Business crisis, managerial and administrative implications

First of a cycle of three articles aimed at deepening the theme of the adequate structure in view of the crisis code

In this short cycle of contributions, we will focus on the specific findings inherent in the three meanings introduced by law to better understand the responsibilities of the administrative and control bodies.

(1) Organizational structure

First of all, the legislator uses the term "structure" which indicates not a sporadic or occasional activity, but rather a real stable and ordinary situation that characterizes the corporate action. In this sense, when we speak of organizational structure, we refer to that set of internal rules and procedures within the company which are necessary to regulate corporate life in an orderly and socially oriented way.

Organization chart

The main document that defines the organizational structure in terms of operational responsibility distributions is the company organization chart , which describes how the company is structured internally.

The organization chart represents the cascading corporate responsibility centers, starting from those with managerial responsibility, up to the more purely operational ones. The interconnection lines between the centers of responsibility, read from top to bottom, represent the direct responsibility of a center for the activity carried out by another center, located at a lower level.

The divisional organizational structure is less widespread, this organization gives greater emphasis to the theme of proximity to the market and, compared to the functional one, can determine the risk of diseconomies of scale on the production side. The managers of the Business Units (eg: European Market) have responsibility for result areas (turnover - costs - investments) and not only for operational cost centers.

From the point of view of verifying the adequacy of the organizational structure with respect to the effective performance of the company activity, the task of the directors and the control body is to verify that the organization chart represents the mechanism of distribution of responsibilities in a truthful way within the company.

Through specific interviews with the various company managers, the control body must be able to have the elements to evaluate that the decision-making power, at the managerial level as well as at the operational level, is effectively attributed to the figures identified by the company organization chart.

Lastly, it will be necessary to verify that the responsibility is distributed through due administrative delegations and consistent professional positions of the company staff, in order to certify the effective transparency of the decision-making mechanisms in compliance with the provisions of the law and with what is established by the by-laws.

The job descriptions

A second fundamental tool for defining an effective company organization is the job description.

If the organization chart represents "the heads" in which the tree of corporate responsibilities is divided, the job description is that document that must define the tasks that each person, who holds a role (managerial or operational), must perform at the inside the company.

The drafting of job descriptions proves to be particularly useful in that, typically in SMEs, the tasks are distributed, as the activities accumulate, not so much in an organic way and coherent with company responsibilities, but in function of other criteria such as seniority work, the time to devote, the occasion. 

In this sense, a careful reflection on the organization chart and, consequently, on the job descriptions of each role within the company, can prove to be very useful in order to rearrange operations according to actual skills and responsibilities, optimizing processes and business features.

Finally, the writing of the job description proves to be fundamental for ensuring business continuity, making the tasks that each person must carry out within the company and the skills necessary to carry them out more objective. In this sense, in the event of a resource leaving the company, the administrator will be able to replace the figure in a much more efficient and effective way without excessively jeopardizing the company's operations.

The procedures

To complete the framework of the tools necessary for the definition of an organizational structure, it is necessary to deal with procedures, i.e. those documents aimed at regulating business processes .

A business process is a set of activities, consecutive to one another, aimed at a single objective, the development of which typically requires the contribution of multiple organizational functions. A classic example of a process is that of processing orders for a production company.

The Commercial Office receives the order, the Technical Office processes it and transforms the requests into product specifications, the Purchasing Office makes any purchases dedicated to the specific customer requests, the Production realizes the product, the Logistics takes care of of the shipment, the Administration provides for billing and collection.

The definition of "who does what" along a crucial process like the one mentioned above ensures, with a greater degree of reliability, that people know what the activities are to be carried out and how they should be carried out. 

The drafting of procedures in written and approved documents is a fundamental step in establishing the "company rules" with which the various operating activities are intended to be carried out by defining work phases and methods.

The corporate procedure is, therefore, that document aimed at regulating the behavior of the company's human resources in order to clarify and establish standardized work management models , shared and consistent with the corporate objectives and legal provisions. It must exemplify how the operating figures must carry out the activities along the process so that the same can achieve its objectives in compliance with the legal constraints and the required quality standards.

From this point of view, the control body must first ask if there are written company procedures, carry out an analysis of compliance and efficacy as well as verify their effective implementation together with the deputy manager.

Assess adequacy

Far from being a mere document list to be fulfilled, the listed tools have the task of promoting the correct management of all company activities in an efficient and effective way. The adequacy of an organizational structure is therefore directly proportional to the efficiency of the company.

To assess the adequacy, we limit ourselves here to reporting some alerts in order to develop compliance considerations with respect to corporate purposes and to maintaining business continuity.

1. Accountability: the first observation is of a general nature. Verba volant, scripta manent , therefore all the tools listed cannot and must not be solely verbal or, worse still, in the mind of those who manage the company but must be written and shared (i.e. officially presented to the people who work in the company).

2. Degree of delegation: to be reasonably certain of the adequacy of the organizational system, it is necessary to verify that the distribution of tasks and responsibilities does not highlight an excessive centralization of powers in one figure.

 It is clear that this aspect is all the more relevant the larger the company size, but certainly the separation of tasks as well as promoting comparison and cross-checking prevents one person from taking on an excessive number of tasks that he is unable to carry out effectively, compromising the success of company activities and the growth of its collaborators.

3. Competence level: to effectively manage complex businesses, specific and complementary solid skills must be present in the company. In this sense, verifying the curriculum and the training and work back-ground, together with the degree of continuous training, of the main profiles present in the company proves fundamental for a good evaluation. Periodically viewing the curricula of company resources can certainly be a good practice to adopt.

4. Level of integration: a final essential aspect to be evaluated is that of the level of integration within the individual offices and between the departments. Information in company contexts often does not circulate adequately and this generates a high risk in terms of speed, efficiency and quality of work.

In the next contribution we will deal with the issue of administrative structure .