First-time CEOs and entrepreneurs often call me to discuss how to structure their organizations. Common questions include: Should I hire a COO or not? Who should the VP marketing report to? How should I split up product and engineering? Should our international arm build out its own functions or be matrixed with U.S. headquarters?
There is often fear in the mind of the entrepreneur that there is a “right” answer to how to structure an organization—and that if she screws it up by doing the “wrong” thing, the implications could be disastrous. This is an incorrect perspective. Most of the time there is no “right” answer and org structure is really an exercise in pragmatism. That is, what is the right structure given the talent available to your company, the set of initiatives you need to pursue, and your company’s 12- to 18-month time horizon?
Here are a few key takeaways and things to keep in mind about org structure:
When I joined Google, it grew from around 1,500 to 15,000 people in three-and-a-half years. After my startup was acquired by Twitter, Twitter grew from about 90 to 1,500 people in less than three years. A company that grows that rapidly is literally a different company every six months. This means that every 6–12 months the company’s org structure may change.
When choosing an organizational structure for your high-growth startup, focus on the next 6–12 months. Don’t try to find the “long-term” solution, as in the long term your company will be completely different and have radically different needs. Eventually, your executive team will start to stabilize but the teams under them will have more frequent re-orgs as each organization ramps in size.
“Eventually, your executive team will start to stabilize but the teams under them will have more frequent re-orgs as each organization ramps in size.”
– Elad Gil
Often there is no one answer to how to structure your organization. Rather, it is a series of trade-offs. Two different structures may be equally “good” and “bad.” Don’t sweat it too much—ultimately if you make a mistake, it will be painful but you can undo it.
Communicate to the team that as your company grows quickly, things will shift around. Make it clear that it is normal for that to happen—it’s a sign of your success— and that other companies that grow fast do the same thing.
Executive bandwidth may be more important than a traditional reporting chain. For example, Alex Macgillivray, the talented former general counsel at Twitter, had user support, trust and safety, corporate development/M&A, and other areas reporting to him at various times, in addition to legal. Many of these departments normally would not report to a GC, but Alex was talented enough to take on more in the absence of other executives with bandwidth to own these areas. As new executives were hired or promoted, things then transferred over to them from Alex.
As CEO, you should look at your team and allocate functional areas based in part on who has the time and skill set to focus on and make that area succeed. This does not mean the chosen executive needs to manage that area forever. Remember, nothing needs to be permanent. There are also some cases that don’t make sense from a tie-breaking or skill set perspective—e.g., your VP engineering should probably not run sales in addition to engineering. However, if needed, your VP engineering could potentially manage the design or product teams in the short term or, if it makes sense to do so, even longer term.
Reporting chains are ultimately about decision-making. For example, there is a natural tension between engineering and product management, so where do you want most decisions to be taken if the two groups disagree? The person who both functions report to ultimately functions as the tie-breaker between the orgs. This is a good heuristic to keep in mind when thinking about org structure.
As an exhausted founder/CEO, the temptation is to try to hire an executive for a role who will last for the remaining history of the company. This leads to over-hiring, or hiring someone who will likely be ineffectual at your current scale. For example, you do not need a VP engineering who has run a 10,000-person organization when you only have 20 engineers. Instead, hire someone who has led a 50- to 100-person team and can scale up your org to the right level over the next 12–18 months. Either that person will grow with the team or you will need to hire someone new in the future. Ben Horowitz has a good perspective on this in his book, The Hard Thing About Hard Things.
Of course, if the executives you hire do grow with the company, all the better; a stable management team is a big positive for a company. Even if the executive team evolves only slightly over time, though, you should realize that your org structure may still change more rapidly.
There is no perfect organizational structure for a company. A company is a living, breathing thing and will change with time—as will the organizational scaffolding on which it is built. As CEO, focus on a pragmatic solution for the next 6–12 months of the company’s life, rather than the perfect long-term solution. 1