Why structure Dictates Performance

Perhaps the biggest constraint on the growth of a business is structure.

Think of a group of school kids playing football. Typically, there is no structure. All of them run around chasing the ball as one mob. As they get older and better they start creating structure with forwards and backs and a goalkeeper, each with their own specific roles to fill.

As a business grows it will only do so successfully if the structure is appropriate for the particular phase it is at.

You see as a business grows it necessarily and inevitably gets more complex and that complexity increases exponentially. It compounds.

Let me try to explain with an example. If there are two people there are two relationships. A with B and B with A. If a third person joins there are now six relationships, adding another person increases the relationships to twelve, so adding another two people multiplies the complexity six fold. Complexity is an exponential power curve and as humans we are not great at dealing with such accelerating complexity.

And this isn’t simply about the number of people. Every time we add something we actually multiply the complexity. I work with a law firm of about 100 people- so about 9900 relationships. It operates from 6 sites and practices 5 streams of law, so you can multiply 9900 by 6 and then 5. This is now a very complex business. It is impossible to manage this business in the same way as you might a single site, single law stream business of any size.

Structure dictates performance.

How to create a structure that works

Actions: the first effect of the growing complexity is that the founder finds themself unable to cope, because in the unstructured firm, the only person who (hopefully) knows where the business is going and how to get there is the founder. So they become totally swamped, answering every question and making every decision. The objective isn’t simply to get tasks off the founders list because that won’t solve the problem.

Start by creating a list of everything you do. Think in ink- write it down. Highlight the things that you have to do because you’re the only person who knows how to do that.

If we are trying to do everything, not only will we become exhausted but we won’t do things as well or accurately as they should be done. Imagine a graph. The X axis represents the skills needed to do something, while the Y axis represents the value to the business of that something. Typically you need to decide what are the limited number of things that are both high value and high skill, that you and only you can do. Write this out on list 2.

Compare the two lists. Everything that is on list 1 but not list 2 must be either delegated, automated or deleted. Your job is to limit the stuff that you do to only the highest value and highest skill, or burn out.