28/04/2012

"Bureaucratic Hierarchy" or"Flat" for Start-Ups

Introduction

I have been wondering for what fits better for start-ups. Will that be "Bureaucratic Hierarchy" or "Flat"? It has always impression that "flat" organization will fit more for start-ups. But at this time, which one is better in general?

As agile coach and SCRUM master for start-ups, I have been thinking the problem in a scope for Agile and Start-Ups. It is worth for me to share some thought with you guys.

For you reference, it is interesting to look at organization charts.

Bureaucratic Hierarchy

I have been experiencing "Bureaucratic Hierarchy" since I have been in IT industry since 1997.  As a software Engineer and Project manager working in China, it has been the mindset that you either move to management or you get fired after 40. The mindset was embedded in everyone who were working in IT industry at that time. From my person opinion, it has been caused by

. No one want to work more than 12 hours a day from day to day
. Software Engineer doesn't produce any value other than code
. Organization runs like traditional enterprises

.com bubble partially explain that the organization structure can't support needs of startups which includes

. Innovation
. Motivation
. New skills
. Competition of resources
. Slow response to market

Flat Organization

Every company start with small and very flat organization. But most of small companies that I have worked had  very flat structure. Every senior engineers have worked as project manager, support team members, and infrastructure team members. With new technologies, all those things are quite easy to achieve. That has caused that turn around of a feature is very quick and feature delivery is mostly quite close to what is required. 

Scale up has been concerns across different start-ups. Most of organizations has been trying to get managers from big company which were transforming organization into very "Bureaucratic Hierarchy" ones. 

But if you look out, you will find that several organization continue road with "Flat" are quite successful, like Google, Valve, Apple and others.  

In the same time, there are bad sides about "flat organization" like innovation costs are very high esp for Google. 


Problems with Startups

Any solution should start with problems. What are most frequent problems seen in Start-Ups these days? From my personal experience, they should be as following:
  1. Urge to make money or prove in good track to  make money
  2. Stay survive in such hard economics time
  3. Respond to market quickly to fullfil customer request
  4. Keep competition strength over new comers
  5. Competition about human resources

"Flat" or "Bureaucratic Hierarchy"

I am personally in favor of "Flat" organization with my strong Engineering background. And I totally believe Engineering should be ones driving company directions instead of marketing and sales because Engineering make things impossible as possible and provide unique opportunities for start-ups.

But in practice, I believe different organization may have their own version of organization structure to fit their own purpose.  My preference is put up here for debate. 

Let's have1 and 2 problems as last to discuss because the difficulty and too many variable from company to company. 

Responding to market quickly to fullfil customer request. As a start-up, making existing customer happy and keep advantage at existing market are super important at this time. Bureaucratic Hierarchy will make decision making harder and there is larger chance to miss opportunities. 

Keeping competition strength over new comers is very hard thing to do because entry requirement for IT start-ups are very low at the moment and it is very easy for new start-ups. Innovation is key strength as technology start-up to keep their strength over new comers. From my point of Bureaucratic Hierarchy will kill innovation because as my experience, there is no motivation from engineering team to do any innovation in that case.  

Competition about human resources are across world for start-ups. What to solve? Solution 1 will be making more money and have more people either by buying company or recruiting new employee. Solution 2 will be keeping team small and employee up to date. With such financial hard time, I believe more in second option as it will bring more innovation into team at the same time and it will keep cost of running very low. But for solution 1, it has been preference for companies which want to grow quickly. I don't believe in such solution because that fast growing won't bring best out of people. Communication will shut-down whatever you try with my experience. Component teams seem to be best solution. But cost in problem solving and development will grow at least in double size because hand-over required and problem investigation needs to involve different teams. In summary, I believe "flat" is better choice for solving this kind of problem. 

Let's think about "Staying Survive in such hard time". It is highly related to "making more money or prove to be able to make more money". So how can we achieve these two. My first thought will be "innovation" and "keeping focus on both product and customer".  "Flat" supports better for innovation. "keeping focus on both product and customer" is strictly fine with any organization structure. But communication failure is mostly associated with "bureaucratic hierarchy". It will be hard to keep company focused with "bureaucratic hierarchy" because of communication failures. From my point of view, costs for communication will be much higher for "Bureaucratic Hierarchy" organizations too.

So I believe "flat" organization structure is much better at this time for start-ups. 



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