We often form new business entities for clients. Most are limited liability companies, but there are still a few corporations, partnerships, and joint ventures every now and then. Most are owned by just one person or a couple of family members or friends. While the LLC operating agreement or the corporate bylaws and resolutions may establish the company and the general legal foundation of how the entity will exist, those documents don’t address the day-to-day operations of the company.
They don’t determine who will be responsible for marketing, sales, accounts payable and receivable, inventory control, nor operations. Unfortunately, many people just leave that up to loose agreements among the principals of the company as to who is going to be responsble for what. For instance, Jenny will handle marketing and accounting, while Jim will deal with contractors, inventory control, and licensing. When that happens, feelings get hurt, and customers and business opportunities are lost. In other words, the ball is often hit to left-center field, and everyone looks at each other and says, “I thought you were going to catch it!” when the ball (customer/business opportunity) hits the ground with a thud.
To prevent this from happening, we recommend that all of our new business clients create an organizational chart from the inception of the company. It can be designed like any other large enterprise: C-Level executives at the top (CEO, COO, CFO, CMO, CTO, CIO….) with officers, directors, managers, and staff at various levels underneath. Then, the duties and responsibilities of each position should be detailed as clearly as possible to delineate which position will handle what parts of the daily operations of the company as well as the visioning for the company’s growth.
In the beginning, each person may wear quite a few titles. In the case of a solely held company, only one person will wear every hat — in addition to the hats of the entrepreneur, manager, and technician. However, as the company grows, the org chart roadmap is already written as to who will be needed to handle tasks. Over time, as the business grows, the owner will hire others to take over those positions. The job description will already be written and ready to go, so it will be easy to determine what kind of person would be a good fit, and easier to measure their success in the position.
