As a tech executive, one thing you cannot ignore is how to organize your teams and when you should reorg them. No perfect organizational structure solves the problem once and for all, and you — as a leader- have the responsibility to adjust the organizational structure to meet the business need. In this article, I will discuss the goal of organization setup and reorg and some cases for discussion, specifically in technology organizations.
Organization setup must meet business needs and accelerate business growth. The only reason for the organization’s existence is to support business in the short term and long term. The business is like a car — transporting people or products safely is the ultimate goal. The organization structure is assembling the parts together with solid power (deliverables faster) and low friction (lower budgets). The manufacturers are strongly motivated to increase the power at a low cost, even if they have to re-architect the entire car — just as Elon did on Tesla. Like car manufacturing, a good organization should 1) deliver high-quality projects faster to acquire the market share; 2) operate the existing business efficiently to control the budget spending. Here, we will see several types of organizational structures.
Vertical, Horizontal, and Matrix are three typical organizational structures. Vertical means you construct the organization End-to-End covering every corner of the business with single-thread leaders. The self-contained structure reduces the friction among teams but will introduce redundant organizations and reinvent the wheels. Horizontal means you aggregate similar functions together as one organization to build professional gurus. The technical depth makes the organization powerful enough to conquer the tech challenges faster and introduces additional team coordination to deliver one big project. Matrix is a mix of Vertical and Horizontal, in which the organization is structured with professional teams but has leaders for vertical business units to identify which professional teams are required for “on-demand” projects. The “on-demand” new project model with persistent business units leader requires highly capable people to plan and manage the projects. Besides three typical structures, the SWAT structure is an unusual one. As the name says, it has a competent team on standby to take action on any high-priority, randomized project, and hand it over after the project is done or the issue is fixed. Next, we will see some organizational structures under specific scenarios.
Move fast to prioritize time-to-market and business growth. Assuming the company is growing fast or would like to enter a new market, you, as a tech leader, need to align the organization with business priorities and needs. Now, the business requirements are moving fast to acquire the market share at any cost (possibly). The organization should support continuously delivering and turning around faster when we receive market/customer feedback. In this situation, you can think about SWAT or Vertical organization to reduce the friction or some politics to drag down the speed. The difference between SWAT and Vertical is about the stage.
- A SWAT team is a good idea at the early stage to turn around or fail faster with limited impact on the organization. However, if the experiment shows positive, it’s better to convert it from SWAT to Vertical as the organization must be prepared for the long-standing business units and reduce the transition risk/cost.
- A vertical team is a midstage or midterm decision that has been made. For example, if the company decides to double down in the new business unit, it skips the experiments, and you are better off having the vertical structure ready as it’s serious already. On the other hand, when the experiment shows a positive signal and the project requires additional resource investments, it’s better to make it a vertical team. However, with this setup, you should always be ready to jump in and smooth the conflict among teams. The priority is handling the debate between the new and existing functional organizations.
Forst professional and optimize budgets. The cost control will catch your attention when the business is mature and low-hanging fruits are picked. Budget management comes in two ways — merge the duplicated functional team to cut the budget and invest in tech depth to break through the barriers. Merging similar functional teams due to a lack of new projects for them. The workload is a good gauge for deciding on a team merge. You could merge horizontally (similar functions without dependency, like data storage and data management) and vertically (closed functions with inter-dependency, like several group functions in the workflow). Investing in tech depth is another output of merging teams as the business enters the challenging zone that requires tech breaks through to extract more profit. The tech breakthrough results from continuous investment in the specific domain and extreme focus. The horizontal organization could meet both scenarios with one shot as it organizes based on professional skills and dedication to one area per team.
Signals to make organizational change. Organizational changes are dynamic and continuous processes. But it doesn’t mean there is no signal to “remind” leaders to pay attention and take action.
- Productivity issue. The organization moves slowly, or the product/service have more unexpected quality issue. The slow-moving may cause by the reductant dependency or a conflict between vertical and horizontal teams.
- One unit is too big to have many hierarchies of functional groups. The huge organization is hard to manage, and the people on top lose control of 2~3 layers down. Building an empire will become the personal goal of leaders.
- Culture shifting. Any organization will organically foster its culture and move away from company culture. It’s OK to have it at a certain stage because we need the org to achieve specific goals under the appointed leader. However, the culture gap will split the company and increase the management cost and inter-org conflicts.
How do we know it’s right? Just like there is no answer once and for all, we cannot see the organization setup is right forever, but we should see a positive sign from it. Keep in mind — move fast and budget control are key success criteria.