Congratulations! Your agency has gotten through the tough stage of expanding beyond the owner(s) and first employees. There’s finally a team of people who can accomplish some pretty amazing things together, and you’ve got a steady client roster. Give yourself a big pat on the back because a lot of hard work has been done to get to where you are now.
But where are you now exactly? For many at this stage, it may seem like you spend the majority of your week just as busy as you were before. The people on your team come to you for answers to tough questions, leaving you little time to work on the actual business. Even more time-consuming, as the team has grown, you’re now meeting with many (if not all) team members to check in, help them problem-solve any issues that arise, and grow them in their roles.
Here’s where defining an organizational structure can help. Don’t know what it is or how to define one? Keep reading!
What is an organizational structure?
Simply put, it’s the way an agency is organized in terms of team members’ roles, responsibilities, and relationships to each other. It also serves as a structure to determine how work flows through the organization in order to meet the agency’s goals.
There are a variety of types of organizational structures depending on what works best for your business. The most common for agencies are:
Flat - Everyone is on the same level. There is little to no reporting structure for the team other than to the owner/CEO. This is likely where most agencies start and when they hit the 5-12 headcount range, they find there needs to be some middle layer of management and move to traditional or matrix.
Traditional - Employees are grouped into departments based on their areas of expertise (i.e. Design, Marketing, Strategy). The employees then report up to the head of the department.
Matrix - Employees are again grouped into departments based on their areas of expertise, however they report to more than one person. In the agency world, this is most commonly a department manager and a separate project manager. The department manager is responsible for each team member’s growth as an employee, and a project manager keeps them on track for project-related work.
Pod - This structure has teams organized by skills needed to complete projects together instead of departments (i.e. project manager, designer, developer, copywriter, marketing, etc). You can think of each pod as a mini agency within the agency that can get a project done from start to finish. Sometimes pods are grouped into the type of projects they’re responsible for working on. This is best suited for larger agencies since more team members are required in order to scale.
Why do you need an organizational structure?
When the team was 1-4 people, you may have found that everyone did a bit of everything. It wasn’t uncommon for your project manager to also handle business operation responsibilities or your designer to handle marketing. When you scale to the 5-12 full time employee range, your team members will still be expected to pitch in when needed, however they have the opportunity to start specializing a bit more. This creates an opportunity for employees to grow in their trade as well as grow into more of a leadership role like a manager.
The purpose of creating an organizational structure is to create boundaries around what each person or department is responsible for while also taking into account how work flows through the organization. The result of creating boundaries is the ability to start delegating some of the work to others on the team instead of handling it all yourself. This also helps to ensure that everyone knows who to ask when a question or issue arises, instead of coming to you each time.
Doing so will create less confusion for the team, bring clarity to how work flows through the agency, as well as serve as a tool to scale the agency.
Steps to create an organizational structure
Now that you know what an organizational structure is and why you need one, here’s how to implement one.
1. Gather Current Job Descriptions
Gather or create a job description (or JD) for each person on the team. These should list all responsibilities each person is handling. If there are people wearing multiple hats, it’s best to bucket the responsibilities into different “roles” (i.e. design responsibilities, project management responsibilities, etc.). This will help you when analyzing if you need to hire additional team members as the roles will already be parsed out.
2. Create a Current Organization Chart
Use your favorite flowchart design tool (ex: Miro or Whimsical) to create a visual indicating where each person sits within the agency and who they report to.
What I’ve found to be helpful is to then include a couple brief bullet points highlighting each person’s high level responsibilities. This helps with visibility around responsibilities without having to open up each job description.
Here’s an example of what that would look like.
3. Audit Major Workflows
Go through the workflows of running the business such as hiring, onboarding, supporting employees’ growth, supporting the operations of the business, executing client work, marketing, etc. Do an audit of all responsibilities and make sure each is accounted for. This can be a significant amount of work but is hugely important for scaling your business.
Have a responsibility that isn’t accounted for? Make sure you delegate that to someone and add it to their JD or you can put that responsibility on the backburner for a future hire/role.
4. Have a Goal Structure in Mind
Start thinking about which structure resonates with you the most so you can start aiming toward that. As a company of 5, you may not have enough team members to create a layer of management but you may at 7 or 8. If you set the stage now, it will be easier to scale in the future.
For teams with 5-12 employees I recommend traditional or matrix. This allows a layer of management so that owners can then focus on more valuable areas of the business, and qualified team members can move into manager/leadership roles.
Some questions to ask yourself during this exercise are:
What do I want to be doing in my role each day?
How large do I want to grow the agency?
How many service offerings do I want to offer?
Do we have any unique qualities that may impact our decision such as being fully remote or having multiple locations?
What’s the end goal of my agency?
5. Build a North Star Org Chart
Start constructing goal org charts for 1 year down the road and 2 years down the road. This will serve as a north star of where you’re heading, understand what roles you’ll need, and whether you intend to grow folks internally or hire externally.
Some important considerations to take in mind:
As agencies start to grow beyond 5 full time employees, I recommend that you start to delegate some of the management responsibilities over to another senior person on the team. Employees all want to feel like they’re growing in their craft so making an investment in a manager who’s not just checking in on projects is crucial as you scale.
Lastly, this may seem like a no-brainer but make sure your financial goals are aligned with your new team member goals. You may need to take into account a drop in billable hours as certain employees take on new non-billable responsibilities.
6. Communicate Changes Back To The Team
You may have found that your north star org charts require people to take on additional responsibilities or to even hire additional team members. This is the perfect point in the process to chat with your team members and make refinements to job descriptions and roles. Before you do this, make sure you’ve strategized ways to address employees’ thoughts and concerns during these changes. While change may be what’s best for the agency as a whole, it can also be scary. I’ve found that when I always address the “why,” people have an easier time accepting changes.
Tips on How to Create an Organization Chart
As I mentioned earlier, it’s best to use a design tool such as Miro or Whimsical to build a visual organization chart so you can have it to reference and also share with team members. Here’s my quick rundown of what I like to do when building an org chart.
Pick a consistent flow chart shape to represent each employee on the diagram.
List each person’s name and their title on the shape.
Have the owner and any leadership at the top of the page, and anyone reporting into them underneath.
You can represent manager relationships by using a line to connect to reports.
If there are leadership who regularly collaborate together, you can connect these employees with lines as well.
Have a very high level description of each person’s role listed in a separate section underneath their flow chart shape.
If you have people grouped by department, color code each department differently as a way to to distinguish between departments.
Include future team members into the chart as well by indicating the person’s title and “To Hire” (example, “To Hire: Operations Manager”).
You probably didn’t start your business dreaming of the day you could craft an organizational structure. But now that you’re here, it’s worth celebrating! The work you invest in creating an organizational structure today will pay dividends in the years to come and establish the foundation of the rest of your growth. It might be tempting to try to grow without one, but that ultimately will come back to bite you. You’ll create more confusion for the team with overlapping responsibilities and promises for career growth, and your top talent may leave. It’s worth the investment now to open up your free time moving forward.