3 Organizational Design Errors CEOs Make

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Many CEOs miss the mark on the design of their executive team.

It may seem basic, but unless the CEO has the right direct reports, managing performance is going to be tough.

The issue usually involves one key function reporting to another function — rather than straight to the CEO. The three classic misalignments of this kind are:

HR reports to finance or operations. Despite lots of talk of a “seat at the table” for human resources, HR leaders often sit below a CFO or COO on the org chart (13 and 10 percent, respectively, according to SHRM).
But HR isn’t just a cost center or an elaborate process to be managed. Rather, it’s a strategic function so vital that it should be overseen by the CEO him- or herself.

Anecdotally, I’ve seen CEOs much more in touch with their HR leadership recently thanks to the pandemic upheaval of 2020 and beyond.
Marketing reports to sales. My colleague Veena Vadgama wrote about this one recently. Marketing is a strategic function that defines, describes, and promotes the company’s products and services; it’s not a subset of the sales organization, merely responsible for funneling in qualified leads.
This latter view sometimes leads to a marketing team that reports up to a sales leader or CRO rather than to the CEO. This marginalizes the ongoing marketing function and, as Veena points out, leads to less experienced and less motivated marketing leadership.
Customer success reports to sales. We all know how urgent and primary sales are (especially early in the company lifecycle), but this often leads to the sales organization subsuming another department: customer success / customer service.
However, customers represent their own constituency; they deserve representation directly to the CEO, unmediated by the interests of sales.

Satisfying and listening to customers, turning them into evangelists, and championing their interests is the job of your customer team, and it’s best overseen by an executive with a direct line to the CEO.

Any of these org chart design issues can handicap an organization. When I talk to a CEO who’s encountering an issue, nine times out of ten I draw out the six areas of the business (each of which should report to the CEO) and we’re able to pinpoint the problem.

You will sidestep a lot of strife by not relegating a key executive under another executive — effectively putting them at the kid’s table of the leadership team.

Bring all six executives to the big table and you’ll enjoy a balance and perspective missing in many of your competitors’ conference rooms.