How Do I Conduct an Organizational Review?

The organizational review process consists of analyzing your business functions, employee structure, operating processes or a combination of these. For small-business owners, an effective organizational review includes examining the structure and performance of your departments or functional areas and reviewing the employees within each area.

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The organizational structure review process includes looking at your business's functional structure and organizational chart, analyzing its processes and procedures, reviewing your financial data and then making recommendations based on those findings.

To begin your organizational review, determine what type of organizational design you have. Many small businesses start with a flat structure, which consists of the owner and several key employees working together to manage the production, marketing, sales, financial and human resources operations of the company. There are no managers, with the owner making all or most of the important decisions. This structure does not have layers of employees, such as directors, managers and coordinators.

A functional structure divides your organization by task, such as accounting, HR, production, marketing and sales. Companies with this structure create departments with dedicated managers and an employee hierarchy. To oversee these departments and their managers, businesses might create a “C-Suite,” which consists of a management team with a chief executive officer, chief operating officer and chief financial officer.

Larger companies have more complex structures, including matrix and divisional organizations, to manage many employees, departments, divisions and even different companies operating under a corporate umbrella.

Once you have determined the type of organizational structure you have, look at your organization chart, which is a diagram of your employee positions showing who works where, and for and with whom: the “totem pole” of your business. Compare your organization chart to your organizational structure to determine if your positions effectively align with the various functions you need performed.

You will then ask yourself some relevant organizational review questions. For example: Do your salespeople report to marketing manager or vice versa, and what benefits/problems does this create? Does your production manager oversee your distribution manager or do they work independently?

Now that you have examined your functional areas and employees within them, assess the processes and procedures your business uses to take products and services from concept to delivery. Examine not only the processes each department uses to do its work, but also the interaction among departments.

For example, do you have a seamless system for salespeople entering orders? Or for your accounting department running credit checks and approving new customers? Or what about for your warehouse filling and shipping orders, and your accounting department sending invoices?

If you do not have a master budget, create one to determine the impact of your operations on your bottom line. A master budget is a financial tool that integrates your annual budget, general ledger, cash flow statements, profit-and-loss statements, balance sheet and accounts receivable reports.

List your major expense areas, such as labor, materials, administration or marketing. Determine if you can reduce them through an improved organizational structure or staff realignment, or better processes and procedures. Rank your revenue sources and profit centers and determine if organizational or staffing changes can improve your performance in these areas.

After you have analyzed your business structure, organization chart, processes and procedures, list areas for improvement and make suggestions. Meet with each department head individually to review your findings. Hold a group meeting of your managers to discuss your findings and ask for their input. Tell them your goals, such as reducing overhead or production costs, decreasing waste, increasing sales, or reducing shipping times, returns or customer complaints.

Use the team’s feedback from your organizational review to create your final report and recommendations.