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When I’m building a new organizational structure with a leadership team, someone usually makes this observation: “In this new structure, who actually owns the customer?” Before responding, I first try to get a shared definition so I’ll ask them to clarify: “Great question. What do you mean specifically by ‘own the customer’?”

They tend to hem and haw before replying something like, “You know, own the customer… a single point in the organization that knows everything about the customer, that is accountable for the overall customer experience, makes product decisions, and that champions the customers needs.” They might then share with me that in their old structure, this role was held by the VP of Product or Marketing or Customer Success. “In this new structure,” they’ll add, “it’s unclear who owns the customer.”

OK, now we’re getting somewhere. Here’s the answer:

In a well-designed organization, no single role should “own” the customer. Instead, the entire structure must be designed to acquire and serve the right customers now and over time. Every role in the structure has a part to play in accomplishing that mission.

Put another way, there are some key steps in the customer journey: from acquisition to on-boarding, to engagement, to support, to the design and maintenance of the products and services customers use, and so on. Each of these distinct steps in the customer journey actually requires a different mindset, skill set, and focus. If the structure were designed so that one role is accountable for all aspects of the customer journey, some very predictable problems will emerge because the organization is attempting to consolidate too many conflicting and competing needs under one role.

What kinds of problems? They exist on a spectrum in relation to the competing demands of short-range vs. long-range, efficiency vs. effectiveness, and autonomy vs. control. You can read more about these competing demands in Top 10 Signs Its Time To Change Your Org Structure. How those problems show up in your particular business will depend a lot on the skills, style and interests of the individual leader as well as the lifecycle stage of your business.

For example, if the leader who is supposed to “own” the customer is more sales-oriented, then you can expect to see a lot more focus on customer acquisitions and a lot less on customer engagement and retention. If the leader is more process- and quality-oriented, you should expect to see a lot of great product plans but very little throughput. In other words, some segments of the cycle will thrive and others will suffer.

Or, if your business is growing rapidly in the early Nail It stage, for example, you will see a lot of firefighting by the team to meet customer needs, with no one really […]

Lex conducting an Organizational Structure & Design Workshop in Capetown, South Africa. Photo Credit: Gregor Röhrig

Changing your organizational structure sucks.

There. I said it.

Helping companies change their structure is the work I do every day. If I didn’t know what I know now, I’d wonder, “Why would anyone want to do it?”

Changing your company’s structure can be a massive initiative. If you don’t do it correctly, it’s a recipe for disruption and disaster. People’s careers are on the line. Job titles can change. Existing reporting lines can get disrupted. One leader’s turf can expand and another’s shrink. The political fallout can be a huge cost in itself.

Even worse, if the new structure is done wrong, you’ll have the classic case of the cure killing the patient. You can set your company back even further in its development.

The corollary is also true. Structure done right can be the breakthrough you’ve been looking for. It’s like activating the booster stage of a rocket. It’s the catalyst to the next level of performance. I know because I’ve seen it happen over and over. It’s the reason why I do the work I do. It’s also one of the most misunderstood aspects of organizational design.

Let me explain all this by starting with a recent example at Microsoft.

In the early 2000s, a few years after taking over as CEO from co-founder Bill Gates, Steve Ballmer decided to double down on the existing divisional structure at Microsoft. A divisional structure typically has strong divisional heads but poor or limited cross-functional coordination across the divisions. Ballmer’s approach led to this infamous visual about working at Microsoft in the 2000s (I’m not sure who the source is but I still find it funny):

If your business has the wrong structure for its business model, strategy, or lifecycle stage, it’s not going to scale up. It’s going to trip up.

What was the problem with this approach? It was the wrong structure for a changed reality. The existing divisional structure worked well for Microsoft in the 80s and 90s during the desktop/data-center era. But the structure itself also made Microsoft incapable of adjusting to a radically changing, Internet-first era. Ballmer tried to rectify this problem by changing strategies several times but he never changed structures until 2013 (and then only haphazardly or half-heartedly). It was too little, too late. Under his tenure, Microsoft lost half of its enterprise value. Not a good score.

Within a short time after taking […]

If I were to ask you — “How are you instilling a culture of speed, accountability, and teamwork as your organization scales up?” — how would you respond?

This is a critical question. On the one hand, you want to keep what works well from your early start-up culture — fast decision making, risk-taking, camaraderie, and innovation. On the other, you have to manage the growing complexity — more people, new product lines, multiple business units, increasing regulatory requirements, and more. How can you achieve both?

Most entrepreneurs and CEOs struggle with this. They know that as their business scales up, they must evolve how the business operates, makes decisions, and cascades its culture. They also rightly fear that more policies, centralization, and procedures could cause the company to bog down and lose its entrepreneurial edge. The status quo is no longer tenable. You need a cure but the cure shouldn’t also kill the patient. What to do?

If we were to ask Jeff Bezos the same question — How do you instill a culture of speed, accountability, and teamwork at Amazon?” — he’d say something like this:

“Amazon’s management philosophy is to be customer obsessed, treat every day as if it were Day 1, manage the two major types of decisions (Type 1 and Type 2) differently, reinforce that it’s better to disagree and commit than get stuck in information paralysis, and elevate true misalignment issues quickly.”

What Bezos has figured out, and what he’s consistently trying to communicate and reinforce, is that to be effective at scale means to build on principles, not on policies. Policies, procedures, and rules may be necessary to some extent (especially if you are in a highly regulated industry) but they do not create high performance. As you know, they often prevent high performance.

Principles, on the other hand, are designed to be few in number but strong in impact. Meaning, a principle points you in the right direction but calls on the common sense and creativity of the individuals executing it. Also, if a principle is violated, this must carry big consequences. It has to, or it has no weight; it’s just a platitude.

If you’re like me and you tend to resonate with the principles-over-policies approach to scaling a business, but you’ve also been wondering how to bring this home for your leadership team and staff, I want to share with you a one-page document I use with success in my coaching practice. This one-pager presents […]

I saw this image circulating around social media last week and I had to roll my eyes:

It’s not because I don’t believe in the values of “new management” thinking. Quite the contrary. It’s that making the shift from “old management” thinking to “new management” thinking is not a problem to solve. It’s a polarity to manage.

A problem is something to be dealt with or overcome. A polarity, on the other hand, is something to be managed on a continuum. Basically, anytime you are dealing with things that seem at odds with each other or paradoxical, you’re dealing with a polarity and not a problem.

Take the first line in the viral image above as an example. Are employees your biggest risk or your biggest asset? The answer is both! Hire the wrong employee or lose control of your HR compliance function and it won’t be too long before you’re served a very expensive and frivolous lawsuit. On the other hand, if you treat your employees like they’re not your greatest asset — like they can’t be trusted to use their common sense or act in the best interest of the company — then you’re going to engender a lot of resentment and apathy.

This meme, which is generating thousands of likes and shares, portrays New Management Thinking as the solution to the problem of Old Management Thinking. It’s actually not the solution. There is no problem to solve – just a polarity to manage.

Don’t treat polarities as problems to be solved or pay the price. Why? Because when a team treats a polarity to manage as a problem to snuff out — chanting all the while “Down with hierarchy!” “Down with meetings!” “Out with the old and in with the new!” — one polarity will be emphasized too much and the organization will experience even bigger problems.

A team like this wastes an inordinate amount of time and energy on the wrong things, leading to a lot of activity and little effectiveness. Their misguided efforts also make it harder for the good and necessary aspects of the opposite polarity to exist within the organization. The end result is an organization that is less resilient and adaptable to change.

As a leader, being able to discern the difference between a problem and a polarity will help you to build a culture that makes the right decisions about the right things. This is true even if, from an uneducated eye, those efforts can sometimes appear to be in support of “old” ways of thinking. But they are not old ways of thinking! You are just boosting up an aspect of a polarity that is needed in your organization at this period in time. Later on, you may boost up “new” ways of thinking, depending again […]

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. So refreshing.

But is it true? Let’s see…

Reinventing […]

“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 […]