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 goals of an 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 coodination 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