Organisational Structures

Thu 20 March 2014 by Jim Purbrick

There have been a number of blog posts recently about exciting new organisational structures. As Cory points out “Every early stage company thinks it has reinvented management”: a very dangerous belief when betting on a new organisational structure can be much riskier than betting on the wrong product.

It starts innocently enough: version 1.0 has finally launched, early adopters have arrived, the graphs are definitely starting to point upward and it’s time to hire.

Growing the company is the next challenge, but no one has spent the last couple of years foregoing income and sleep to build another Acme Corp., in fact no one believes that an Acme Corp. would have been capable of launching version 1.0 which was clearly only possible due to having a room full of smart people and no management.

So, the first course of action is to hire more smart people and empower them to choose the right thing to do. This works for a while but eventually the CEO can no longer keep track of what everyone’s doing and some things are falling through the cracks.

This is clearly a scaling problem, so a scalable system is devised. Maybe everyone picks N tasks a week and votes on the most important, maybe this is 2 years ago and some bonuses are sprinkled on gamification style, or this is in 6 months time and some sharing economy social mechanics are wedged in.

Like all alphas there are some wrinkles and so the system is tweaked and iterated on, but now the organisational structure has become a second product. While some people are enthusiastically hacking on the organisation, they’re not working on version 1.3 which is late. Other people are frantically trying to get version 1.3 out of the door while another no longer buys the new organisational structure and has cashed in their last 2 years vacation along with the money they gamed from the bonus system to pay for a month long holiday in the sun.

Eventually it becomes clear that fighting on two fronts is not sustainable and the CEO decides to pivot to a more conventional organisational structure to concentrate on getting version 1.4 out on time. Some of the people who heroically got 1.3 out of the door would make great managers, but by this time they have either already burned out and left or are shopping their CVs to Acme Corp.

Luckily the product is still generating buzz, so a brace of experienced managers can be drafted in, but this generates even more organisational churn as some more of the smart people look up 4.5 years in to their 3 month project to discover that a lot of their friends have left.

The organisational structure that looked like a trivial problem compared to building version 1.0 results in version 2.0 never shipping.

Getting product decisions wrong costs time and money. Getting organisational decisions wrong burns even more valuable human capital and goodwill. Engineers at startups expect to make product pivots, but they don’t expect to be alpha testing an ever-changing series of organisational MVPs at the same time.

In many cases the ground breaking tech product and/or service is mostly a clever combination of commodity hardware and open source software connected to the internet and maintained by a small and heroic ops team.

Similarly, the innovative company is often a clever combination of existing organisational structures maintained by a small and heroic management team.

I’m currently very happy as one of the nodes in the middle left picture below. We’re hiring.

Organizational Charts (via bonkersworld.net )

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