🦴 Quite possibly the best org structure framework
Lex Sisney's "Organizational Physics"
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I wanted to write about the best content on organizational structure I've ever read: Lex Sisney's Organizational Physics. He also has a book out by the same name, which is good. I have no relationship with Lex - I just think his content is a hidden gem.
For many CEOs and leaders, being on top of culture and ensuring you have the best possible people is hard enough. But org structure tends to be glossed over superficially - it doesn't seem to get the attention it deserves or requires.
And yet having a sub-optimal org structure can be the cause of many unnecessary problems - it will prevent your organization from reaching its full potential.
A couple of years ago, Mandaê was suffering from a lot of issues, some of which I suspected might have to do with our org structure. So I dove deep into this topic and started learning as much as I could. Eventually I stumbled upon “The Top 10 Signs It’s Time To Change Your Organizational Structure.” I realized we were exhibiting nearly all 10 symptoms. Oops. So I read Lex's other posts.
To this day, what I consider most valuable is “The 5 Classic Mistakes in Organizational Structure: Or, How to Design Your Organization the Right Way”. If you click on any link here, click this. I think it's pure gold.1
Lex provides a framework for how to think about organizational structure. I won't rehash it here, but I'll say two things:
We applied it at Mandaê and it helped tremendously. We're growing faster and with stronger margins than ever before.
Many aspects weren't obvious at the time, but in retrospect, they’re stupidly obvious.
A lot of problems we used to have seemingly disappeared overnight:2
Unnecessary conflicts we used to have between senior managers got centralized and pushed as far down as possible to those in positions to make the best decisions for Mandaê (i.e., not the CEO, and what a relief it's been).
Explicit P&L responsibility went to our Product teams (specifically, gross profit responsibility in Mandaê's case). This seems to be an unusual structure, but it's also one that makes all the sense in the world. In many organizations, product is the group most capable of generating step-change improvements in gross profit, yet they don't have this explicit responsibility. They should.
Effectiveness functions no longer report into efficiency functions. In Mandaê's case, it wasn't obvious to me to combine sales and operations functions, but afterwards, I wondered why we'd never thought of this before. “Customers in, packages out” now describes our CCO's responsibilities.
And the list of positive benefits goes on.
None of this is to say that Mandaê functions perfectly today. We still have problems that come up. They just come up less frequently. They're also “better” problems to deal with, and not the frequent, unnecessary ones we used to have.
Of course, you can have the best org structure possible, but if you don't have a good culture or the right people in the right places, it won't matter either. The talent density at Mandaê is greater now than ever before - it should be like this for any evolving startup - but having people that know how to deal with conflicts, that know how to work as a team, that understand what's in the best interests of Mandaê - in other words, that have the right values - really makes all the difference. If you don't have a team or culture like this, no org structure will save you.
But org structure does matter3. An analogy I like to use is that if your company is a human body, then culture is the blood, people are the muscles, and your org structure represents the bones. If any aren't as healthy and as strong as possible, it'll take you longer to get to where you want to go. If your org structure is misaligned, it's akin to trying to get around with broken bones - it can preclude or significantly increase the difficulty of getting to your destination. (And even if you do manage to make it, you'll have suffered a lot of pain in the process.)
Luckily, healing a broken bone is not only possible, it's usually easier to fix - so it's worth thinking carefully about your org structure. If you're a founder, CEO, CHRO or other leader, I recommend reading Lex Sisney's content.
Not exaggerating, it's been pure gold for us. A free piece of content on the internet has likely helped Mandaê generate millions of dollars in equity value. So a couple of points here: (a) The power of the internet still blows my mind - it's absolutely amazing. (b) Lex Sisney is most definitely on my list of people I owe at least a beer or a cup of coffee to. But in case I never get the chance, this post is a way to pay him back, but mostly it's a way to pay it forward to other leaders - Lex's content is very good.
My team knows it wasn't actually an overnight change, of course. It took a few months and the COVID-19 pandemic delayed our full transition, but the disappearance of certain problems seemed almost magical and instantaneous.
Also, all three components work as a system. Having a misaligned org structure can negatively stress your culture (e.g., by creating a lot of unnecessary conflicts), and your people (e.g., you might lose great people that have to repeatedly deal with what they accurately perceive to be stupid problems). And yes, Mandaê suffered from all of this.