Design, refine your accountability structure

Design, refine your accountability structure

Some novel organizational structures have emerged in recent years, especially among forward thinking tech companies. A few of the more well-known concepts include Holacracy, Sociacracy 3.0, and various other approaches that involve task forces or ‘squads’ that constantly spin up and disband. In our view, these are all interesting but unproven.

It’s worthwhile to read up on these org experiments and maybe even cherry pick a few transferrable practices. Otherwise, we suggest sticking with a more conventional, level-based framework: in most structures, priorities flow downward and accountability flows up from individual contributor to manager to executive leadership to CEO to board to shareholders. The reporting lines change as needed, but not too often.

Once your company exceeds ~50 people, you will necessarily start building out the middle layers. Certain functions need it sooner than others – this is often an “a-ha” moment for one or two leaders when re-evaluating organizational needs. When you add mid-management, beware of stifling cross-department collaboration or organizational agility.

Tips for avoiding the pitfalls of additional management layers:

  • Allow/encourage dotted lines:in a cohesive organization, it’s natural for individuals to report to different people for different things, often across department lines. This facilitates the cross-pollination of ideas and offers career development opportunities. Just ensure everyone knows exactly to whom they report for each project/task and limit everyone to just one solid reporting line at any given time. The manager at the receiving end of this solid line should have the best pulse on the overall workload, development, and wellbeing of their direct report.
  • Avoid managing by committee each employee should have a single direct manager who trumps all other dotted line managers of that employee (see commentary above). Management by committee (i.e. multiple managers taking partial accountability for an employee) generally does not work because it leads to accountability cracks and confusion at all levels.
  • Connect individual objectives to company-wide objectives: this will discourage silo mentality and spur people to work across groups.
  • Adopt select practices from more avante-garde systems as mentioned above, we don’t advise full adoption of these systems, but there is something to be said for the spirit of individual empowerment and organizational agility behind them. Leaders will do well to selectively implement a few specific practices that can successfully transfer to their own company culture, just as long as they remain grounded in reality vs. aspirations.

The other key structural consideration as your company scales is whether to remain a functional or divisional organization. Functional organizations are organized by functions which work across all product lines. Divisional organizations are organized by product lines, each running semi-autonomously with their own P&L and dedicated functional support.

Source: Ben Thompson, Stratechery

Nearly all startups begin as functional organizations by definition because they have a single product line. As companies launch new and distinct product lines, divisional separation starts make sense. This is the typical evolution. Of course, there are notable exceptions such as Apple. (sidenote: there is an interesting history behind this, starting with Dupont Chemicals nearly a century ago. You can read that story as well as some excellent, albeit dated commentary on Apple and Microsoft’s org structures here and here).

There are many factors to consider when deciding which structure is right for your org, some of which are listed below. As you can see, functional structures are much harder to pull off at scale. Regardless of the decision you make, making it deliberately and at the appropriate crossroads will put you ahead of the pack. Most rapidly scaling companies ultimately stumble into some hybrid by accident.

Divisional Structure
Pros Cons
Built-in accountability and direct incentives (separate P&L) trategy tax: decision makers for division A forced to factor benefit/harm to divisions B and C
Clear career advancement opportunities for generalists More challenging to coordinate products and deliver seamless customer experience
Functional Structure
Pros Cons
Superior product coordination and more seamless customer experience (when done right) Difficult to execute at scale (requires truly collaborative culture)
Cannot effectively manage too many products
Requires exceptional visionary overseeing everything (e.g. Jobs / Ives; these don’t grow on trees)

We recommend sticking to a functional org structure until it hurts. For most businesses, the line is somewhere around a few hundred people (Apple is the extreme anomaly). Whichever structure you ultimately establish, ensure that accountability pervades throughout. Everyone should have someone else holding him/her accountable to their best work.

We recommend sticking to a functional org structure until it hurts. For most businesses, the line is somewhere around a few hundred people

Further reading:

Surround your people with A players: recruiting, screening and onboarding

There are many deep resources on this topic, so we will just highlight a few tips and further reading. Assembling a strong mix of backgrounds, skillsets and inclinations is critical to positive org health momentum. In other words, ‘empowering your people’ means surrounding them with other A players.

Here are a few tips from our experience

  • Recruiting – great candidates are often already gainfully employed. You have to go find them. Recruiters can sometimes help, but building your own internal chops at sourcing passive candidates is even better. Here are a few talent sourcing hacks:
    • Reference farming sessions: hiring managers should regularly meet with their individual team members and walk through their direct network to drum up potential candidates. Contact promising prospects on the spot. The act of meeting will force action that otherwise won’t happen.
    • VCs and advisors: this is what they are there for! Share the job description with them and have a concrete ‘ask’. If they have significant hiring experience, get them involved with interviews and reference checking at least at the senior team level.
    • LinkedIn: good old-fashioned profile stalking – this is the OG network and it’s still shockingly effective.
    • Referral program: start with informal perks and build up to a formalized program as your organization matures. A relatively small cash reward (e.g. $500) can go a long way to motivate people. Turn all of your employees into talent spotters, and then consider expanding to the broader stakeholder group including former employees, friends, business associates, etc.
    • Internal Recruiting Team: if you growing rapidly and have a large number of open roles on a consistent basis, consider building your own internal recruiting team. Make sure to compensate them like a top outside firm so that you can attract the best recruiters.
    • Targeted job/discussion boards: try posting on AngelList (the world’s largest startup community) and/or apply guerilla tactics to relevant forums on Reddit, Quora, Facebook Groups, etc.
    • Be Kind: remember you are leaving a brand impression in the ecosystem, just like a sales process. It may not seem a priority to you to acknowledge job applications, keep people up to date with where you are in your decisions, and send polite and friendly rejection notes, but it is important to candidates.
  • Screening tips:
    • Test for mission, vision, values fit: ideal candidates will have some level of personal connection to the products and change your company is making. When people care about your mission, they work a little harder and care more about the details. This is the #1 way to solve the recruiting challenge: give a prospect a higher reason for joining beyond title or compensation. If you neglect this, expect low acceptance rates, low success rates with new hires, and to generally overpay for talent because that’s your only offer.
      This is the #1 way to solve the recruiting challenge: give a prospect a higher reason for joining
    • Test for hard skills upfront: filtering early in the process can save everyone time. This naturally applies to technical contributor roles such as software engineering and accounting. There are varying opinions on whether to use general aptitude tests in the hiring process. In our experience, they do help predict performance in certain roles when used correctly. Just beware of assuming a false sense of precision: if you do use a general aptitude test, consider setting a bar vs. stratifying of performance into levels. Importantly, these tests should be considered as just one input factor among many when considering a candidate.
    • Pick an evaluation methodology: there are a number of good ones out there. We like The A Method for its simplicity. A well-crafted scorecard is critical. If your short on time, see a useful summary here.
    • Filter out cultural clashes: ensure that your evaluation process deliberately tests for cultural fit. Dig into past behavior that aligns or clashes with the company’s core values. The latter tends to be less subjective (i.e. filter out vs. filter in). One important nuance from the A Method summary linked above: “While the A Players you bring in need to be attuned to your culture, the culture needs enough elasticity to embrace the A Players who can challenge you in areas where you need to be challenged. Seeing it all come together is truly a beautiful thing.” Culture fit tests don’t have to be elaborate. Discord, a unicorn that started in the social gaming space, observes how candidates treat the waitstaff and engage with the general public when they take them out to lunch or dinner. They want to see how a candidate interacts with people that aren’t important in the hiring process, as this aligns with the team culture they’ve built.
    • Take Reference Checking Seriously:don’t outsource this step to a recruiter. References can provide critical insights, but you have to know how to get past the typical niceties. We outline some of the specific tips and questions to ask during reference checks here.
    • Seal the deal: once an offer is made, pull out all the stops. It’s not easy to get a candidate to this point! The A method has some good tips here as well.
  • Onboarding – the 3 pillars:
    • Culture see MVV onboarding section of this guidebook
    • Admin: as a starting point, check out this new hire checklist by Betterteam
    • Job training: this will vary by situation. Ask your managers to creating simple training kits for the individual contributor roles – these will save time and ensure consistency
  • Further reading:
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