Small companies are awesome, usually started by just a man or woman, and a dream. However as the company become more successful the layers between the founders (if they haven’t sold yet) and the workers becomes more and more pronounced. Eventually the company becomes essentially unrecognizable to the original small startup, for better or for worse. Departments get created and the executives put qualified and talented people in the drivers seats of these departments. However after a while these people need more people, and those people have great ideas that need even more people in order to execute them. All of a sudden you have 40 people working in the Marketing department for a company that only has 200 employees. A company cannot really survive if they have too many bloated departments. In my example above marketing is an important part of the business, but too much G&A expenses creates unnecessary strain on the business and to be honest on the other departments as well.
So I guess that brings up the question “How can I make sure that my company doesn’t experience the dreaded “Bloated Department?”. Well there are a myriad of ways to make sure that this doesn’t happen to your business. The one great idea is to come up with a plan on how you want the business to scale. What I mean by that is draw a simple flow chart of who reports to whom. This will hopefully give you an idea of how things are ran. Next, have your department heads (or you if the company is small enough), go through a thought exercise. Ask them to fill out the same position flow chart, but this time have them fill it out as if the business has doubled overnight. Ask them what positions they will need to accommodate this newly expanded business.
Now one thing to keep in mind is that some departments will need to literally double in size, while some will only need minimal additions if any. This is the key of the exercise because to be honest, people want to do less work and the more they can push off on some new person the better. So, take the results with a grain of salt and make educated decisions that you and the department head can agree upon. Because after all everyone has to work together and somewhat like each other, in order to have a thriving company.
Also another exercise you can do is look to combine departments. Some large companies have a marketing and advertising department, but for your smaller company this might not make sense. Or maybe you have an accounting and a finance department that realistically do the exact same thing and you may want to combine them. Now this isn’t an open invitation to start laying off people, but perhaps you can start looking at the make up of your organization. Take a look at the structure of the company and start to formulate how you want the company to look in 5 – 10 years. Think of it as a Bonsai Tree, that requires careful planning and pruning in order to grow in the shape you want it to.
In conclusion, a company needs constant attention, that is a given. However so does the organizational structure, if it gets too bloated it will eat the company from the inside out. It’s great to give a bunch of people jobs and all, but be aware of department heads and people in management that want to add a bunch of people all of a sudden. The constant strain of making payroll may eat into your bottom line over time.
Disclaimer: This is not investment or financial advisory advice and I am not an financial advisory nor investment professional. Any investment decisions should be made with the help of an investment professional, with careful consideration and research.