Why Hierarchies are Ruining your Company’s Culture

Devon-McDonald by

At the expansion stage, B2B software companies are focused on two primary objectives:

  • Getting more customers
  • Getting more internal talent

Here at OpenView, we are so committed to that notion that we’ve built an an entire investment support team that only focuses on helping our company in those two areas.

Designing Your Organization Structure: Where Many B2B Founding Teams Go Wrong

When we refer to adding more talent, the emphasis is typically on hiring that mid-level management layer beneath the executive team. This is most commonly the Director-level hires responsible for building teams of worker bees in the trenches, scaling repeatable process, and turning your functional areas into fine-tuned machines.

When looking to add the best director-level talent to your business, it is important to consider the structure of the organization and how teams will be assembled. Whether it’s sales, marketing, engineering, or any other operational group within the company, adding too many layers of management can be detrimental to your growth and the culture you are trying to establish.

I see many executives shoot themselves in the foot by designing their organization to look like giant layer cakes. The common scenario: A company has 50 people total, and yet they’ve already got EVPs, SVPs, VPs, Sr. Directors Directors, Sr Managers, and Managers.

This, my friends, is recipe for disaster. And I can summarize why in five words: entitlement, lack of ownership, politics.

As Tim Kastelle, a professor of innovation at The University of Queensland Business School recently wrote in the Harvard Business Revenue:

“There is a growing body of evidence that shows that organizations with flat structures outperform those with more traditional hierarchies in most situations. There are sound business reasons for treating people with dignity, for providing autonomy, and for organizing among small teams rather than large hierarchies.”

At the expansion stage there really is no need for the kind of hierarchy that is better suited for a large, stuffy corporate environment.

4 Ways to Keep Top Talent Motivated in a Flat Organization

There are many companies that have adopted a flatter organization built around self-managing teams, and have thrived in doing so. One of the questions businesses going down this path do need to address, however, is how they can retain top talent without a clear promotion path to manager, director, senior manager, VP, etc.

It’s an interesting challenge. Here are four ideas of how you can give top performers more responsibility in lieu of a new title:

  • Give ownership of goals and initiatives to top players within your team/organization.
  • Give your best performing players the opportunity to mentor other team members.
  • Give increased flexibility to those who’ve earned their keep.
  • And of course, just because there aren’t new, sexy titles being handed out like candy, that doesn’t mean you shouldn’t financial be rewarding your best players. In this market, competitive compensation increases must be considered if you want to retain your A players.

What do you think? Is ditching management hierarchy truly viable? What are some other alternatives to traditional promotion tracks?

 

Image courtesy of Collin Anderson