Free Management Library's
Online For-Profit Organization Development Program Module #2:

Starting and Understanding Your Organization

Written by Carter McNamara, MBA, PhD, Authenticity Consulting, LLC. Copyright 1997-2008.

(This learning module is in the organization development program. However, this module can also be used by anyone as a self-study exercise to learn more about starting and understanding an organization.)

INTRODUCTION

This module is useful to entrepreneurs who are thinking about starting a business, or have already started their business and what to understand more about what they're really doing. The module also will be useful to practitioners/consultants who want broader understanding about business organizations, including how they are started. This understanding for practitioners/consultants can help them provide more effective services to clients and establish stronger credibility with leaders and managers in the workplace.

Starting an organization requires careful thought and planning. However, you can't effectively manage an organization if you can't effectively manage yourself. So in this module, you are first guided through some careful examination about yourself as entrepreneur (and you are an entrepreneur if you are starting an organization).

Maintaining a healthy organization requires healthy practices in boards of directors (if applicable, for example, if your organization is a corporation) and management. To truly understand and be effective at these practices, it helps greatly if board members, chief executive and employees have some basic understanding of the overall organizational "system" of their organization, including its common traits, dimensions, "personality" and life cycles.

This is not just an academic exercise. Too often, people don't really understand the overall structures in their organization. When problems occur, they only see the specific events, and not the larger structures that cause the behaviors that cause the events -- this is very important for practitioners, too. To effectively resolve problems, you have to change the structures -- not just react to events.

The importance of this understanding of organizations is evident when you realize that many graduate business training programs start out with an overview of the organizational system, often in a course called, for example, "Organizational Theory".

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MATERIALS TO REVIEW

• The following materials will help you address each of the topics and learning activities in this module.

Starting Your Organization

Preparation for Planning a Business Venture
NOTE: If you are not starting your own organization, but rather are wanting to learn about what's involved, then you need not answer all of the questions in detail in this study material -- and you probably don't need to follow links out of the document. However, you should scan the questions in order to understand what's involved in starting a business.

Considerations About You

- - - Are You Really an Entrepreneur? (read all the articles about entrepreneurs, their traits, etc.)
- - - Have You Looked at Alternatives to Starting a Business? (review the questions)
- - - Are Your Personal Finances in Shape to Start a New Business? (review the questions)
- - - How Will You Manage the Stresses Involved? (consider your own stress management)

Considerations About Your Business Idea (some basic business planning)

- - - Is There Really a Market for Your New Product/Service? (understand considerations)
- - - What Type of Business Will You Start? (for-profit? nonprofit? what name?)
- - - What Are the Risks Involved?
- - - What Skills Do You Need to Run Your Business?
- - - What Are Your General Plans for the Future of Your Business?
- - - What Resources Will You Soon Need? (skills, facilities, money, etc.)
- - - You're Ready to Write a Business Plan Document, If Needed
- - - If You're Still Going to Start a New Business ..

Understanding Your Organization

NOTE: You need not follow links out of the following documents, but do read the content on each of the following Web pages.
Organizations (an Introduction) -- particularly the sections:
- - - Basic Definition of Organization
- - - Various Ways to Look at Organizations
- - - Two Basic Types of U.S. Business Organizations
- - - Legal Forms and Traditional Structures of U.S. Businesses
- - - Common Dimensions in Organizations
- - - Key Concepts in the Design of an Organization
- - - Organizational Culture (the "personality" of the organization)
- - - Life Cycles of Organizations
- - - Future of Organizations -- A New Paradigm?
- - - - - - Characteristics of the Future Organizations
- - - - - - New Structures (networks, self-managed teams, learning org, self-designing org)

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SUGGESTED TOPICS FOR REFLECTION AND DISCUSSION

• Learners are strongly encouraged to discuss the following questions with peers, board members, management and employees, as appropriate.
• Note that if you are planning to start a new organization, it will be very helpful to obtain documents relevant to the particular rules and regulations to start a business in your state. Contact your local Secretary of State and/or Attorney General's office and ask what documents you need to start a business. It will be very helpful if you have addressed the following activities.

Understanding Your Organization

1. What is a basic definition of an organization? An organization gets ongoing direction primarily from mission, vision and values. That's why it's so important for boards, management and employees to understand these concepts and how they apply to their organization. What is a mission? Vision? Values? (See Basic Definition of Organization (which includes some optional reading about systems thinking).)

2. It helps a great deal to think of organizations and programs as systems, for example, when planning products or managing major changes in your organization. What is a system? (HINT: Think about inputs, processes, outputs and outcomes.) How is a system different than a pile of sand? What are some common characteristics of systems. How is an organization like a system? (See Basic Definition of Organization (which includes some optional reading about systems thinking))

3. What metaphor do you prefer to describe organizations? Machines? Organisms? Persons? Groups? Families? Others? (See Various Ways to Look at Organizations.)

4. Organizations have certain dimensions and concepts in common. When designing, organizing and/or re-organizing organizations, it helps to be aware of these dimensions and concepts. Name at least three of the dimensions of organizations. Name at least three key concepts to consider when designing organizations. (See Common Dimensions in Organizations and Key Concepts in the Design of an Organization.)

5. The concept of culture is VERY important. Each organization has its own unique culture. When managing an organization, it's important to acknowledge what values are really important to the organization, what behaviors typically occur and what behaviors are really treasured. Lack of understanding about culture is one of the major reasons that organizational change efforts fail. Describe the concept of organizational "culture". (See Organizational Culture -- the "personality" of the organization.)

6. People -- like most other systems -- go through life cycles. When trying to understand, manage or help a system, it's very important to you know what life cycle the system is in. This is true for organizations as well. Organizations have life cycles. This is often forgotten when trying to work with organizations. Describe the concept of organizational life cycle. (See Life Cycles of Organizations.)

7. What is the "new paradigm"? What are several of the changes that might be expected in this new paradigm? What major, overall driving forces are causing this new paradigm? What are some of the characteristics of organizations in the new paradigm? What are some of the new structures that you might see in the new paradigm? (See Future of Organizations -- A New Paradigm?, Characteristics of the Future Organizations and New Structures (networks, self-managed teams, learning org, self-designing org ).

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ACTIVITIES TO BUILD SYSTEMS AND PRACTICES

• Learners are strongly encouraged to complete the following activities, and share and discuss results with peers, board members, management and employees, as appropriate.
• As you proceed through the following activities, be sure to note any incomplete actions in the Action Item Planning List.
• Note that the information in the subsections "Understanding Your Organization ..." is enough to give you a basic sense of your organization, including its structure and basic parts, its current (or desired) personality, and feedback among the basic parts. You'll soon learn a great deal more about your organization as you progress through the remaining modules in this program.
• Note that if you are planning to start a new organization, it will be very helpful to obtain documents relevant to the particular rules and regulations to start a business in your state. Contact your local Secretary of State and/or Attorney General's office and ask what documents you need to start a business. It will be very helpful if you have addressed the following activities.

Starting Your New Organization

1. Write a five- to ten-sentence description of the purpose of your organization. This is the mission statement of your new organization. What is the nature of your organization's products and industry, e.g., services, manufacturing, wholesale, etc? (For assistance, see Writing/Updating a Mission Statement.)

2. If you are forming a corporation, you'll likely need a board of directors. Find out the minimum number of people required to be on a corporate board of directors in your state. You might call, for example, your Attorney General's office, States Attorneys office, etc. Recruit at least this number of people to join your board. (For assistance, see
Overview of Board Roles and Responsibilities of Board of Directors, Joining a Board and Recruiting and Orienting Members.)

3. Recruit expertise to help you get your organization started. A great place to start is by getting references from other small organizations. Don't forget about finding an insurance agent. You'll probably soon need liability and property insurance. (For assistance, see
Getting and Using a Banker, Joining a Board, Getting and Using a Consultant, Getting and Using a Lawyer and Getting and Using an Accountant.)

4. If you plan to form a corporation, then draft a set of Articles of Incorporation (or whatever other type of legal charter is required, for example, a constitution, Articles of Association, etc.). (For assistance, see Articles of Incorporation.)

5. Your board (if applicable) will probably need a set of bylaws (bylaws specify how your board will govern the organization and how it will be configured, for example, with a chief executive, etc.). (For assistance, see Corporate Bylaws.)

6. Make a draft (probably a very rough draft at this point) of a plan that includes the top 5-8 goals for the organization to accomplish over the next year. Think about what resources are needed to achieve these goals. (This is a very rough draft of a strategic plan. We'll refine the plan later in this program.) Write down the costs for the resources and group them in major categories including: personnel, computers, office supplies, facilities (rent, utilities, etc.) and any other major groups of costs. This is a very rough draft of a yearly budget. You don't have to go into great detail at this point. (For assistance, see Guidelines and Framework for Successful Planning, Basic Description of Strategic Planning and How Do We Prepare a Budget?)

7. Hold a meeting of your board of directors, if applicable. In the meeting, members should review the drafts of the Articles, bylaws, strategic plan and budget. Members should vote to approve the drafted items. Members should also vote to select officers. Your state may require that boards have certain officer roles, for example, Chair/President, Secretary and Treasurer. (For assistance, see Board Meetings and Sample Meeting Minutes .)

8. Make the necessary filings for incorporation (probably to your local Secretary of State), if you are planning a corporation. That office can likely provide you continued guidance for legally registering your organization.

9. On the Action Item Planning List, make note to follow up on the following actions.
a) Contact your local city hall to identify if you need permit or license to makes sales in your locale.
b) It may be useful to obtain a employer identification number at this time, so you're ready if and when you hire employees. You can get this number by calling the
c) Start obtaining facilities in which to operate, whether in your home, an office, etc. The link Setting Up an Office may help you.
d) Begin looking into computer equipment you may need. The link Computers, Internet & Web may help you.

Understanding Your Organization -- A Systems View

1. Diagram a logic model of your organization, including its inputs, processes, outputs (tangible results) and outcomes (impacts on customers/stakeholders). (Note that this systems view is sometimes called an "outcomes model", which is very useful when trying to get a clear perspective and understanding of your organizations.) Fill in the table in the Guidelines and Framework for Designing Basic For-Profit Logic Model

2. If possible, diagram a basic systems view of the development of each of your products in your organization, including inputs, processes, outputs (tangible results) and optionally outcomes (impacts/benefits on customers). (Note that we'll soon give more attention to products, including their design and marketing, in an upcoming learning module.) Fill in the table in the Guidelines and Framework for Designing Basic For-Profit Logic Model

Understanding Your Organization -- Its Culture, or "Personality"

1. Write a half-page description of the culture of your organization. Include what values your organizations holds dear and what values you see reflected by the behaviors in your organization. Note that if your organization is still fairly new, you can still benefit from this activity by describing what you'd like to see as the "personality" of your organization. This activity will be useful later on during strategic planning when writing values statements. (For assistance, see Organizational Culture -- the "personality" of the organization.)

Understanding Your Organization -- Its Life Cycle

1. Write a half-page description of the life cycle of your organization. Is it in Birth? Youth? Midlife? Maturity? Include what characteristics you observe that lead you to conclude that your organization is in that life cycle. Note what life cycle will be next for your organization. Include description of any challenges that you might expect when you go through the next life cycle change. (For assistance, see Life Cycles of Organizations.)

Understanding Your Organization -- Its Communications

1. In the materials for review, you learned that organizations are systems and that for systems to thrive, their needs to be continued and effective feedback (communications) between its major parts. What can you do to ensure effective communications between the key roles in your organization, including customers, board members, board committees, board chair, chief executive and employees? Effective communications requires more than good intentions. What specific structures can you use, for example, consider reports from management and employees, meeting minutes, staff meetings, etc. (For assistance, see Basics of Internal Communications, Communications (Writing) and General Recommendations to Improve Communications Skills.)

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ASSESSMENT(S)

Assessments for Organizations 1. If you already have started your organization, then perhaps the following organizational assessments can help you measure the health of various aspects of your organization. If you have not started your organization, or if you just want to understand the nature and systems of organizations better, then the assessments can be helpful as well -- you might give them a quick scan.
Organizational Assessment Tools

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TRACKING OPEN ACTION ITEMS

1. One of the first indicators that an organization is struggling is that open action items are not tracked and reviewed. (Open action items are required actions that have not yet been completed.) Instead, organization members only see and react to the latest "fires in the workplace". Whether open action items are critical to address now or not, they should not entirely be forgotten. Therefore, update and regularly review a list of open action items that includes listing each open action item, who is responsible to complete it, when it should be completed and any associated comments. When updating the list, consider action items as identified during discussions, learning activities and assessments in this module. Share and regularly review this action item list with the appropriate board, management and employees in your organization. You can use the following Action Item Planning List.

2. If you have questions, consider posing them in the national online discussion groups HRNET or ODNET which are attended by many human resource and organization development experts.

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(Learners in the organization development program can return to the home page of the organization development program.)

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For the Category of Capacity Building (Nonprofit):

Related Library Topics

Recommended Books

Starting a Nonprofit Organization

Overall Capacity Building to Enhance an Established Nonprofit Organization

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Starting a Nonprofit Organization

The following books are recommended because of their highly practical nature and often because they include a wide range of information about this Library topic. To get more information about each book, just hover your cursor over the image of the book. A "bubble" of information will be displayed. You can click on the title of the book in that bubble to get more information, too.

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Overall Capacity Building to Enhance an Establish Nonprofit Organization

The following books are recommended because of their highly practical nature and often because they include a wide range of information about this Library topic. To get more information about each book, just hover your cursor over the image of the book. A "bubble" of information will be displayed. You can click on the title of the book in that bubble to get more information, too.

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Also See

Organizational Development -- Recommended Books

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