When you started your company, your organizational chart was probably very simple: just you all alone. Then maybe you hired freelancers to help you. Now, you need employees dedicated to growing your company, but your organizational chart doesn’t include them.
Before creating your own org chart, it may help to understand the typical organizational stages companies traditionally go through:
The Hub and Spoke.
When you add your first part- or full-time employees, the organization chart is a series of dots all clustered around and reporting to you. When there are fewer than six people, this can be effective, since you're still directing your company in a command and control type of environment where you make all the decisions.
As more employees get hired, people usually begin to specialize and not do every job in the company. Departmental responsibilities begin to form with everyone still reporting to you. These typically include sales, marketing, production or service delivery, development, and office or bookkeeping activities. The first departments typically to form are the activities you don't want to do yourself.
The First Manager.
After about nine employees, you'll probably name the first manager to direct the work of other people. This may be in practice or in name only (i.e., you're still the “real” boss). Early on in this structure, you still make all the critical decisions.
The Top Down.
In this model, you implement a hierarchical decision-making process so specific actions can move forward without your approval. You start to hire managers who are more experienced and highly paid to gain increased leverage in the business. Letting go of total control may be one of the most difficult transitions you'll need to make as the company grows in revenue and people.
The Great Autonomy.
Managers gain control over their own strategy, tactics and people under this model. But going from total control to no control can send panic through even the best entrepreneur. Instead, consider a two-step process to start giving one strategic task to the best manager to complete. Help set the goal, how it will be achieved, what success will look like and its due date for completion. Monitor the ongoing results. When this is successful, you might then delegate more tasks to the same person, but this time have them determine how it will be achieved. As things progress, give more autonomy to more managers. This is also the time when many founding entrepreneurs may be replaced by professional CEOs.
The organization may eventually become too big and bureaucratic. That might sacrifice some ability to be nimble, innovative and change direction. At this point, you might split off a unit to be the incubator for new ideas and projects. This was done very effectively when I was at IBM in 1981, when they started to develop the personal computer in its own division in order to be successful.
The Great Divide.
If this new business initiative is successful, it may even get split off to its own company or autonomous division. The organizational process then typically starts all over again from the hub and spoke model.
The New Rules of Organization
Some entrepreneurs have come up with more innovative organization models to meet the creative needs of their companies and the constantly challenging market. They include:
This is typically s a small, autonomous group. Rather than the traditional vertical groups (sales, marketing, delivery and product), autonomous pods have at least one skilled person from each vertical discipline. Each pod is essentially a startup with its own product and set of metrics. The goal of this design is to reduce interdependency by enabling autonomous pods to focus on clear outcomes that deliver value to customers. Pods typically rotate leaders, so there’s no one person with the title of manager.
In this organization model, authority is distributed and everyone becomes a leader of their own roles. The goal is to give more power to employees, and to make the concept of bosses obsolete. For this system to work, it helps to have a purpose-led company whose employees all share a clear sense of direction. Then the business can shift to organizing the work, not the people. Teams, which are called “circles,” are created, and instead of employees having a predefined job, they try to fill many roles in many places within the organization. Each role comes with a list of responsibilities assigned to an individual within that circle. CEO Tony Hsieh restructured Zappos to run this way.
The Zero Governance.
In this organization, there's no formal management or hierarchy at all. No one tells employees what to do (or what not to do) and there are no reviews, no job titles or promotions. Leadership of any project is determined in an organic way by whoever steps up. Raises and bonuses are based on peer reviews. If a team member decides one day to do something different, they simply move their “stuff” to a new function. Bellevue, Washington-based Valve proclaims that it has been boss free since 1996.
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This article was published on January 23, 2015.
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