December 4, 2022

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Creating the ideal organisational structure for your business

No matter if you run a small business or a big multinational conglomerate, most organisations use horizontal and vertical connectors to create a structure that they believe will meet their needs.

The organisational structure of a business determines how it runs on a daily basis and, in reality, affects its culture, values, and success. In addition to defining how an organisation should function, a structure may help increase productivity.

A good structure can significantly help in managing the processes as businesses grow in size. At the very least, your organisational structure must reflect certain values. The question is which structure will best meet your business needs.

This week’s edition of Let’s Talk focuses on the most effective organisational structures every business should consider.

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Michelle T Holland, Executive Director, SynergyIQ

Michelle T Holland
Michelle T Holland, Executive Director, SynergyIQ

“Unfortunately, there isn’t a magic wand when it comes to structure. A structure is used for a couple of things – one, to provide a simple and effective way of ‘managing’ outcomes and people’s needs, and two, a way of supporting the operations of the business.

“In a pinch and in a bind- in the short term– don’t make sweeping changes, instead create a structure that helps you to deliver what you need to get the work done in the short term, while being mindful of your culture.

“For example, if a team is without a key person or leader, placing them in the care of a competent and compassionate people leader is better for your culture than placing them in a caretaking position with a ‘technical’ expert without leadership capability. Your people can get their job done without a technical manager, but your culture will be impacted if they don’t have a manager or leader that cares about them.

“In the longer term, I would suggest that a strategic review is conducted on what work outcomes are needed into the long term, what client/customer demands are predicated, how the operational model of the business works at its best, and determine the type of culture you want to have– once these decisions are made, the workforce structural design is made to suit these outcomes.”

Madhuri Nandi, IT Security Manager, Till Payments

Madhuri Nandi
Madhuri Nandi, IT Security Manager, Till Payments

“We are all very familiar and have some experience with a variety of organisational structures. With COVID, the calculations for how organisations should adopt hybrid teams and keep the delivery pipelines working smoothly should alter. Most of the project planning takes place between functional teams, whereas reporting teams is where quick decisions could be made.

“Given these factors together, it is ideal for the organisations to adjust their organisational structures that support teams to create functional groups using MATRIX organisational structures. Where they can maintain thick reporting lines with standard groups while establishing a matrix reporting lines to the extended teams.

“In this structure, the organisations can get benefited of both high deliveries, promote hybrid working environments for the employees and build successful teams.

“Employees would not be empowered to experience the freedom of hybrid working while being supported by traditional organisational structures like Hierarchical, Flat, Functional, Product-based, Geographic, and many others. In a Matrix organisational structure, employees at all levels can deliver and succeed together.”

Shiva Pillay, General Manager and Senior Vice President Asia & Japan, Veeam Software

Shiva Pillay
Shiva Pillay, General Manager and Senior Vice President Asia & Japan, Veeam Software

“I believe that organisational structures follow a common sense model, meaning you right-size the structure for the stage of your business. Start-ups, for example, often work best in a flat hierarchy as they need to be flexible across roles and quick to adapt to new changes.

“This is also where new leaders develop a management style that will eventually influence and shape how the company is run. As that business grows, scale becomes critical for sustainable growth, this often requires bringing in experienced leaders who can balance a start-up mentality with a sustainable future plan and processes.

“For established and more traditional businesses, the organisational structure can vary and often includes a top-down reporting line, where management and senior leadership are expected to make critical decisions.

“Long-term or short, what I find most important is that transparency should always be the core of the business and implanted no matter the structure. At Veeam, we value the opinions of our employees and place a heavy emphasis on open and effective communication. Employees gain the most trust when they are supported and heard – creating mutual understanding goes a long way.”

Rolf Howard, Managing Partner, Owen Hodge Lawyers

Rolf-Howard
Rolf Howard, Managing Partner, Owen Hodge Lawyers

“Beyond a sole trader structure, there are three business structure options. A company is a legal entity in its own right. Most small companies are established as Proprietary Limited companies, where ownership (proprietary) of the company is limited to 50 non-employee shareholders. A partnership is a structure whereby two or more people co-own and operate the business, and income and losses are shared. A trust is a structure whereby trustees (people or companies) are responsible for the business assets and beneficiaries.

“When deciding on a business structure, the business size, revenue and industry will all play a role. Liability should be a consideration. A company will have limited liability which provides a layer of protection between directors and third parties.

“However in the case of trusts and partnerships, generally trustees and partners will have some level of liability. When it comes to tax minimisation, trusts are generally more beneficial than companies or partnerships. Trusts also afford other protections in the case of bankruptcy or divorce.

“Ultimately the best structure is one that has been chosen with your specific business circumstances in mind. Talk to your lawyer to identify the best option for your business.”

Mark Gardiner
Mark Gardiner, Special Counsel, Aspect Legal

“Options for operating a business include operating as a sole trader,  a partnership, as a company or through a trust structure. As a Commercial Lawyer, I would generally recommend that a company structure is best for both short term and long term operations – despite some higher set-up and administrative costs.

“A company is a legal entity that is separate from an individual, unlike a sole trader or a partnership. The assets and liabilities owned by the company are completely separate to company directors and shareholders.”

“As a shareholder of a company, a person is not liable (in their capacity as a shareholder) for the company’s debts. Business operations are controlled by the company directors and owned by the shareholders.

“In the longer term, there’s the benefit of being able to add shareholders – enabling business growth via further capital contributions as each new shareholder comes on board.”

“Bonus points to those who consider owning the shares of an operating company through a discretionary trust structure which can provide even greater asset protection benefits.”

Suzette Bailey, CEO and coFounder, reKnow

Suzette Bailey
Suzette Bailey, CEO and coFounder, reKnow

“There is no easy answer when it comes to the best organisational structure for a business as it should depend on the company’s goals, values and culture and external requirements.

“It is important to clearly understanding the business’s goals and how the organisational structure helps to achieve them. If the goal is rapid growth, a flatter structure allows faster decision making and realisation of opportunities. If the goal is a high quality and consistency levels, more hierarchical structures may help ensure standards are maintained.

“It’s also important to consider company culture when choosing organisational structure. If very informal, a flat structure may be more suitable. Alternatively, if the culture is very formal, due to regulatory or market requirements, a hierarchical structure may be more appropriate.

“Ultimately, the best organisational structure for a company will be the one that best aligns with the company’s goals, values and culture at the time. Organisations should be prepared to review and adjust their structure to meet their goals and external requirements, rather than force an existing structure to meet changed goals or set goals based on structure.”

Dominic Woolrych, Co-Founder and CEO, Lawpath

Dominic Woolrych
Dominic Woolrych, Co-Founder and CEO, Lawpath

“In Australia, it is most common to start a new business as a sole trader (ABN), however, it’s important to know that under this structure you are personally liable for the debts and obligations of the business.

“It is therefore crucial that you transition to a company structure (usually a Pty Ltd) once the business is up and running. We usually recommend to transition to this structure when the business takes on risk or starts generating consistent revenue.”

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