How are departments inside a business created?

[OneStepAhead]

My question is regarding how a business decides what departments to create and focus on as time goes along.

How is it that new departments are created (what drives owners to create them) and what is the usual progression along the maturity continuum for businesses to follow?

Just for clarification by departments I am referring to general departments such as accounting, marketing, legal, etc.

[BusinessAdviser]

Create 'em as you need 'em. There is not "usual progression," as it should depend on the business's needs.

[OneStepAhead]

Create 'em as you need 'em. There is not "usual progression," as it should depend on the business's needs.

I was looking for a little bit better info, let me elaborate on my problem a bit.

My family has a business that is run by my mom. There is no actual system in place she basically runs it as she goes. The business is run on a cash basis and my mom uses the cash directly to pay for things so there is little if any accounting. It is a very immature business with plenty of room for growth but with growth comes maturity.

I know I do not have all of the skills to fill each role but I can find people to fill those rolls, I just don't know exactly where to start the maturation process, any ideas?

[BusinessAdviser]

I was looking for a little bit better info, let me elaborate on my problem a bit.

My family has a business that is run by my mom. There is no actual system in place she basically runs it as she goes. The business is run on a cash basis and my mom uses the cash directly to pay for things so there is little if any accounting. It is a very immature business with plenty of room for growth but with growth comes maturity.

I know I do not have all of the skills to fill each role but I can find people to fill those rolls, I just don't know exactly where to start the maturation process, any ideas?

Thank you. Take that as lesson one: The quality of the advice is directly linked to the amount of information provided, all other things aside.

Now, I have to dig a little deeper: Why are you looking to "create departments?"

[OneStepAhead]

Thank you. Take that as lesson one: The quality of the advice is directly linked to the amount of information provided, all other things aside.

Now, I have to dig a little deeper: Why are you looking to "create departments?"

Point well taken.

Well the main problem is that I feel there is no order in the business and it has been mostly by chance that it has been open for such a long period of time. Let me explain:

My mom has a high school education with no formal experience in business whatsoever and my dad leased the location for my mom so that she had something to do while the kids were all at school. It eventually turned into a somewhat successful alterations shop where she repairs clothes for people as well as makes custom clothes for brides. She learned to sew from her mother and it is a trade that is no longer being taught as widely as before, a scarcity among tailors in the long run.

The client base is usually women who get along great with my mom. They refer people to her and that along with a monthly mailer is how the business has grown. In the beginning there would be days without a single customer, those days are gone and now it is not uncommon for her to open 6 days a week but I feel like we could be doing better in achieving the main goal,increase revenues and create a business model in which the employees run the business for us and we have minimal roles within it (30 hours per week or less).

The problem is that there is no order there. There is no accounting system besides depositing the days money into the bank. This also means that there are no targets or goals being specified or met for that matter.The marketing we do is very minimal and I feel we could capitalize on referral and online marketing not currently being done. There is only a verbal agreement with the employees we have and they are paid on a cash basis weekly and there is no management to manage the business when my mom does step away for a few hours to run errands. I think you're beginning to see why I feel like departments or whatever you'd like to be called need to be created and implemented.

I just don't know where to start or what the most important aspects of the business should be.



Over the years

[BusinessAdviser]

"I feel like we could be doing better in achieving the main goal,increase revenues and create a business model in which the employees run the business for us and we have minimal roles within it (30 hours per week or less).

The problem is that there is no order there. There is no accounting system besides depositing the days money into the bank. This also means that there are no targets or goals being specified or met for that matter.The marketing we do is very minimal and I feel we could capitalize on referral and online marketing not currently being done. There is only a verbal agreement with the employees we have and they are paid on a cash basis weekly and there is no management to manage the business when my mom does step away for a few hours to run errands. I think you're beginning to see why I feel like departments or whatever you'd like to be called need to be created and implemented.

I just don't know where to start or what the most important aspects of the business should be."

OK. These are the important parts to me of your last post.

You don't need "departments," as creating departments just means separating the company into different areas where members in each area specialize only on issues related to that area.

What you do need is:

1) Business advice - Think about hiring a business consultant, or at the very least begin to read book after book to learn about operating a small business.

2) Strategy - Based on this increased knowledge, create a business plan, marketing plan, and strategy for operating the business.

3) Organization - Get and stay organized according to these plans and strategies.

Really, unless you ask more direct questions, it's going to be hard to help you without dedicating unreasonable amounts of time.

One big issue to immediately look into is the legality of paying employees in the manner that you do. This would be #1 on my list of issues to address.

Unless you get all this under control, you can kiss away the opportunity for having the business run itself more.

Feel free to ask any other questions with regard to any of these or other issues, and hopefully others can jump in as well.

[OneStepAhead]

"I feel like we could be doing better in achieving the main goal,increase revenues and create a business model in which the employees run the business for us and we have minimal roles within it (30 hours per week or less).

The problem is that there is no order there. There is no accounting system besides depositing the days money into the bank. This also means that there are no targets or goals being specified or met for that matter.The marketing we do is very minimal and I feel we could capitalize on referral and online marketing not currently being done. There is only a verbal agreement with the employees we have and they are paid on a cash basis weekly and there is no management to manage the business when my mom does step away for a few hours to run errands. I think you're beginning to see why I feel like departments or whatever you'd like to be called need to be created and implemented.

I just don't know where to start or what the most important aspects of the business should be."

OK. These are the important parts to me of your last post.

You don't need "departments," as creating departments just means separating the company into different areas where members in each area specialize only on issues related to that area.

What you do need is:

1) Business advice - Think about hiring a business consultant, or at the very least begin to read book after book to learn about operating a small business.

2) Strategy - Based on this increased knowledge, create a business plan, marketing plan, and strategy for operating the business.

3) Organization - Get and stay organized according to these plans and strategies.

Really, unless you ask more direct questions, it's going to be hard to help you without dedicating unreasonable amounts of time.

One big issue to immediately look into is the legality of paying employees in the manner that you do. This would be #1 on my list of issues to address.

Unless you get all this under control, you can kiss away the opportunity for having the business run itself more.

Feel free to ask any other questions with regard to any of these or other issues, and hopefully others can jump in as well.

Thanks Jonathan, I appreciate your willingness to help and I will look into those issues. I've read a lot of books and I know more or less what I need to do but this is my first actual business decision and I really would love to have everyone and anyones support.

I have read a good amount of business books and have taken some business courses so I have a general idea of what I would like to do. Would you mind critiquing my action plan once I write it up? It will be the current problems I am facing and now in the business and how I plan to solve them and avoid them in the future.

[BusinessAdviser]

Relevant article I came across on Entrepreneur.com:

When You Should Delegate
With skilled employees come fresh ideas and more efficient ways to operate.
By: Cynthia McKay | 12/27/2007


Grim statistics suggest that 70 percent to 80 percent of businesses fail in the first year. Dun and Bradstreet predict that businesses with fewer than 20 employees have only a 37 percent chance of surviving for four years. It's no wonder business owners attempt to do everything themselves--from office maintenance to marketing.

After 16 years of owning my own business, I finally realized it wasn't profitable to do it all. From the day I opened my company until eight years ago, I tried to answer the phones, sell my products, copy and design mailers, attend chamber of commerce meetings, invoice, order inventory and, in general, run the company single-handedly.

I thought I was saving money by keeping the profits in the "family." In my mind, it looked good: no employees, no payroll taxes and very little overhead. What I missed was the fact that I was spending so much time on the little things that I halted productivity. Accomplishing all that I could in one day allowed me to operate the business cheaply but not necessarily effectively. I unknowingly hindered my ability to move the company forward and, in turn, increase revenue.

Do What You Do Best
Business owners should do what they do best, constantly evaluate the strengths and potential of the business, and keep their brainchild on track. Although most entrepreneurs are successful because they are in love with the idea of control, they must recognize that delegation doesn't mean relinquishing power. Growth and success require support. Before I added staff, I believed that the entire concept of Le Gourmet would be annihilated by new employees possessed with notions contrary to the way I ran the business. Instead, I quickly realized that with new talent came skilled individuals, fresh ideas and better ways to operate day to day.

At first, I thought no one could run the business as I could. I wrongly presumed that adding new individuals to my sanctuary would not only be an invasion of privacy, but also a complete fiasco. I expected those employees to lack the enthusiasm and drive that I possessed. Instead, I found that my new “family of professionals” was able to do things quicker and better than I could. Within months, I found that I had the time to write a book, keep more business engagements and develop a better brand and product line. For a reasonable hourly rate, I received in-house confidants, gatekeepers, troubleshooters, innovators and valued friends.

Delegating Multiplies Efficiency
Once I made up my mind to delegate, the transition happened quickly. The billing I previously did was transferred to an office manager who could produce invoices in lightning fashion, while my new accountant charged me a mere pittance for my quarterly taxes, financials, payroll and fatherly advice. Instead of wasting time searching the computer for special (and cheaper) airfares, I hired an in-house travel agent to handle the myriad of trips I previously slaved over for hours. Rather than answer the phone and deal with countless sales calls, I found a polite and qualified individual who would handle each call with finesse and make my company appear much bigger and more professional than it actually was.

I was amazed at the progress the company made with a few minor adjustments. I suddenly had a new and productive attitude, similar to when I first had the idea to become my own boss. I realized after acquiring competent staff members that I had been wasting my time with chores that weren’t on my list of passionate things. Along with my knowledgeable professionals came a breath of fresh air that I desperately needed.

To begin the delegation process:

Think about how your individual role most benefits your company, and cultivate that position. In other words, get rid of chores that you don’t want to do and focus on your desire for success.

Remove any undertaking that makes you feel stagnant. Replace it with something that can grow your image and increase revenue.

Hire the right individuals for clerical tasks, sales, accounting and basic customer service, and you can completely rekindle your attitude toward your business. Allocate jobs to the best professionals you can find, and you’ll appreciate the concept that your valuable time is even more precious than previously thought.

Your role as figurehead should revolve around better developing your original concept and distributing your enthusiasm to more complex aspects of marketing and product/service development, as well as management.

Letting go can be the beginning of a wonderful and productive change in your organization.