In part one of this blog, I discussed how departmentalization can help you manage your business more efficiently. Today, I'd like to continue this topic by covering important factors you should address before dividing up your company.
First, it's imperative be well organized. If you're going to departmentalize, you need to have a person who is fully qualified to handle the accounting function and a solid accounting system to track how everything is allocated. For example, if a technician goes on a service call, to which division does that call get charged? Is it a normal call that can be charged to the service division, or is it a callback that should be charged to warranty? You also have to make sure all services and inventory are recorded properly.
Establishing your accounting system and allocation procedures before departmentalizing will simplify the process immensely. You'll have a disaster on your hands if you try to put things in place after you've split your business into different divisions, so you should make sure you have a formal and disciplined system before taking any action.
Next, you need to understand what contributes to your gross profits, such as how your direct costs and overhead costs compare. You should be aware of these factors no matter what, but these numbers become even more important if you segment your business, because it's easier to make mistakes.
While maintaining disciplined procedures is essential to departmentalization, you must remember the importance of helping your team through this transition. Any time you make changes, you must thoroughly communicate with your team. Employees perceive changes in their own way, so be clear on your reasoning for introducing new processes. A fundamental change to the business model affects the company culture, and clear communication will help your team adjust and thrive.
Building on this idea of communication, I recommend you have some kind of reward or bonus program in place when your team achieves established KPIs. It can be as simple as buying lunch for everyone or hosting a company party. Even regularly saying thank you or recognizing stand-out employees at company meetings will show people you appreciate their hard work and success. Many employees are driven by instantaneous recognition rather than end-of-the-year bonuses, so incorporating small gestures of gratitude can make a difference during extensive changes to the company culture and work processes.
Like any major business decision, departmentalization affects the entire company. If you manage your divisions with discipline and accuracy, your business will be better organized and more efficient for it.
Dave Nichols is a regional training manager with HVAC Learning Solutions.
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