Set Up a Management Team Structure to Optimize Your Business

This article is an excerpt from the Shortform book guide to "Ready, Fire, Aim" by Michael Masterson. Shortform has the world's best summaries and analyses of books you should be reading.

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Do your managers efficiently and consistently manage your business’s daily operations? Or, do operational tasks constantly distract you from leading your business?

If you have a successful business and want to keep it hitting on all cylinders, you need effective systems. A well-structured management team can oversee these systems, ensure smooth operations, and optimize your business over the long haul. That frees you up to focus on leadership and business growth.

Read more to learn how to set up an effective management team structure.

Effective Management Team Structure

Once you’ve expanded your product lines and increased your profits, optimize your business’s internal systems and procedures. Achieve this by structuring your management team to handle day-to-day business operations. Masterson explains that this strategy improves your chances of long-term success by ensuring that all business functions run efficiently without your direct attention. Such a management team structure reduces costs and increases productivity and profits. It also allows you to focus on pursuing opportunities that fuel the ongoing growth of your business.

(Shortform note: In addition to the benefits outlined above, efficient operations also ensure customer satisfaction, positive reviews, and a reliable source of revenue. Management experts Ken Blanchard and Sheldon Bowles (Raving Fans) explain that customers form expectations based on their past transactions with a business—and they expect future transactions to be just as good, if not better. This means that businesses must set processes in place that allow them to provide a consistent and reliable service—otherwise, they risk disappointing and losing their customers.)

Masterson suggests that you follow five steps to structure your management team.

Step #1

Outline all of the tasks involved in running your business and note the departments and managers who are accountable for them.

(Shortform note: Business strategy experts suggest creating a thorough outline to fully understand your operations. In addition to Masterson’s advice, note the specific people responsible for carrying out each task, what triggers them to take action, and what they specifically do. Interviewing the people involved in each task will help you to gather all of the necessary information.)

Step #2

Group the tasks into operational functions (for instance, accounting and inventory management) and marketing functions (such as market research, advertising, and customer service).

Step #3

Assign an overseeing manager to handle all operational functions, who will report directly to you.

(Shortform note: Business experts suggest that you research the different types of organizational structures and consider factors such as the size of your business, the complexity of your operations, and the industry you operate in before grouping tasks and assigning managers.)

Step #4

Appoint separate overseeing managers for each of your product or service lines. They’ll report directly to you. They should assign their own marketing managers, sales managers, and product development managers. For example, one overseeing manager would appoint a team of managers to handle plush toys, while another overseeing manager would appoint a different team of managers to handle plush toy storage solutions.

(Shortform note: The organizational structure Masterson advocates here is a product-based structure. This structure can be advantageous for businesses with many offers because it encourages each department to develop specialized skills that help shorten research, development, and marketing cycles for each specific offer. However, it can also result in higher costs due to resource duplication across multiple divisions, and it may foster an unhealthy culture of competition rather than collaboration if overseeing managers prioritize departmental profits over company-wide success.)

Step #5

Set key objectives for each overseeing manager and request regular progress reports.

Advice on Setting Objectives

While Masterson suggests that you set objectives for your managers and monitor their progress, he doesn’t provide practical advice for completing this step. Therefore, we’ve adapted a goal-setting process from Measure What Matters to help you define and measure your business objectives.

1) Define your company’s overall goal: This is your vision of where you want to be in the next five years. It needs to be clearly defined and action-oriented. For example, generate annual revenue of $500,000.

2) Identify individual objectives: Each of your managers need to identify their objectives. The objectives they define for themselves must align with the company’s main objective. For example, your sales manager might set an objective to acquire X number of customers by the end of the year.

3) Define your key results: Your key results must be measurable sub-goals toward achieving your final vision. They need to include specific results and deadlines. To identify your key results, ask yourself, “What steps do I need to complete to reach my objective?” For example, your sales manager’s key results might be to increase online sales by five percent every month, increase offline sales by 10% every month, and so on.

4) Regularly check progress: Checking the progress of each key result provides valuable insights that will help you to stay on track—it helps you assess the effectiveness of your current strategy and provides an opportunity to revise or update your key results. The frequency of your check-ins depends on the length of time needed to achieve each key result.

Using this process to define both your long-term and short-term goals will ensure that all of your managers are:

• Focused on one final objective
• Aligned toward achieving this objective
• Accountable for the progress they make toward achieving this objective

Set Up a Management Team Structure to Optimize Your Business