Should you run a top-down or a bottom-up organizational design?

Choosing “top-down” means giving the roles at the top of your organization significantly more control over key decisions than those lower in the hierarchy. Choosing “bottom-up” means having little to no centralized control so that those doing the work are free to organize, make decisions, and perform as they best see fit. Both camps have their own justifications.

The extremists in the top-down camp believe that an autocratic, hierarchical style of command-and-control decision-making is necessary for an organization to be successful and fulfill its purpose. In this case, strategies or plans are first conceived at the top of the organization and then cascaded down into the organization for implementation. When decisions from the bottom need to get made, they must first go to a qualified manager for approval. Deep down, the proponents of a top-down structure believe that if there isn’t an appropriate level of centralized control, the inmates will soon be running the jail and chaos will reign.

The extremists in the top down camp believe that without a high level of centralized control the whole enterprise will quickly fall apart.

The extremists in the bottom-up camp believe just the opposite — that most forms of hierarchy are unnecessary and inefficient (if not outright evil). Their view is that a top-down hierarchy separates authority from those actually doing the work. Therefore, at its best, a top-down approach leads to cultures of disempowerment, resentment, and bureaucracy. At worst, it gives birth to autocratic tyrants who wield unchecked power, enriching themselves and their families at others’ expense.

The extremists in the bottom-up camp believe that most forms of hierarchy lead to tyranny.

So who’s right?

Well, if you were to gauge the current zeitgeist in business and popular culture, you’d get a strong sense that the bottom-up camp is right camp to be in. Best-selling books and viral articles get published regularly that bemoan the old paradigm of top-down command and control as “so-last-century” while promoting an emerging new paradigm of self-managed, egalitarian organizations without bosses, titles, or anyone telling you what to do. Ahhhh. […]

“We believe that the future standard for all executive teams will include a head of Customer Success who’s on the same level as the head of Sales, Marketing, and Demand Generation.” – Aaron Ross

If you run a software-as-a-service (SAAS) business, you might already know about the core concepts behind Aaron Ross and Margaret Tyler’s book Predictable Revenue. Aaron Ross learned his craft as the head of customer acquisition for Salesforce.com and this book seems to have become the hot new bible for scaling up the revenue side of a SAAS business.

The main theme of Predictable Revenue is that the single most important thing a SAAS business can do to scale revenues is to segment its Sales roles into distinct focus areas and also to create a new role in the organizational structure called “Customer Success” that is dedicated to making existing customers successful and driving renewals.

Lately, I’ve been getting asked frequently in my consulting practice about how to structure the Customer Success role. My sense is that there is some confusion out there about the distinction between Account Management and Customer Success. In this article, I’m going to show you how to use the principles of Organizational Physics to actually structure the Customer Success role so that your own SAAS business has the greatest probability of realizing its potential.

Role Segmentation: Always a Good Idea

Predictable Revenue argues that the major role of Sales is actually four roles that need to be segmented in the organizational structure:

• “Inbound Lead Qualification” to qualify new leads coming into the business;
• “Outbound Prospecting” to create and qualify new sales opportunities and then pass them to Sales or Account Executives to close;
• “Account Executives or Sales” that close deals and carry a quota;
• “Account Management/Customer Success” which is a role dedicated to making existing customers successful and driving renewals.

Does it make sense to segment these different sales roles? Absolutely. In fact, you should define and segment all of the major roles and most of the minor roles in your entire business — not just sales.

Segmenting by roles greatly supports scaling your business. It helps to create role clarity and accountability. It allows the right style of people to focus on the most important things for their roles. It significantly improves the hiring process. And with the right management process, it can significantly increase execution speed.

Predictable Revenue encourages the segmentation of sales roles earlier than one might think and I totally concur — but again, for all roles. Technically I would start to think through your organizational design and role segmentations in the mid- to late Nail It stage of business development. Heck, it doesn’t even cost anything to segment by roles if you don’t have the budget to […]

Photo credit: AudienceView.

It’s a classic tale. Your company’s driven, visionary founder manages to lead your start up to takeoff and hit rapid growth mode. But then something happens, and everything starts to bog down. Those former start up struggles and early wins turn into a whole new set of challenges: running the business at scale.

At about this time in an organization’s lifecycle, conversations in the board room and around the water cooler start to focus on the founder. See if you’ve said or heard any of these before:

• Our founder has great energy and ideas (along with some really dumb ideas) but we still can’t seem to get our act together.
• It’s no secret our founder isn’t an Operations person.
• We need to either replace our founder or support her with someone experienced who can run day-to-day operations and keep the trains on time.
• What we need is a President/COO. Then the founder/CEO can be Mr. Outside and the President/COO can be Mr. Inside.

Does any of that sound familiar? I bet it does. On the surface, having a President/COO can make a lot of sense. Every organization needs stability, structure, and experience if it is going to scale up. The approach is certainly popular. “President and COO” titles are so common—throw a stapler in the air at your local office park and you’re bound to hit one on the head.

But hiring a President/COO to solve the “founder” problem typically brings just a new set of problems, setbacks, and even disasters. In many cases I’ve seen, the new President/COO was a sure bet on paper but failed to replicate past successes in a new environment.

In another common scenario, you’ll find that soon after joining, the new President/COO will get into conflict with the founder/CEO about who really runs the business. When this happens, the culture quickly erodes into “old guard” vs. “new guard” and execution speed bogs down across the board from all the in-fighting and politics.

There’s also a little appreciated but equally severe problem that happens when the founder leaves the business too soon, now that “the professionals are in charge” or because “it’s just not that much fun around here anymore,” and the company fails to capitalize on its true potential over time.

While hiring and integrating capable senior leaders into the organization is needed and necessary to scale your business (I’ll show you how to do this here), the popular approach of having a President/COO to oversee business execution usually turns out to be a fix that is much worse than the original problem.

I’ve coached many founder-led, high-growth companies to increasing revenues and profits without a traditional President/COO and without mistakenly consolidating business functions together. I can say with confidence that there is a better way to build great leadership to help […]

“What’s the difference between an organizational structure and an organizational chart? Do you need one or the other—or both—to manage your business?” I get asked different versions of this question a lot. The distinctions are subtle but important. Knowing the answers—and approaching your organizational design the right way—is mission-critical to scaling your business.

The short answer is this. In most cases, if you’re entering a new stage for your business—scaling beyond start-up mode or embarking on a new growth strategy—you’ll need a new organizational design. And when it comes to organizational design, you really only need two things:

1. A well-designed organizational structure
2. A “role-centric” human resource management system (HRMS) that mirrors the structure

That’s it. You do not need a classic org chart—that constantly-changing and almost instantly-out-of-date diagram that shows names, job titles, and lines of reporting responsibilities. The org chart tends to quickly become obsolete and leads to a counterproductive focus on who’s where in the organizational pecking order…

You don’t need this. Photo credit Pathfinder.

Trying to maintain a classic org chart—or, heaven-forbid, to redesign your business based on one—causes much more harm than good. So drop the classic org chart and instead embrace the principles of effective organizational structure combined with a role-centric HRMS. Here’s what you need to know…

Are You Attempting to Redesign Your Business from an Org Chart?

It should be intuitive that, in order to manage and scale your business, you need a sound organizational design. As I’ve written in “The 5 Classic Mistakes in Organizational Structure: Or, How to Design Your Organization the Right Way,” everything has a design to it. If your business design sucks, then your execution will too.

Changing an organizational structure can be very challenging because there’s a lot of inertia tied up in the status quo. Individual perceptions of job status, internal politics, titles, compensation, and desired career paths can make changing your structure seem complicated, if not daunting. Many companies set themselves up for failure by attempting to redesign the organization from an existing org chart. When this happens, it sounds something like this…

“OK, so what if we have Sally and Mike report to Jeff, Jeff report to Ron and Ron and Helen will split reporting responsibilities? That could work. Wait.. what… Helen is leaving now? Damn. OK, how about if instead Peter takes over for Ron and Ron can head up the new product line? No, that won’t work because Ron’s ego is as big as the Grand Canyon and he’ll feel like he’s taking a step backward. Shit. This is complicated. I guess we’ll just stick with the status quo, even though we all know it’s not working well at all.”

If you ever find yourself in a conversation […]

The headlines rolled across my feed like the credits on a blockbuster movie. Something big seemed to be happening but I wasn’t quite sure what to make of it. It seemed that Zappos—the popular business management poster child for happy employees and customers—just announced it was adopting some new-fangled “boss-less,” “hierarchy-less,” “structure-less” management system called Holacracy.

“Hola-what?” I said to myself as I started clicking links. Aimee Groth at Quartz wrote: “Zappos is going holacratic: no job titles, no managers, no hierarchy,” while the Washington Post headlined with, “Zappos Says Goodbye To Bosses,” and the Canadian Broadcast Company led with “Holacracy management style eliminates all bosses, titles.”

I’ve been around long enough to know that what the media was reporting would be far removed from the truth. I also had the inkling that the level of publicity that Zappos generates made it likely that Holacracy would become the next buzzword in management in 2014. Paul Herbert captured it well: “A new word crept into HR’s vernacular last week: holacracy. Better get used to seeing it.”

Each year I attend two personal/professional development workshops for my own education and growth. After trying to make sense of Holacracy through their website materials and recorded webinars, in the spirit of exploration I decided to dive deeper and make Holacracy one of my annual workshops. I signed up for their 1/2-day Taster Workshop followed by a 5-day Practitioner Certification Training in Las Vegas hosted by Holacracy founder Brian Robertson.

A few weeks later I hopped in my car to make the trek from my home in Santa Barbara across the desert to Vegas. The seminar turned out to be located just down the block from the Gold and Silver Pawn Shop of History Channel fame. As I drove by their shop at 1pm on a Friday, there was a line of people down the entire block. “Note to self,” I murmured while rubber necking the crowd, “this is what a reality TV can do for your small business.”

I parked and found my way to the seminar, located on the third floor of a secured building. I buzzed the intercom, walked up three flights of stairs, and entered the room where I’d spend the next week. I noted there were about 25+/- people gathered around circular conference tables and a standard lecture area at the front. I found a spot, put down my stuff and, with a mixture of curiosity and anticipation, made small talk with my fellow attendees, a surprising number of whom were French nationals, while waiting for the seminar to start.

Little did I know then what a struggle that entire week — and even several weeks after digesting my experience — would be for me. What did I struggle with? First, I found it […]

The NFL is the most popular professional sports league in the United States. In fact, it’s bigger than the next three largest professional sports leagues combined. But when it comes to the field of talent management, what makes the NFL such an interesting case study for businesses of all types and sizes is not its popularity but its parity.

Each season, all 32 NFL teams begin with the same basic chance to be competitive. All teams have a roughly equal amount of money to spend and the same numbers of players to a roster, and the worst teams from last season get higher draft picks and an easier schedule this season. If a team gets “harmed” during free agency, the league will assign it compensatory draft picks to help it stay even.

Parity in the NFL has worked. On any given Sunday, one team can beat another. However, a few teams — despite parity — have been able to win consistently over time. In fact, over the past 13 NFL seasons from 1999 to 2012, just 6 teams out of 32 have achieved a 60% or better winning percentage: the Patriots, Colts, Steelers, Packers, Ravens, and Eagles, with only one team achieving a 70% winning percentage: the Patriots.

Clearly, if everything else is held nearly equal, then these winning teams have cultivated an edge in how they go about managing their business and developing their front office and on-field staff. Is there something you can learn from these consistent winners? And if there is something you can take away, can you actually apply it in growing your own business — a business that probably has just a fraction of the money and assessment resources that an NFL team can throw at the hiring problem? And can you teach it to your own team?

These are smart questions to ask. Even if you don’t follow the NFL or understand the rules of the game, anyone can appreciate the dedication it takes to thrive over time in a highly competitive setting. True, the NFL has its problems and its detractors. It’s violent beyond belief. It’s hypocritical when it comes to player safety. Its locker rooms and rosters are filled with some great men and some giant a@*!#$. That said, the NFL absolutely provides some critical insights for how to think about and approach the hiring process for every business, not just a professional sports team.

While you may not have considered the similarities between your business and an NFL team before, there are many. First, you too are faced with intense competition for great talent. Second, you can’t just throw money at the problem. You have finite time, energy, and resources to make great hires and avoid bad ones. Third, when an athlete is drafted and signed to a professional contract, […]