Startup structure

Structure is the arrangement of and relations between the parts or elements of something complex.

Organizational structure is a system that outlines how certain activities are directed in order to achieve the vision and goals of an organization.

Organizational structure is the product of the decisions made about where the organizations is headed and how it plans to get there.

Organizational structure is is the product of decisions intended to impact the expectations of skill, behaviours and priorities within the organization.

"The purpose of a startup is to build an organization. An organization has structure. An organization without structure is not an organization." - Lucas Weldeghebriel, Chief Editor of Shifter

The purpose of structure within a startup is to regulate uncertainty and facilitate delegation.

By establishing structure, you are forced to reflect on and make decisions as to who is expected to do what and how, which has the added side-effect of improving your understanding of the organzation as an entity.

According to Marius Jones, who did his doctorate on the emergence of coordination mechanisms in startups, the following structural mechanisms should be in place at the startup stage of an organization:

• Objectives
• Roles
• Routines and processes
• Systems

International studies have shown a positive correlation between structure and performance in startups.

Sources:

1: Sine, W. D., Mitsuhashi, H., & Kirsch, D. A. (2006). Revisiting Burns and Stalker: Formal structure and new venture performance in emerging economic sectors. Academy of management journal, 49(1), 121-132.

2: Grimpe, C., Murmann, M., & Sofka, W. (2019). Organizational design choices of high‐tech startups: How middle management drives innovation performance. Strategic Entrepreneurship Journal, 13(3), 359-378.

3: Meijaard, J., Brand, M. J., & Mosselman, M. (2005). Organizational structure and performance in Dutch small firms. Small Business Economics, 25(1), 83-96.

"Unlike in corporations, in a startup you need to constantly evaluate the structure, and have a dynamic relationship with it." - Lucas Weldeghebriel, Chief Editor of Shifter

Some startup founders are sceptical of structure (or rather, of there being too much of it).

This is often related to a fear of how structure will negatively impact the motivation of employees or themselves, by making the workday more robotic and less creative and flexible.

Allthough too much structure could, theoretically, result in a dystopian organization of worker-bees, this is extremely rare, simply due to the fact that having too much structure isn't useful.

The amount of structure required should match the level needed in order to properly reduce uncertainty and faciliate delegation at any given time.

If there is too little structure, add some. If there's too much, take some away.

According to Marius Jones, some growing pain indicators of there not being sufficient structure are:

• The founder is the structure (meaning that if they went away, so would the structure)
• The founder feels like a gummy bear, being streched in all directions
• The founder feels like their people aren't performing as well as they would have expected

Marius Jones further points out that his research has shown that the startups that were most successful in establishing structure did so before there were indications of growing pains.

Startups focus on speed since they are burning cash every day as they search for product/market fit. But over time code/hardware written/built to validate hypotheses and find early customers can become unwieldy, difficult to maintain and incapable of scaling. These shortcuts add up and become what is called technical debt. And the size of the problem increases with the success of the company.

You fix technical debt by refactoring, going into the existing code and “cleaning it up” by restructuring it. This work adds no features visible to a user but makes the code stable and understandable.

While technical debt is an understood problem, it turns out startups also accrue another kind of debt – one that can kill the company even quicker – organizational debt. Organizational debt is all the people/culture compromises made to “just get it done” in the early stages of a startup.

Just when things should be going great, organizational debt can turn a growing company into a chaotic nightmare.

Growing companies need to understand how to recognize and “refactor” organizational debt.

Organizational Debt Is Like Technical Debt -- But Worse

Many leaders put off or avoid developing structure alltogether. Here are some of the reasons why some leaders are reluctant to develop structure:

Ownership

• I don't consider it to be my responsibility.
• I don't have the mandate to make structural decisions.

Timing

• I don't think we need it yet.

Dynamism

• With the speed at which we move and change, I am concerned that the structures will be outdated by the time they are completed and put into operation.
• I am concerned with introducing too many or too complex structures relative to our current needs.

Cultural impact

• I am concerend that structure will negatively impact the creativity within the team.
• I am concerned that structure will make the culture too formal.

Employee experience

• I am concerned that the structure will be considered rigid by the team.
• I am concerned that the structure will considered unreasonable by the team.
• I am concerned that the structure will negatively impact employee motivation and retention.

Alignment

• It's a struggle to align with other leaders and team-members around what could and should be the structural expectations.

Personality

• I'm not a particularly organized or structured person.

Motivation

• I find the process of establishing structure boring (I would rather be doing something else).

Gain intuition

• I am not familiar with any studies showing positive correlations between structure and performance.
• I have not been a part of an organization where structure has had a positive impact on culture and performance.
• I have had negative experiences trying to introduce structure in the past.

Operationalization

• There's no use in establishing more structure all the while people are not complying with the existing structures put in place.
• I am concerned that the structures will just be put in a drawer and won’t actually be used.
• Articulating structure seems futile if I have no way of operationalizing the structural intentions.

Problem analysis

• I struggle to identify and understand the root causes of problems, and to design structures that solve for those root causes.

Decision making

• I struggle to make the decisions required to design the structure.

Best practices

• I'm not sure what the structure should look like (what the best practices are).

Competence

• I don't feel particularly skilled in organizational design
• I don't feel particularly skilled in business process modeling
• I don't feel particularly skilled in organizational anatomy

Quality

• I am concerned that the final structural product won’t meet my standards.

Prioritization

• I don’t feel I can justify spending time prioritizing structural development over more pressing matters.
• I don't know which structures to prioritize improving.