Establish An Organizational Structure First

  • Apr 2
Establish An Organizational Structure First

When you’re a small business with a staff of fewer than ten people, you are much more analogous to a conventional definition of a ‘Team’ than a company with a staff of over 100. Regarding the former, you know the person you can rely on when it comes to performing a specific task. In fact, it’s much like a sports team. With the latter, you have teams within organizations to form one big group. This adds to the complexity and a dire need for an HR department. However, while a properly outlined organizational structure may appear more important for large organizations, it’s just as important for startups.

Business Decision-Making

Now reflect on what the decision-making process may look like for a small business verses a large one. While on the surface they look entirely different, they share a universal similarity: a representative republic performs both.

A small business can make time to hear everyone’s input on how to proceed when facing a crossroads. This form of effective leadership promotes creative thinking. Because it gives everyone a voice and, in turn, improves and strengthens team dynamics. However, just like a sports team, one member retains 51% of the voting rights should you reach an impasse. That’s the coach, aka CEO/President. Since there is a disproportionate weighting with the votes, the team structure goes from a democracy to a representative republic. Listening to your employees and taking their ideas and concerns into the decision-making process represent employee needs. But sometimes you must make tough decisions that would never survive a democratic vote. Sadly enough, most startups with more than one founder have to learn this lesson the hard way.

Organizational Structure and Team Dynamics

Various people on a team representing a form of organizatoinal structure, sitting at a table an discussing a project

Multi-founder organizations thrive on the euphoria of all the greatness that is in their future thanks to the widget they’ve developed. Establishing a formal organizational structure, with defined voting rights, becomes a taboo topic due to the confrontation it stands to cause. Thus, the co-founders maintain equal voting rights which are all fine and dandy until they face their first deadlock.

For odd-numbered teams, the good news is at least a decision will happen since it cannot end in a tie. Unless one member abstains from voting (great help they are). The problem that arises from this is that the alliances forged through this process stand to disenfranchise the members who lost the vote, in turn creating animosity and hurting productivity. Also, keep in mind that it is only a matter of time before you encounter an impasse. As you can imagine, team dynamics get very toxic very fast.

For even-numbered teams, the demise is much quicker. The first stalemate that is encountered is the last because when a decision can’t be made a business can’t continue to operate. All it takes is one decision-making process to tear apart a team and deprive the world of what could have been.

Voting Rights

All that said, no matter how small your business is you should always act as if you’re a large one. That starts with formalizing a corporate structure, as difficult as that may be in the case of going into business with your best friend whom you’ve never disagreed. People change when money is involved which is why management must step in and give one person the final say.

Article written by Vaughn Pourchot

Last updated March 10, 2023