Small business owners very often take exception to giving titles to employees. They don’t see the value in it. Since the firm cannot afford to hire multiple people for different jobs and each job many not require a full time person anyway, everyone must wear many hats. So how can we assign a title to anybody? It seems pointless.
Unfortunately, everyone wants a title. So the owner gives a very high title like Chief Marketing Officer or Chief Technology Officer. That way they cover all the related responsibilities in the employee’s area of focus. It feels better to the employee (he has an important title) and it gives the outside world an impression that the firm is bigger than it is.
The problem with this approach is that the structure of the organization is actually being undermined and there is no plan for the future growth of the firm. How do you know if an employee is really qualified to be a Chief Whatever Officer? What happens when you do grow and need to put a real senior manager in place and need to “demote” the employee by putting someone above him? It creates all kinds of employee and culture challenges.
When defining your organizational structure, it’s important to start with how you want the organization to look when you are done with it. What does this mean? Business owners should have an idea of what they want their company to look like when they are ultimately ready to get out of their business. (You have an exit plan, right?)
Create your organizational chart with this in mind. Then assign your current employees to each box on the chart based on their current skills and the need for the role. When your firm is small a person will likely appear in multiple boxes. That’s OK. Give them the title of the highest box they appear in. Give them the authority to hire their own team and as you grow, they will reassign the roles to new employees until one person is in each box.
With this approach a small firm of 5-10 people, for example, won’t have any Chief Whatever Officers because the owner will be assigned to all those boxes. You may not even have any managers since the firm probably has one level of employees all reporting directly to the owner. These roles are not needed at this time in the firm’s growth so the owner assumes responsibility for all of them.
5 Reasons for Job Titles
Establishing appropriate titles and assigning them to the right people are important for the following reasons:
- Employees need a sense of their place in the organization and titles establish lines of authority.
- Titles define roles and responsibilities which helps employees understand what they need to do to be successful. This is accomplished by creating a job description for each title that specifically defines responsibilities and authority related to the position.
- Job descriptions are then the basis for the compensation structure of the position. It provides a salary range and incentive programs that reward goal attainment defined by the firm’s management.
- As the firm grows employees have an opportunity to advance within the firm and, as such, obtain more compensation for added responsibilities. It creates a culture of growth for both the firm and the employees.
- If necessary, managers can be hired from outside the firm and inserted into the organizational structure without creating a feeling of being demoted by those with fictitious senior management titles.
Establishing appropriate employee titles in an organization is critical to the growth of organization. It creates a culture of growth that defines everyone’s roles and responsibilities, provides employees career advancement, establishes appropriate compensation packages, and provides management the ability to put the right people in the right places in the organization.
Take another look at your organization chart and reevaluate how you use titles in your firm. Making this one alteration will change the trajectory of your growth and the growth of your employees.
Question: Do you think titles are important? Does your answer change based on the size of the organization? You can share your answer on Facebook, Twitter, or LinkedIn.