Organization Structure & Design
The Organization Structure and Design plays a key role throughout the lifecycle of a company’s growth. From inception sa small startup of a handful of people to growing to a core 20 person team to growing to 100’s of employees, one thing remains constant and that is change. The organization has to change the way it is structured. Finance is usually outsourced to a small accounting firm.
Initially the working style is very informal. the founders probably work out of a garage or rent a small room somewhere and communication is very easy. As the team grows the working style can remain the same for up to 20 employees but the founders need a bit of privacy to discuss confidential matters. At this stage the entire company is very hands on, and it feels like a close knit family. Everyone knows each other and are super focused on jumping to solve any fire that pops up because there is no other choice. Once the team starts to grow beyond 50 to a 100 or 150 employees some formal structure is often put into place. The founder lose the ability to monitor progress across the company and then have to appoint managers with proper span of controls. Usually 1 manager to about 8 direct reports is considered to be the optimal organization structure. By this time the Human Resources as a function becomes important to drive recruitment, establish company culture, policies and procedures and manage the performance evaluations and promotions. Departments tend to be more formalized. While all hands meetings do continue the leadership team is put into place and there are regular management meetings that are held. A couple of finance resources are brought in full time with a 3rd party service provider as support for compliance matters is the usual model.
Once the employee size crosses a 1000, the company takes on more of a corporate work environment. Finance has to adapt for every stage of development and growth. The information requests tend to change from total company wide performance early on with a strong focus on new customers onboarded. As the company grows longer term projections tend to become more important. As departments are formed, the request to provide departmental information increases. When individual or team performance targets are set, managers need information on how their team is performing and ask for even more information. Finance teams usually grow, perhaps a few accountants and financial analysts with a Financial Controller or Chief Financial Officer (CFO) is brought in. For VC funded companies, often there is some finance support from other investee companies or guidance from the VC CFO.
While growth is a good problem to have, it is important that the organization structure is thoughtfully designed. The founders usually continue to drive the business and set the strategic vision but cannot be involved in every minor decision. The ability to organize the company in a logical management structure where the leadership team and the next level leaders are delegated the right about of authority to drive decision making while still having the pulse of the organization with open channels of communication to quickly address any serious problems or long term risks to the company. This is a delicate balancing act.
There are also cases where internal superstars that held key roles and responsibilities in the startup phase tend to lose their importance once the company grows beyond a certain size where new hires with highly specialized skill sets are brought in at a senior level. It is important to manage this transition as the core team may feel demotivated or a sense of losing relevance.
There are lots of growing pains when a business scales. Finance needs to be a great business partner to walk in step as the business changes and manage the growing pains by anticipating the business needs. Ezee consultants have been part of such change during a large unicorn’s growth stage and can help organizations to manage this change effectively, all the way from a small founder setup, to a medium sized company to a large company. We can provide the resources, compliance support, advisory, training and putting in the right processes and routines.