How Is the Organisational Structure Rebuilt During a Period of Rapid Growth?

The need for structural reorganisation is most often associated with periods of contraction. Rapid growth creates the same need, and it is usually recognised later. While revenue rises, headcount expands and new product lines and territories come into play, the decision-making mechanism of an organisation may remain as it was in its founding years. Because the growth figures look positive, the inadequacy of the structure stays off the agenda for some time.

A structure falling behind does not become apparent through a single event. It develops cumulatively, and organisations usually read it not as a structural issue but as a matter of individual performance or workload. Delayed decisions, the same work being carried out by two separate units and unclear boundaries of responsibility for newly appointed managers are all indications of the distance between growth pace and management capacity. When these indications are addressed by adding headcount alone, the management burden generally increases further.

Structural reorganisation during growth is not limited to redrawing the organisational chart. How decision authority is distributed, along which lines information flows and where responsibility is concentrated are all rebuilt. The chart is the visible surface of that design.

The Point at Which Growth Outpaces the Organisational Structure

In their founding and early growth years, most organisations operate with a similar structure. Headcount is limited, communication is direct and decisions converge on the founder or the general manager. Up to a certain scale this structure works quickly and efficiently. A decision is taken in a single meeting, implementation begins the same day and the outcome becomes visible within a short period. At this stage the simplicity of the structure is an advantage.

Once headcount doubles, the same structure begins to produce delay. The senior management agenda fills with operational detail, the number of matters awaiting a decision rises and prioritisation becomes harder. The founder or general manager is drawn into daily operations precisely when the direction of the organisation needs to be set. The relevant measure here is not headcount but the number of decision points reaching senior management. When headcount grows by thirty per cent, the number of decision points often rises several times over.

The second indication is the blurring of boundaries of responsibility. In a small team, what each person does is visible, and gaps between roles close naturally. As headcount expands, this self-regulating mechanism comes to an end. The same work is carried out in two units, while other work waits because it has not been defined within the remit of any unit. Newly appointed managers learn who to consult on which matter by trial, and this lengthens the settling-in period.

The third indication is that information flow remains dependent on individuals. How the organisation works, why particular decisions were taken and the history of client relationships reside not in a documented system but in the knowledge of a few long-serving people. During growth the load on these individuals increases, and the organisation begins to carry a fragility arising from critical knowledge being concentrated at a single point.

The point at which the structure falls short becomes visible in different areas depending on the source of growth. In an organisation growing through sales volume, operations and supply are usually the first areas to come under strain. In one beginning to operate in a new territory, how decision authority is shared between the centre and the field comes to the fore. In organisations growing through a new product line, resource allocation and prioritisation become the pressing issues. Where structural reorganisation begins is determined by making this distinction.

The role of the founder or general manager also changes during this period. The person involved in almost every decision during the founding years cannot, beyond a certain scale, keep pace with all of them. This shift usually relates not to hesitancy about delegation but to the fact that the decisions to be delegated have not been documented. Where it is unclear which decisions have been delegated, the person receiving them hesitates to act and the matter returns to senior management by another route. Delegation works only where the scope and limits of a decision have been defined in advance.

When these indications emerge, the common response is to recruit. Adding headcount distributes workload in the short term. However, where the structure is undefined, each new person adds one more connection point requiring management. The management burden does not decrease; it changes direction. This is why structural reorganisation and headcount planning are best addressed within the same period.

The Areas Addressed in Establishing the New Structure

Structural reorganisation during growth requires several interconnected areas to be addressed together. Not all of them are completed simultaneously; the order of priority varies according to the source of growth. An organisation growing through sales volume and one growing through acquisition do not have the same sequence of needs.

•      Distributing decision authority across levels: which decision is taken at which level is documented, together with value and impact thresholds. Delegation that remains an informal convention is not applied in practice.

•      Clarifying reporting lines: each role's reporting line and the roles reporting into it are made clear at a single reading. Where dual reporting is necessary, the matters that travel along each line are separately defined.

•      Establishing the middle management layer: the number of employees reporting directly to senior management is brought to a manageable level. Delegation carried out without this layer finds no counterpart in practice.

•      Formalising support functions: finance, human resources, legal and information technology processes are connected to defined flows rather than to individuals. This is generally the area under the greatest strain during growth.

•      Aligning performance and reward structures with the new levels: expectations and their corresponding rewards are defined together for newly created roles. Where a level is added without its counterpart being defined, the structure remains on paper.

•      Setting the information flow and meeting rhythm: which information is passed to which level and at what frequency is defined. The aim is not to increase the number of meetings but to concentrate information at the appropriate level.

Before these areas are addressed, the current position needs to be set out. The new structure is built not from an ideal chart but from how the organisation actually works today. At this stage the effective scope of responsibility for each role, a record of decision matters reaching senior management over a defined period, and the lines along which recurring coordination difficulties are concentrated are all compiled. The resulting data indicates where the structure requires adjustment. Structures designed without this work are usually limited to adapting charts taken from comparable organisations and do not correspond to the organisation's own way of working.

Once these areas are defined, the following question concerns who will take on the new roles. There are two sources: the existing team and appointments from outside the organisation. Managers promoted internally carry organisational knowledge and established relationships, yet most are assuming management responsibility for the first time. Current performance is not an indicator of success in the new role, as the two roles require different sets of behaviour. Structured assessment practices allow a promotion decision to be supported by forward-looking behavioural data alongside past performance data. Our article on establishing a succession pool for critical positions sets out a detailed framework on this subject.

For positions requiring an external appointment, the executive recruitment process covers not only the experience sought but also alignment with the organisation's stage of growth. A manager arriving from a highly formalised organisation requires a distinct period of adjustment in an environment where processes are still being established. The support provided during the first months following appointment is therefore decisive, and our article on the first months in senior appointments examines the management of that period.

A third route applies where establishing a particular function requires an experienced manager for a limited period. In defined, time-bound assignments such as rebuilding the finance structure, formalising production planning or launching operations in a new territory, interim management allows the structure to be established before a permanent appointment decision is taken. On completion of the assignment, capability transfer is made to the internal team.

The capacity of the human resources function is a decisive factor in carrying out structural reorganisation. In most organisations experiencing growth, this function operates under the weight of recruitment, with limited capacity for organisational design, level definition or reward structures. Treating the structural work as separate from the recruitment agenda prevents either area from stalling. Where this distinction is not made, structural work generally begins but is suspended before completion under the pressure of daily operational priorities.

Implementing the New Structure in Stages

Deciding on a structure and implementing it are separate processes. During growth this distinction becomes more pronounced, as the organisation is simultaneously expanding its business and rebuilding its internal order. A comprehensive structural change announced in a single step can slow commercial momentum.

A staged transition reduces that risk. Distributing decision authority is usually the first step, as it relieves the senior management agenda quickly and creates time for the remaining arrangements. Bringing new reporting lines into effect is the second stage. Aligning performance and reward structures with the new levels is generally introduced at the start of the following period, since mid-year changes conflict with existing objectives.

During the transition, some roles may need to sit within both structures for a period. It is common for a manager moving to a new level to carry both sets of duties until the previous responsibilities are handed over. Defining the length of this period at the outset and documenting the date by which the handover will be complete prevents a temporary arrangement from becoming a lasting ambiguity. Where no timescale is set, dual responsibility usually extends and the new structure is slow to take effect.

Communication during the transition is as decisive as its design. A general announcement conveys the existence of the new structure but does not ensure that each employee understands what has changed within their own role. Unit-level discussions close that gap. In these discussions the new reporting line, the limits of decision authority and any change in the scope of the role are addressed separately. Explaining the need from which the structure arose prevents the arrangement from being read as a performance judgement.

Those moving into a management role for the first time are the most critical group in this period. A specialist who becomes the manager of colleagues they have long worked alongside is attempting to continue technical work while also leading a team. Executive coaching provides support during this transition, addressing the behavioural dimension of the change in role. How the organisational outcome of such a programme is tracked is set out in our article on measuring the organisational outputs of executive coaching.

During growth, the content of some roles also changes and a limited number of roles close. Because the organisation is expanding, the position of a manager without a counterpart in the new structure is often raised late. Career transition support provides a structured programme for the manager concerned while protecting the organisation's credibility with the remaining team. How the organisational outputs of the programme are reported is examined in our article on reporting career transition support outcomes.

A common tendency in structural work during growth is to establish new levels through job titles. Titles awarded without a change in the scope of responsibility or decision authority meet expectations in the short term but contribute nothing to how the structure works. In time, roles carrying the same title but operating within different remits emerge, and the relationship between levels becomes unclear once more. Defining the title structure together with decision authority and scope of responsibility prevents this.

The final stage is monitoring. Whether the new structure is working is reviewed against concrete indicators three to six months after implementation. Whether decision timelines have shortened, whether the number of matters reaching senior management has changed and where recurring coordination difficulties are concentrated form the agenda of that review. Gaps not anticipated in the initial design usually become visible at this stage, while the cost of correction remains low.

Where growth is achieved through acquisition, structural reorganisation requires a distinct framework, as two management cultures and two separate decision-making traditions come together. This particular situation is examined in our article on establishing the management team in the first year after a merger.

At E&E Group we have been advising organisations since 1992 on establishing organisational structures during growth, restructuring and change, on executive recruitment, on assessment practices and on executive coaching programmes. To discuss the structural requirements of your organisation's growth period, please contact us.