Organizational Structure – Startup to Maturity – Part 2

This is the second part of my blog post since the first one was getting too long and this topic can be several chapters in a book.  The observations and lessons learned  as a 3 time CEO, 2 time CTO, and a GM driving a startup division from 1 person to nearly 500 people worldwide.

To recap,  I recently had the privilege of presenting to the Software Leaders Group organized here in Dallas.  The group consists of CTO, CIO, other senior development leaders both for product and large enterprises.   My presentation discussed  the startup to maturity challenges of a software or high tech company organizational structure, leadership, and hiring/retention.  The organizational challenges of a startup are very similar in a mature organization who is venturing into a different product area or wants to drive innovation.

(Slides are available at the bottom of this article.)

There are fundamental changes in the organization as the startup grows in maturity and size.   I’ve seen this play out consistently with very distinct inflection points through the business growth process.  Business growth is great but you will need to understand that it will  have its own stress and anxiety as well as attrition.

VC to RevenueAs the organization matures, the final stages is something we see in larger organizations, its generally not very creative but a straightforward hierarchal structure.  You may think there is creativity in the org structure but end of the day for proper control and oversight clear accountability and responsibility needs to be in place.  Having said that, I think the flatter the organization the better.

I see organizations that have added layers through growth and have isolated themselves from the people doing the work and closest to the customer.  Organizational boxes are added to accommodate a person that doesn’t quite fit in the executive/management ranks but needs to be promoted to a better salary so they don’t quit.  As I discussed in the previous post, this is a mistake.  Don’t add layers or positions to accommodate someone.  This is a disease that will be very hard to get rid of especially as you grow.  You’ll under pressure to do the same thing elsewhere in the organization.   These added layers become very problematic especially when you hit a rough patch and need to cut costs.

The organization needs to be designed to allow people to see growth paths for careers that make sense for their area of discipline.  For example, an engineer who is brilliant doesn’t make them a good manager.  This though is many times that is the only path upwards in a traditional organization.  Why not provide an engineering growth path that raises the brilliant engineer in stature, give them a title to participate in industry committees and steering groups.  What I’ve done in the past is create something similar what IBM has done, create a position or group called scientists or research etc. Then you have a chief scientist.  This gives engineers upward mobility for increased salary and stature without putting them in a frustrating position of managing.

As the organization grows there are always needed areas of change to adopt to market conditions, emerging competition, customer needs etc.  The focus may change from engineering to product management to marketing to sales for structuring and hiring.  Change in product management maybe necessary when you have a new product line or maybe it make sense to breakup the product into smaller chunks or focus on verticals where the base product stays the same but feature nuance maybe needed or how to go to market.  The sales teams always seems to be in flux.  Get a good and experienced sales boss that understands growth and change and the sales model you’ve landed on.  So many different sales models I can’t discuss them all here.  Marketing is another one depending on campaigns, conference and show support, PR etc will require additional staffing or shuffling of positions.  

I hope you are getting my point… your organization will be changing.  If you don’t change you will die… pretty blunt but thats the way it is.

The-Greiner-Curve Larry Greiner, a professor of management and organization at the University of Southern California’s Marshall School of Business came up with a organizational theory/model in 1972.  A very interesting theory that I think has proven itself for organizational change and challenges in growth.  There is also a 1998 Harvard Business Review article on this called Evolutoin and Revolution as Organizations Grow by Larry E. Greiner.  I highly recommend you find a copy.

I also included a YouTube video that goes through the Greiner Curve explanation and worth 5 minutes of your time to review it.

Also here are the slides I used for my presentation: Organizational Tipping Points

Please don’t hesitate to contact me about Organizational Structures… its one of my favorite topics and hard to get right when you are growing  Contact

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