MANAGEMENT 101: Structuring Your Business For Sustainable Growth

This is the second unusual article of the Management 101 series, in the first post we looked at how to organize your business for sustainable growth using 3 key managerial principles of culture, structure and execution.

I discussed the first managerial principle of culture in the first post, in case you missed it, you can read about it by here; MANAGEMENT 101: How To Organize Your Business For Sustainable Growth. In this unusual article, we’ll be discussing the second managerial principle; structure.

Structure: How To Systemize Your Business For Sustainable Growth

The word structure within the context of management is often generally associated with organizational design [organogram] only. While this is true, structure does involve organizational design but is not limited to it.

The word structure fundamentally means a system of parts; a way of linking different parts together into an integrated whole.

Structure refers to the preservation of culture. The arrangement, building or organization of different parts into a whole such that the core essence [DNA] of the organization will still be retained. It refers to the creation of systems and processes that are specifically designed to reflect the organization’s DNA; purpose, vision, mission, values and brand.

Structure doesn’t exist for itself; it exists for the benefit of preserving and reflecting the fundamental guiding principles of the organization.  The structure of a business is made up of culture [core ideologies] and other factors that shape how and why people do their jobs the way they do them. You cannot build a structure without a foundation.

Culture is the foundation on which structure is developed. If you can think of structure as everything in your business that directs, controls and influences the behaviour of your people, the flow of energy and activity, only then will you get the true picture.

Structure is the systemization of culture in order to achieve synergistic results.

This involves the creation of a systemic view of the entire business; a way of seeing the organization as a whole. Without a systemic view of the business, it’s impossible to direct, control and influence the flow of resources and activities, towards the fulfillment of set objectives. We will not know what is to be done where, why and how. If an organization is a social organism [living entity], it can only thrive and function based on a given system.

What’s A System?

A system is a combination of interrelated parts or components [inputs] that are brought together [process] for the purpose of achieving a particular objective [output]. A system in the most basic form is simply a way of doing things. The manner or technique through which a problem, goal, task or activity is being approached. There are four key elements in a system; inputs, processes, outputs and outcomes.

These four key elements form the basis of every system that exists or that is being developed.

The input refers to a set of interdependent variables that constitute the necessary ingredients needed for the development of a system.

The process refers to the set of activities, steps or task that must be undertaken in order to direct the interdependent variables [input] towards the creation of a particular thing [output].

The output is the actual thing or object that the system was developed to create.

The outcome is the original intent of the system developer. It refers to the predetermined goal, objective, purpose or end result that the output was meant to achieve. In systems development every part is necessary to ensure that the purpose for creating the system is achieved. Let’s now look at how to apply each of these four key components of a system in the creation of a working business model.

• Inputs:  

In creating a working business model, your first step is the identification of the necessary ingredients [inputs] required to make your business work. These are a list of all the necessary resources peculiar to your particular business without which your business cannot begin operations. The simple interpretation of inputs is this; “what does your business need in terms of people, materials, capital, facility, etc. [resources] in order to effectively and efficiently function in alignment with the organizational culture; purpose, vision, mission, values and brand?”

• Processes:

Inputs all by their self are still inputs. Processes are where inputs are put to creative use. Processes are what make inputs meaningful by creatively combining them together to create something which never existed before.  Processes represent the different core operational disciplines of a business; marketing, finance, HR, production, administration, etc. They are the traditional functional departments of a business organization.

Processes are what define the hierarchical flow of relationships and responsibilities [organizational chart/design] in a business enterprise. Each of these core operational disciplines requires the development of a sub-system within the overall system as they involve the execution of highly specialized and technical duties, activities and tasks which also need to be broken down.

Marketing for example, in order to carry out its core functions will require a system with its own inputs, processes, output and outcomes that are related to how the business intends to find, keep and grow potential customers. The marketing system will cater for functions such as; sales, market research, product/service development, customer relationship management, distribution channel, etc. The same thing applies to other functional areas of the business too; production, finance and the rest. In essence, each processes of the organization’s working business model constitute a sub-system of the entire system. This explains why an organization is often described as a system of systems.

• Outputs:

They constitute the actual products/services that were created through the interaction of inputs and processes. These are the goods the business sells or the service it renders to members of the public. The output serves as a form of feedback that allows for the evaluation of the entire system. Without the inclusion of outputs as one of the key elements of a system, all that happens within a working business model will be regarded as cost incurred and efforts expended.

Customers don’t buy costs or efforts; they pay for outputs that allow them to achieve specific outcomes. Until outputs are created, a business has no place in the market and therefore must return to the drawing board to modify her system. A system is only as good as the quality and quantity of outputs it can consistently create.

• Outcomes:

Goods/services created in the form of outputs have specific needs for which they were made. These are the needs or problems being solved in the lives of the people who buy these products/services. The contributions and impact of the organization as a result of the goods/services it provides to the society is what constitutes outcomes.

For example, the outcome for a Pharmaceutical company manufacturing Malaria drugs [output] will be the actual number of malaria patients cured as a result of using the drugs.  Outcomes, just like outputs, also serve as a form of feedback that allows for the evaluation of the entire business model. The outcomes achieved must be exactly the same as the one stated in the organizational DNA. If not, the entire system must be re-engineered.

If systems are the foundation of a working business model, what then are the key systems that must be in place and are necessary for the successful creation of a business model that works?

• PEOPLE SYSTEM: how do you get, develop, retain and maintain a constant supply of the human resource needed to create your products/services?

• DISTRIBUTION SYSTEM: where is the product/service being sold to the ultimate consumer? What middlemen are involved?

• SALES SYSTEM: how will the product/service be sold? Who is doing the selling for you and how will they be compensated?

• PRICING SYSTEM: how much will the product/service cost? What would wholesalers, retailers and consumers eventually pay for the product/service and how would you arrive at that price?

• PRODUCTION SYSTEM: how and where would you get what you need [raw materials] to create what you sell? How do you or would you make your product/service? What is your value chain? [the processes that a product/service goes through before it reaches the final consumer].

• MARKETING SYSTEM: how do you intend to find, attract and keep profitable customers for your product/service? How would customers know about the existence of your product/service? How will you survive when competitors arrive?

• GROWTH/EXPANSION SYSTEM: how do you intend to get bigger at what you do?

To be continued…

The next unusual article of this management 101 series will focus on the third managerial principle for sustainable business growth; Execution –the application of an organization as a tool. Make sure you don’t miss it; click here to subscribe to our email list to avoid missing out!

Your turn

Structure is all about systems; an organized way of doing things. Small businesses remain small primarily for lack of structure, so what structures have you put in place in your business to ensure its sustainable growth?  Are there any particular challenges holding you back from putting structures in place in your business?

Would really like to hear from you, share your thoughts and comments below, can’t wait to hear from you!