Transparency is about building trust. The more your people trust each other and the organization, the more engaged and secure they feel – even in bad times. It simply leads to better work. Erring on the side of transparency is a good general approach.
That said, you can take transparency too far. Having an open book approach to the company’s finances can help build trust, but at some level it can also lead to unnecessary stress. It’s common for early stage companies to have one or several near-death moments as cash gets tight. Briefing your team on the intimate details of your lack of cash and limited runway can leave team members wondering if they are going to have a job soon. Productivity is likely to drop just when you need it to peak. In these situations, the CEO needs to bear some of the burden of uncertainty. Let the team stay focused, not feeling like they are bumping up against existential threats on a regular basis.
Instead, be transparent about your goals and where you stand relative to them. Be transparent about what each team in the company is working on so that other teams can coordinate and help drive the overall impact. Create an expectation of transparency in all directions: what’s going well, what’s not going well, what have you learned?
Making transparency stick:
When it comes to conflict, there is a sweet spot. The goal is to set the conditions just right to hit that sweet spot. Once again, it starts with institutional transparency and interpersonal trust. Patrick Lencioni describes a highly functional team in The Four Obsessions of an Extraordinary Executive:
“These people argue like brothers and sisters, but then they seem to forget about the arguments ten minutes later, just like my cousins. One of them would have a bloody nose, and the next thing you know they’re laughing.”
This is one rendition of the conflict sweet spot, albeit a more forceful one. Just remember: all valued team members need to feel comfortable bringing a contrarian idea forward. This can be particularly daunting for certain personalities. Their ideas may be rock solid, so you want them to surface. Create channels for these people to ‘speak up’ (e.g. anonymized contrarian meetups described above).
Perhaps most importantly, leaders should develop an internal “thermometer” as decisions are being made and – as appropriate – nudge the discourse left or right on the spectrum below. “Hurtful words” are a simple way of knowing you’ve crossed the line into destructive. The best team formats reside at the intersection of direct but caring exchanges (also see the simple grid from Radical Candor in the Foster Leadership Cohesion section).
Source: The Advantage, Patrick Lencioni
A few tips to make L&D stick:
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:
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.
|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|
|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.
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
A head of People Operations is like a traditional head of Human Resources with several important distinctions. They are responsible for some combination of finding, growing, supporting, motivating, and retaining your team. They are a champion for your company culture and a resource for your management team. They are far more than an administrative function.
People ops is an emerging role that is still being defined. Start by looking at your particular needs. Perhaps you need an internal recruiter who is 80% focused on recruiting and 20% on the other items above. This can be a logical economic calculation during heavy hiring phases. In general, though, we’ve found CEOs tend to under-index on the softer side of this role.
One important note: while a head of People Ops can be tremendously helpful in executing the items above, remember it starts from the top and it all breaks down if the CEO is not visibly out front leading the charge.
When should you hire a head of People Ops? Ideally, as early as possible. Head of People Ops is one of the most widely underappreciated positions among startups. Many companies wait too long and do irreversible damage to their organizational health. Natural startup law dictates that after ~50+ people (or roughly year 3-5) you face more significant morale dips, turnover spikes, disjointedness and so on.
Of course, these people don’t come free. For economic reasons, early-stage companies can typically wait to hire a full-time head of People Ops until one of two things happens:
Key call-out: hiring a Head of People Ops is not a cure-all. All too often, CEOs make a people ops hire to “fix” organizational disfunction. This is a formula for failure. Once again, it starts from the top. This position must have strong and visible support of the CEO. The prioritization of people matters must be clear.
Next: Closing Advice