person occupies a position.
So we define the hats
To define your organization, determine the hats and create your organization chart.
A note on hierarchy: yes, I know we don’t want to be bureaucratic and tied down with red tape. But hierarchy, even a logical (as in only exists in your mind) hierarchy, matters.
Without hierarchy, nobody knows who makes the final decision. So you end up relying on people figuring it out as they go along, jostling for position, and taking the initiative. This is an incredible waste of time; it is like having a black hole in the middle of your company that sucks all the time, energy, and interest out of your business. And it is the source of most small business politics, which is like a second black hole.
If you only have a logical hierarchy, it matters because of perspective. For example, which hat should decide on product improvements: operations? Or marketing? Hierarchy helps.
So, avoid resource-sucking black holes: define a hierarchy even if you don’t like titles and don’t like hierarchy.
Here is how we define the key roles in a small business
Step 1: What is your strategic objective
You must know what you want to achieve or what you are building. Your business should focus on one objective, define it and get clear on it.
Step 2: What are your avatars and programs/products
Your avatars are the customers you serve, and your programs are how you serve them. This is the work you do. The fewer avatars and programs you have, the better; many multi-million dollar companies were built around one avatar and one product.
Step 3: What is the work that you need to complete?
List the functions that your program/product requires.
Step 4: Define your organizational hat chart
Start with the standard hats and adjust as you need for your program:
Hats in parentheses are hats that you may not need to start but may need later when you are growing or managing your business.
Our standard Hat Chart gives you a framework for understanding the management roles in a company
Chief Executive Officer (CEO)
The CEO is the visionary and leader. The CEO function ties all other roles together and makes final decisions. In the start and grow phases of the business, you will need a jack-of-all-trades kind of a CEO who can fix things, figure out what is wrong, and make the business work.
As the business grows, the CEO function shifts to a very forward-looking externally focused one – this requires a different set of skills than starting a company.
An important CEO task is assigning hats to others.
If you are starting your own business, you wear the CEO hat and many other hats for now, but you will assign these as you grow.
The CEO wears the Strategic Analyst, Chief of Staff, and Investor Relations hats until the business grows large enough to require this support.
Leads the strategic planning process, and conducts a strategic analysis of the company and the market.
The analyst CAN report to the CFO, but CFO by nature, tends to be more focused on control rather than creative expansion. So we like having the strategic planner function report to the CEO. The CFO is a rational check on the CEO’s strategic planning ideas.
(Chief of Staff)
The Chief of Staff is an extension of the CEO; it manages staff and works on a day-to-day basis to manage the company. Early in a company’s development, the CEO does this work, but as the company grows, the CEO needs to be in many places at once; that is where the Chief of Staff comes in.
Reports to the CEO and builds relationships with investors. If you are raising money, the investor relations hat is essential. Keeping your investors happy and informed is critical to further financing rounds and ensuring your investors’ continued support.
The CEO takes on this role at first.
Chief Operations Officer (COO)
Primarily responsible for the delivery part of the business, all logistical, process and delivery tasks fall under the COO.
Delivery (Production) Manager
The Deliver or Production Manager manages the delivery of the service or production of the product. (These are the same things, but people use different language to describe a service versus a physical process).
As your organization grows, you may divide your delivery into multiple sections or discrete organizations. They will all have a leader who reports to the production manager.
Customer Success Manager / Service Manager
We’ve put the customer success manager under operations, but it could also fit under marketing. We see it as an operational role because the customer success manager focuses on how your business processes support customers. The customer success manager ensures that your customers have the best possible experience and experience the transformation promised by the CMO.
Ensures that you have the right technology to operate and scale your business. This hat often helps innovate and think differently about how to operate.
In some organizations, especially technology-heavy or focused companies, the technology manager could be a higher-level role, so a CTO.
In non-technology-focused companies, this role often falls under the CFO. We think that is a mistake. Technology is not a cost to be managed; it is the backbone of your operations, so we think it belongs in the operating function. (Though, yes, you do need to keep an eye on technology costs.)
Chief Financial Officer
The CFO manages the money and analytics. Often the CFO plays the role of controller and keeping business spending in check, but the role of a good CFO is much broader than that. The CFO role:
- Models the business and creates budgets.
- Helps manage trade-offs: you can’t spend on everything, so the CFO frames the choices.
- Supports decision-making through the company, not just with financial knowledge but general analytic capability.
- Manages financing and finds money for the company.
Often CFOs are seen as accountants, and that is a mistake. Accountants are narrowly trained, and valuable, but narrow. With experience and training, an accountant can develop CFO skills, but the CEO role must be larger than accounting.
Small businesses often outsource this role to others, which can work well. If you outsource, make sure the entire CFO role is taken care of, not just accounting.
Accounts Receivable Manager
Manage invoicing and collection. Not managing receivables, the money you are due, is a colossal mistake for startup companies.
Accounts Payable Manager
Manage the money you owe and bills you must pay. Balancing receivables and payables is a critical financial function. You don’t want to pay your bills a lot faster than you receive your income because then you run out of money. But, on the other hand, you also don’t want not to pay your vendors because you rely on them and want to keep them happy.
Accounting and Reporting Manager
Responsible for accounting and financial reporting. Reporting is essential: accounting is useless if you do not receive insightful reports that help you run your business.
Chief Marketing Officer
Marketing is the function of getting your product out to the market. This encompasses everything from design to sales. Your CMO must take ownership of the products, the avatars, and the entire process of solving their problems.
The CMO decides things like:
- What markets to go after.
- What features the product should have.
- What price you should charge.
The CMO is also responsible for selling the product. This hat owns the process by which strangers become aware of the product, become customers, and then raving fans.
There is a natural tension between marketing, operations, and finance. Marketing always wants more features and new solutions. Operations wants to standardize and reduce variability; finance needs to pay for everything. Even if you are a small team, you want some tension. It will help you find the right balance between features, standard delivery, and making money.
The CMO owns the brand and image of the company in the eyes of customers and key stakeholders.
Responsible for the selling part of the process – from conversations with interested prospects to signing contracts.
Leads Generation Manager
Responsible for awareness, content, turning strangers into leads, and managing the process to do so.
This hat oversees “inbound” digital marketing and “outbound” cold outreach.
This hat should find ways to automate and streamline the marketing and sales process to reduce the required manual sales.
This hat ensures that the product and avatar fit. This hat is responsible for adjusting product-based messaging and ensuring that expectations fit reality. In addition, the product manager suggests changes to the product: new features, innovations, and changes to make the product more valuable.
If you have a community, you will need community management. This is someone who engages with your community, keeps them happy, and keeps them engaged.
Technology-based companies will want to raise technology management to the level of CTO. In tech startups or technology-heavy companies, the CTO is responsible for the following:
- Development of new applications and solutions. They often have an entire development team working for them.
- Technology innovation.
- Implementation of new technology.
The CTO is different from operations in that operations focuses on executing existing solutions while the CTO develops new solutions. (The CTO can, however, develop these solutions for operations.)
Chief HR Officer
Human Resources is responsible for the people aspect of the business, hiring, developing, and firing people.
There is also a lot of technical compliance under HR:
- how to structure pay packages,
- payroll reporting,
- deciding company rules and regulations.
And so on.
Often smaller companies can reduce their need for a complete HR function by relying on a Paid Employer Organization. This allows them to outsource all of the compliance work.
However, as long as you hire people to work in your organization, you will need HR thinking.
Often the HR manager reports to the CFO. This can work fine as long as the CFO recognizes that your people are a resource, not a cost to be managed.
Now, design your organization
Use these hats as a starting point. Those in parentheses you may not need, but the others you do need. One way or the other, you require each of these perspectives.
You may require more hats: depending on your product, you may need hats that we haven’t considered here, so build those into your organization as well.