ENTREPRENEURIAL FAILURE

Failure is a distinct form of exit wherein when an entrepreneur is forced to exit their firm due to
poor financial performance such as insolvency.

Organizational Structure:

A system that defines how specific activities are directed within an organization in order to fulfil the
goals of that organization is referred to as an organizational structure. Rules, roles, and obligations
are all potential components of these activities.

Each employee's role, as well as how that role fits into the larger system, should be clearly defined
by an effective organizational structure. To put it another way, the organizational structure defines
who is responsible for what within the corporation so that it can achieve its goals.

A visual picture of how a firm is shaped and how it may best go forward in accomplishing its goals is
provided to the organization by this structuring so that it can make better business decisions.

Entrepreneurial Organizational Structure:

Based on the nature and size of the business, the organizational structure of an entrepreneurial
company frequently has two central requirements. Because these companies are innovators, they
must create organizational structures that encourage frequent interaction and communication
among their marketing, sales, and production departments.

Because they are frequently smaller businesses that are unable to fully departmentalize due to high
sales of a single product, they must maximize management resources through multitasking.
Structure:

Flat vs. Hierarchical

Smaller companies with fewer employees that are constantly evolving their product development
and marketing strategies frequently use a flat organizational structure rather than a hierarchical one.
A traditional hierarchical organizational structure divides a company into departments, each with its
own leader and subordinates reporting to the department head. These divisions operate
independently and report to a president, chief executive officer, or executive management team. A
flat organizational structure is made up of individuals or small groups who collaborate and report to
the owner or CEO. A flat structure may necessitate managers taking on or participating in more than
one task in order to maximize scarce human resources.

Planning Structure

An entrepreneurial structure should encourage collaborative planning rather than top-down

strategic and marketing planning, which involves the execution of plans assigned to various
departments. Prior to any promotions, marketing activities include product development, pricing
strategies, brand creation, and distribution channel selection. In a larger company with a hierarchical
organizational structure, for example, the marketing department might develop the product and
then delegate production to figure out how to make it. All team members are involved in product
planning in an entrepreneurial organization so that they can share their concerns or make
suggestions about whether the product can be manufactured. Marketing at large companies will be
familiar with its production department's capabilities, whereas marketing at an entrepreneurial
company will pitch an idea, asking production, information technology, sales, and finance if they can
realistically bring the idea to market.

Structure of Communication

An entrepreneurial organization holds regular team meetings to discuss ideas before making a
decision, whereas a more traditional organizational structure uses department head meetings to
announce progress and inform subordinates of decisions. To exchange project status in real time, an
entrepreneurial company may create an intranet or a communication system based in the Cloud. A
Cloud-based system stores information on a secure Internet site that anyone with a password can
access from anywhere. An intranet is hosted on the servers of a company. Each team member will
have his or her own responsibilities, but will update his or her progress on a master document that
all other team members can access from their computers at any time of day.
Importance of a Good Organizational Structure

Structure enables better communication

Since the free flow of information is critical to the success of a company, the organizational structure
ought to be created with clear communication channels in mind. For instance, the Chief Financial
Officer and the Senior Vice President of Marketing might be the ones who oversee the department
that is responsible for financial planning and analysis. This is due to the fact that both of these
members of the top management team rely on the information and reports that are provided by
financial planning.

Direct lines of responsibility and accountability

It is imperative that reporting connections be made crystal apparent in order to ensure that all
members of the organization are aware of their roles within the company, as well as the individuals
to whom they are accountable for the completion of their tasks. Because these links are so obvious,
it is much simpler for managers to oversee employees working at lower organizational levels. Each
employee benefits by knowing whom they can turn to for direction or help. In addition, managers
are aware of those individuals whose responsibilities fall beyond the scope of their authority. This
ensures that they do not venture outside of their limitations and interfere with the responsibilities of
another management.

Growth & Expansion

Companies that are able to sustain rapid expansion are those that make efficient use of their
available resources, especially the managerial skills they possess. When a company has an effective
organizational structure, it can ensure that the proper people are working in the appropriate
positions. The structure may imply that there are weak spots or inadequacies in the management
team that is currently in place at the organization.

It is imperative that the organizational structure develop in tandem with the expansion of the
company. When one department head has too many persons reporting to him at once, there is often
a need for additional levels of management since it is impossible for the department head to provide
each employee the attention and direction necessary for the employee to succeed.

Efficient Task Completion

The successful execution of projects is made easier by organizational structures that are well-
designed. If the boundaries of each department's duty, as well as the competencies of each
individual on the team, are defined precisely, project managers will have a much easier time
determining the human resources that are at their disposal. For example, if you were working on a
project to develop a new product, you would need to conduct market research. The manager of the
project needs to be aware of who within the organization is able to carry out this research and from
whom authorization must be sought before the research can be carried out.
Fits Company's Needs

Companies operating in distinct markets have varying requirements for the composition of their
talent pools and place varying degrees of priority on particular managerial tasks. For example, a
software corporation will often have a sizable number of developers on staff. It is absolutely
necessary for the success of that kind of business to organize the reporting relationships within the
development team in such a way that both creativity and productivity can be pushed to their full
potential and deadlines can be reached.

Companies frequently have to go through a period of reorganization, during which individual

positions or even whole departments may be moved around on the organization chart. This is done
in an effort to make the most efficient use of the company's human resources and to ensure that the
operation is carried out in an orderly fashion.

Why Organizational Structures Fail?

1. Not knowing what you are trying to achieve

It is essential to have a clear understanding of the reorganization's goals before beginning to

rearrange the boxes and lines on an organizational chart. Is it the consequence of a merger, an
acquisition, or a reduction in staff size? Are you looking to cut expenses and increase your business's
efficiency? Are you experiencing difficulties with your performance? Is there an excessive number of
direct reports, which can be preventing the growth of employees and inhibiting innovation? Is there
an excessively complicated reporting structure? Companies can increase the likelihood that the
redesigned organization will achieve its stated goals with the support of clear rules that represent
what those goals are for the new company.

2. Structuring an organization for specific personnel

It is not unheard of for specific individuals within an organization to wield a significant amount of
power as a result of their length of service, level of knowledge, or significance to certain customer
connections. As a consequence of this, there is a possibility that the preferences of the person will
take precedence during the process of designing the organization, rather than the goals and
requirements of the company. It is of the utmost significance to keep the organizational design
aspect distinct from the process of actually selecting staff members.

The organization design should be driven by strategy, and strategy should dictate the types of
people to hire based on the design of the company. If you create an organization around the people
who will work there, it will not be optimized to provide the most effective support for the broader
goals that have been established. It's possible that skill sets won't be sufficient to meet future
demands, and that labor prices won't be accurate. And while it may be possible to assuage guilt or
preserve a previous relationship by putting a single person in a position that is not a good match for
them, the wider business will suffer as a result, putting both income and efficiency at risk.
Additionally, the individual may get disengaged over time when working in a position for which he or
she is not appropriately fit. This might be a result of working in an environment that is not conducive
to optimal performance. If you construct an organization around the people who will work there,
you will end up with compartmentalized processes that are owned by separate people. This will lead
to a decrease in overall efficiency and put the organization's ability to support the overall business
strategy in jeopardy.

3. Causing more disruption than needed

Re-organization is viewed as an opportunity to "clean house." Although it is true that the need for
change typically provides a good opportunity to also address other inefficiencies or issue areas,
leaders should be cautious about causing more disruption than is necessary in order to avoid
negatively impacting their teams. The morale of workers might suffer when drastic workforce
reductions or process changes are implemented. This can also lead to the loss of valuable talent, a
halt in innovation, and an overall diversion from the organization's primary goal.

4. Making decisions and/or having sidebar agreements outside of the agreed-upon process

The viability of the project is put in jeopardy if a sidebar or supplemental agreement puts at risk the
process that has been documented, agreed upon, and conveyed. These activities might make it
possible for additional exceptions to be made to the process of designing the organisation, and they
might also make it more difficult for people to trust the leadership of the company going ahead. For
instance, management has devised a method of evaluating and choosing candidates for all of the
positions that have been rearranged. Two managers are overheard having a side conversation in the
hallway where they express their desire to fill one of the posts with "someone like Kim." Despite
having already communicated that the two positions will be posted and interviews will be conducted
in order to make the final selection, the two managers come to an agreement and decide that Kim
will be promoted to the position and that they will find someone to replace her in her current role.

Even though it might appear harmless at the time to make minor adjustments to the process that
has been agreed upon, doing so actually puts the project in jeopardy because it creates the
justification for making larger exceptions later on in the process, and it also demonstrates to the end
population that the process is not "fair."

5. Ignoring the currently administered state assessment

There is a strong desire among many companies to skip the stage of completing a full current state
assessment (CSA), which takes into account the organization's current expenses, volumes, and
service levels, and go straight to the stage of designing the organization. Because the design is based
on many of the metrics and criteria that are set inside the CSA, it is essential that a thorough CSA be
finished before the design begins. It is typically dependent on an organization's capability to analyze
and compare layers, spans, and cost-to-manage to standards in order to determine whether or not
the redesign resulted in gains in efficiency and/or performance. Without a CSA as the foundation,
these and other analyses cannot provide the level of insight necessary for decisions to be made.
6. Violating the rules of confidentiality by disclosing the information

It is of the utmost importance for all participating in the redesign to maintain the secrecy of the
project information at all times. It can be detrimental to an organization's level of employee
engagement and general productivity to reveal too much, too fast, to people who are not part of its
"Circle of Trust." When a new organizational structure is designed, the roles, responsibilities, and
reporting connections within the organization change as a result. As a result of the fact that these
modifications have the power to either promote or discourage workers, they also have the potential
to endanger the efficiency of the new structure. If workers believe that they will not have a job in
the organization's future it can have a negative impact on their performance, which can trickle down
to other individuals or entire departments. This has a network effect on the rest of the organization.
In addition, firms run the risk of losing their most brilliant personnel, who may be highly sought after
in the market but are concerned about their future within the new organization. This may cause
these individuals to leave.

7. Failing to implement a comprehensive change management and communications approach

It is of the utmost importance that a formal plan be established in order to facilitate the conveyance
of the appropriate information at the appropriate moment in the process. All levels of the
organization should be kept apprised of the development of the details of the new organization, as
well as the details regarding the selection procedure, as they are finalized. By doing so, you will
reduce the likelihood of being surprised or confused about the new obligations and expectations
brought about by the shift. During the process, the legitimacy of the organization will be called into
question if rumors and formal communication are in disagreement with one another.

Reorganizations have the potential to be very fruitful endeavors. However, if you take the time up
front to identify what your primary drives are—whether you are trying to change the culture,
decrease expenses, promote growth, or alter general operations—you can increase the likelihood
that you will succeed in achieving your objective of improved performance

Impact of Poor Organizational Structure on Entrepreneurial Ventures

The company's organizational chart serves the same purpose as a navigation map. However, if your
organizational structure is poor, you may face a number of difficulties, including the following:

Serious financial loss: Because of the excessive use of enterprise resources and budget

Inadequate communication between departments: It can be difficult for teammates to determine

who and when they should report their tasks to.

Departmental strategic management is lacking: It is difficult to develop and implement effective

long-term plans for developing new products or services, expanding supplier channels, and so on.

Poor brand reputation: Order delays and lengthy wait times for your customer, you may also lose
new clients.