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An executive structure

I used to think that the executive structure of a business was what it was because of a systematic and intelligent process. After all, when an architect plans, designs and supervises the construction of a building it is expected that such building is safe, secure and relevant to the needs of the people inhabiting it.

Do we do the same when it comes to business? I don’t think so. In fact, I would argue that the executive structure of most businesses is the result of iterative and/or haphazard experimentation. Look around you and just notice how each and every business at the top is structured differently. It is a free for all; almost any old Tom, Dick and Harry can come up with an executive title or structure so long as such a person has internal political power.

What do I mean by an executive structure? Every business has (or should have) a chain of command which starts with top management and a structure around which top executives are organised. The most efficient and effective organisations are normally those with a seven pronged executive structure covering the basic areas of any business (irrespective of industry). Therefore, there are certain business fundamentals that every executive structure must adhere to and I say this irrespective of type, scope and size of business.

To my mind and based on my experience, all businesses should, at executive level, be organised in the following manner: chief executive officer – responsible for company strategy, vision and leadership; chief financial officer – responsible for financial and accounting matters including risk management; chief operations officer – responsible for the daily operations of the company; chief information officer – responsible for IT and its application to business strategy; chief marketing and Sales officer – responsible for product or service development and innovation, marketing, communication and sales; chief human resources officer – responsible for anything to do with HR but also finding and nurturing talent and leadership succession planning; general counsel – an internal or external (high-level) business legal advisor to the CEO and board.

Granted, some businesses, due to their limited size and resources, might opt to have the same person occupying more than one role. For instance, in some SMEs you could arguably have the CEO also doubling up as the chief marketing and sales officer, the chief operations officer as the chief information officer and the chief financial officer doubling up as chief human resources officer.

In fact, the core of executive structure arguably is the triangle of the CEO, chief financial officer and chief operations officer, and when business’ resources are limited, such as in a start-up or a small company, it could function with just this trilogy of executives who double up for the remaining four executive positions. But the seven roles must exist irrespective.

What I am saying may sound simplistic or manifestly obvious but let’s take a quick look at the executive structure of a random sample of six publically listed companies on the MSE. The companies are listed in the table below. Please note that this is not a scientific exercise, inevitably prone to contain inaccuracies since the information was obtained from the companies’ respective websites or their published annual reports (both of which could be outdated or inaccurate) but it will serve our purpose.

You would expect a publicly listed company to have each and every box marked “yes” since these are the key business areas for any business. You would also expect for this information to be readily available which it wasn’t for some of the other plcs not mentioned above. Never mind, but if the best or biggest don’t get it right; imagine what smaller businesses might do. By the way, may I congratulate Island Hotels, BoV and 6PM who seem to have a very strong executive structure in place.

I think it is often underestimated how much more efficiency and effectiveness one can extract from a re-organised and properly thought out executive structure. If your business doesn’t have these key positions covered, it is probably operating at a handicap. True, you can have the wrong person in a position, if the person occupying it is not up to standard. Or you can have the seven titles mentioned above but poorly defined roles and responsibilities. W0hile it is important to have these seven titles mentioned above, it is only the first step.

W. Edwards Deming (management guru) used to say: “The worker is not the problem. The problem is at the top! Management!” This is why I recommend that a business should ensure that it gets its executive structure right since by doing so top management stands a much better chance of delivering success and rendering Deming’s sage advice obsolete.

Mr Fenech is managing director at FENCI Consulting Ltd.

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