How 4 Top Startups are Reinventing Organizational Structure – Process Street

How 4 Top Startups are Reinventing Organizational Structure

organizational structure headerWhen a city doubles in size, the productivity per person increases by 15%. When a company doubles in size, the opposite happens.

Companies like Zappos see this as a fundamental problem to solve. For them, the root lies in organizational structure.

With the opportunity to be dispersed remotely and to build complex products without factories and production lines, the tech industry is particularly able to pursue innovative approaches to structure, management, and organization.

Increased self-management, remote working, and task forces instead of departments, are all emerging trends which lend themselves to growing businesses.

Elon Musk talks about his businesses innovating the production process as much as the product. Mark Zuckerberg describes Facebook’s structures and organization as its biggest asset.

Ethan Bernstein, Assistant Professor of Leadership in Organizational Behavior at Harvard Business School, adds:

…[O]rganizations who are increasingly thinking about structure as an advantage and a form of making their employees more productive, will continue to evolve and innovate in this direction. And that’s something I think we’ll see across all organizations, regardless of whether they are trying to deliver “wow” to customers, or trying to do something very different.

So what are the competing philosophies which are driving these trends within the industry? Which companies have implemented the most extreme reorganizations and how have they dealt with the changes?

In this article we’ll look at:

  • Zappos: How they implemented Holacracy, with a why and how explanation.
  • Buffer: The steps they took to prioritize the individual within the company over management structures, with the challenges they faced and the lessons they learned.
  • Zapier: How they reflect these general shifts and why they chose not to dive in to extreme organizational innovation.
  • Basecamp: The marriage of many competing philosophies documented through their company handbook.
  • Process Street: The tool which helps you build the machine which builds the machine.

Defining our scope: The increased autonomy of employees, improved adaptability, and higher efficiency

organizational structure modern officeIt is important primarily to define the scope of our little investigation.

Organizational structures are not all, and have not always been, one set way. However, since the industrial revolution, when mass production became a key factor of the economy, organizations have typically had a hierarchical element with increasing specialization of labor. This is reflected too in the industrial heyday of the United States through Fordian workplaces and the following decades of high output.

Our investigation is looking at how tech companies are experimenting with moving away from that model.

The stereotypical tech company is often portrayed in the media (sometimes without exaggeration) as having unusual work practices: pizza for all, table tennis in every room, and beanbags instead of chairs.

While this differs from the stereotypical corporate office of suits, strict bosses, and rigid workplaces, it doesn’t really differ from a Fordian model which might share some simple attributes we take for granted. Loosely gathered from a British Sociological Association Conference paper by Simon Clarke, these might include:

  • Employees generally work in departments or teams with fixed scope and responsibilities.
  • Employees have a direct line manager and set tasks to complete.
  • Employees have clear job titles and predetermined wages for that title.
  • Employees are paid enough to buy products and participate meaningfully in the economy.
  • Employees are subject to a bureaucratic management hierarchy which is responsible for decisions.
  • Employees work in an office with their colleagues.

As we’ll see, certain elements which we consider part of the normal workplace are being abandoned by experimenting companies in favor of new models.

But why are they being abandoned?

organizational structure cooperative unionLots of organizations have utilized different forms of company structure, and many still do. Mondragón, Spain’s 10th biggest company, is a workers’ cooperative. The International Cooperatives Association’s revised 1966 principles, adapted from the original 1844 Rochdale Principles, are as follows:

  1. Open, voluntary membership.
  2. Democratic governance.
  3. Limited return on equity.
  4. Surplus belongs to members.
  5. Education of members and public in cooperative principles.
  6. Cooperation between cooperatives.

The motivations behind the cooperative movement, and Mondragón initially also, were to some extent political; “small p political”. These original principles were geared to protect workers from the power of capital as the industrial revolution in Britain was in full swing. Similarly, in 1865 reverend Henry Solly founded the first association of working men’s clubs – collectively owned pubs which acted somewhat as community centres, and became one of the most prevalent forms of social institutions in Britain.

In all these stories you will find implicit or explicit political narratives, yet this emerging reorganization of tech companies is not centered around political goals.

The ultimate goal is to make the company more successful. For some, this might mean saving money by reducing overheads: a classic reason why a startup might look to be remote, along with opening up a broader talent pool and access to cheaper labor.

For other tech companies, as we’ll see, it is about finding ways to combat traditional problems growing companies face – solving a problem other companies might not have diagnosed. Some of these reasons are rooted in adaptability; prioritizing the long term success of the company in uncertain economic environments.

To be clear then, there is nothing new about radically moving away from hierarchy or increasing worker autonomy. What is new is the attempt to deliver these goals in the pursuit of greater profit: for economic rather than moral motivations.

What is Holacracy? How Zappos abandoned hierarchy in favor of managed chaos

organizational structure zapposZappos CEO Tony Hsieh made the announcement that the company were to shift to a holacratic model in 2013. This transition was sped up in 2015 as the management system was finally overhauled.

Lots has been written on this, with countless critical articles appearing less than 12 months after the switch. But what is holacracy and how does it function?

Let’s start from the basics. In their own words:

Holacracy is a comprehensive practice for structuring, governing, and running an organization. It replaces today’s top-down predict-and-control paradigm with a new way of achieving control by distributing power. It is a new “operating system” that instills rapid evolution in the core processes of an organization.

They explain their rationale by trying to mimic already existing quasi-organic structures to reap the same benefits:

In a city, people and businesses are self-organizing. We’re trying to do the same thing by switching from a normal hierarchical structure to a system called Holacracy, which enables employees to act more like entrepreneurs and self-direct their work instead of reporting to a manager who tells them what to do.

This use of a city to illustrate their vision for how a company could reorganize and restructure does not simply rest on an analagous basis. The choice of a city in particular comes from the relationship cities have with two distinct variables: growth and productivity.

When cities grow, they become more productive. When companies grow, that same pattern doesn’t appear.

Zappos’ holacracy implementation lead John Bunch, on the Harvard Business Review IdeaCast podcast, described the scenario as follows:

I guess what we’re trying to do is structure our company more like cities are structured. Research shows that every time the size of a city doubles, productivity per resident goes up by 15%. But when companies double in size, actually the exact opposite thing happens, productivity per employee goes down. And part of the reason why we think that is is that in cities, you are self-organized, you’re self-directed. And you have a certain level of freedom and autonomy to do what you think is right.

organizational structure holacracy vs hierarchyThe raw premise of Zappos’ holacracy experiment is that there is something wrong with existing business structures. They have diagnosed a productivity problem at the heart of traditional companies. As they can see cities out-achieving companies in the relationship between growth and productivity, they have aimed to mimic certain structures and relationships found within cities.

This diagnosis is reliant not just on identifying the disparity between city growth and business growth, but also on what specific features give cities the advantage.

Zappos have identified individual autonomy and its resultant entrepreneurialism as being at the heart of this performance success. Hence why they have looked to prioritize these features in their business.

Part of nurturing that entrepreneurialism is embracing a borderline Darwinian interpretation of the success of cities; a Darwinian interpretation which yeilds further secondary benefits, if accurate.

Well, part of what we’re trying to do is have evolutionary design, emergent design built into our organization so that we can always be adaptable.

This adaptability provides not just a possible improvement in existing performance but, more importantly, a theoretical blueprint for long term success.

On a related note, Mondragón, mentioned previously, was included as a case study in Capital and the Debt Trap, a 2011 text by Claudia Sanchez Bajo and Bruno Roelants which argues that cooperatives tend to last longer than normal businesses as a result of their distributed governance structures. Through Zappos’ holacracy experiment, they may be marrying the consistency of distributed governance with the adaptability of internal entrepreneurialism – a move which, on paper, would appear to create long term stability, however counterintuitive it may seem.

How does holacracy work in Zappos on a day to day level?

organizational structure holacracyBunch describes to us the first step of the holacracy implementation and presents us with the immediate challenge the organization faces:

So what it really looks like is throwing away the traditional org chart that we’re all accustomed to where we fit in one place in the organization. And instead, having a way that we can come together to define what work needs to be done, and then allow people the agency to figure out what work it is that they are most connected to.

So, how is this achieved? How do Zappos facilitate this communication and come to a functional consensus?

So we have tools like Role Marketplace which helps show what work is there that we need help on. We have tools for understanding what work should we be prioritizing over what other work. We have tools to help us understand how successful are we being at the work that we are doing.

Surprise! They use technology to try to facilitate the new modes and means of communication required to make this system work.

Through the use of technology, it is possible to centralize elements of communication and organization. The difficulty is making that system work effectively. An open task marketplace where people can look at available work and gravitate toward tasks they want to participate in allows people to focus on the kinds of tasks they feel most motivated to do. This is part of Zappos’ overall wish to identify the strengths of each individual and utilize them as well as possible.

But what we’re really trying to do and understand is what skills each and every individual has at the organization and what skills they’re using for the work that they’re doing.

However, this begs the question: What about the unsexy tasks? What about the jobs which don’t require entrepreneurialism but instead need simply time, effort, and dedication?

organizational structure zappos employeeBunch suggests that the flexibility and fluidity within the company is more about opportunity, and that not every individual will be rushing to achieve that.

There are some groups that are very, very stable. For instance, we have a large group answering customer phone calls, and that’s very stable work. We know that there are customer phone calls that are going to be coming in every day, we know how much work we need for that, and so if you’re the type that just wants certainty, you might just stick in that area.

Bunch’s unsaid suggestion here is that different people want different things. Some people enjoy structure and consistency and within Zappos these people will gravitate towards the kinds of tasks and roles which deliver these ends.

This variety is an important part of the overall concept. Different teams will use different processes, and those processes should evolve naturally out of the fulfillment of that task by the individuals performing that task. A slight example is given in how Zappos interact with meetings:

Meetings happen when they need to happen on whatever cadence makes sense. So some groups meet frequently, some groups meet very infrequently. And so, just like in a traditional organization, meetings happen when they need to.

Business processes and events occur when they need to and policies are structured to deal with these issues as they arise like in any startup organization. It is as if Zappos have imported some of the chaos of startups into their established company. But don’t let the chaos fool you, structure and management is in some ways more prevalent than before. There are more roles in the company today than there were people or job descriptions in the previous iteration of the company. As such, though there is less management, there’s actually more to manage:

I would say maybe that holacracy is chaotic. There’s actually probably more structure in a holacratic company than there is in traditional companies. So the work is very well-defined, what work is going on across the organization is very well-defined, it’s transparent. You can look it up anywhere across the company. And so it’s actually fairly structured.

This might be a controversial take, but the use of technology to organize self-management and reduction of hierarchy, rather than the workers’ committees and boards employed by traditional cooperatives, looks almost like an automation of management jobs. If technology can facilitate labor as well as or better than management can facilitate labor then we’re describing a partly automated structural change.

Nonetheless, as interesting as the theory is and the intended results are, how is the experiment going?

What initial problems have Zappos encountered?

organizational structure removal of hierarchyZappos have long had a policy where they would offer a new hire the job and at the same time offer them the opportunity to reject the job offer and receive $2,000 for doing so.

Which sounds crazy.

But Zappos have been highly respected for company culture, typically have low turnover rates, and are used as a case study regularly for how to deal with being a customer facing company. All of this is rooted in Zappos’ relationship with its staff.

Which is why, in 2015, when Zappos decided to accelerate its holacracy transition, they created a new offer.

As reported in The Atlantic, Zappos experienced what has been described as a mass exodus of management.

But now, one of the company’s unusual approaches has led to what’s being called a Zappos exodus, as 18 percent of the company’s staff have taken buyouts in the last 10 months. That takes Zappos’ turnover rate for 2015 to 30 percent, which is 10 percentage points above their typical annual attrition rate.

It was this sudden and dramatic shift in staff attitudes which prompted columnists and shock jocks to declare Zappos’ experiment failed. To say it had failed seems a bit of an overstep at such an early stage. However, it didn’t seem to look good for the company.

But the severity of this turnover spike was questioned at the time by Zappos:

The company says that the additional turnover in 2015 “was mostly due to us giving long-time employees the opportunity to pursue their dreams (average severance paid out was about 5.5 months pay when we last analyzed the data).

The defenses at the time continued:

It’s not clear how many of these departures would have come about in the form of layoffs, as their COO Arun Rajan initially told Quartz that many offer-takers were managers, and that the managers (whose status was diminished by holacracy) who hadn’t taken the buyout would have likely been laid off as the company restructured

organizational structure zappos wallUpon reflection, maybe a mass exodus of managers when the company is moving to a managerless structure isn’t really the most damning occurrence. The question of employee turnover would have to be returned to at a later date to see whether it had stabilized or whether the spike had become a trend.

Fortunately, we are at a later date and can look at this data.

Forbes report that Zappos’ employee turnover rate for 2016 was the lowest rate they had experienced since the company was founded 18 years ago. At the moment, this is the strongest evidence we could ask for to dispute claims of a trend; it’s looking instead like the exodus was a blip.

That said, not everyone is yet on board with the changes:

The New York Times reported last year that those in charge of payroll, for instance, had trouble determining salaries after titles had been banished, and some employees wanted a boss to consult when making important decisions.

While many articles critical of Zappos cite recent Stanford studies on the topic of hierarchy within organizations:

One Stanford study found that egalitarian work structures were disorienting. Workers found hierarchical companies were more predictable, and therefore preferable, because it was easy to figure out who did what and how compensation should be doled out.

Another Stanford paper, which looked at why hierarchical structures in the workplace have such staying power, concluded perhaps the obvious: Hierarchies work. They are practical and psychologically comforting.

How will the story end for Zappos? I couldn’t possibly say.

However, we do have a shorter case study which can tell us a lot about the challenges of moving to a non-hierarchical managerless model. This is the cautionary tale of Buffer.

Why Buffer brought back structure; self-management and the challenges for a startup

organizational structure buffer websiteIn November 2014, the Buffer team were looking at the growth of the company and trying to envision new ways they could move forward.

The Buffer leadership cite the book Reinventing Organizations by Frederick Laloux, originally published in February 2014.

You can watch a lecture by Laloux below to gain a full insight into his philosophy of organization:

I’ll first run over a series of core theoretical elements and then delve into the practical aspects of what changes in the company Buffer sought to implement.

One of the central themes which Buffer took from the text, which already lined up with their ethos and company culture, was the importance of the individual.

Reading through the Buffer values document, you would be forgiven for mistaking it as a self-help guide or an emerging spiritual movement. The focus on the importance of the self while also emphasizing the subordination of elements of the self to company values feels at times religious.

There are Freudian parallels which could be drawn between the relationship Buffer construct between wholeness and teamwork; a need to meet some of the instinctual desires of the id, suppress the moralized tendencies of the super-ego, and promote the rationalized power of the ego.

organizational structure freudFor example, employees were encouraged to bring their ideas to the table and be creative within the workspace. However, they were instructed clearly to lose a sense of ownership of that idea once a team begin working on it. This way, the idea can change and be reshaped. The creative qualities of the individual are celebrated but emotional desires of ownership, protection, or self-promotion are actively discouraged.

All companies do this in ways, just Buffer present these wishes explicitly as part of a psychological breakdown of what they want to see from their staff.

The core values Buffer operate by are contained concisely in this graphic of theirs below:

organizational structure buffers values

Joel Gascoigne, Buffer’s CEO, describes how their growth led the company to thinking about its structure and how this process occurred:

Some of these changes we were not completely happy with, and this triggered some reflection and searching for how we want to structure the company. It was also right around this time that we had a chance to visit Vegas Tech Fund in Las Vegas and get insights into some of the big organizational structure changes that have taken place at Zappos.

He goes on:

We then discovered Frederic Laloux and his incredible book Reinventing Organizations (I can highly recommend his YouTube video). Laloux talks about the previous paradigms which have existed for companies in the last few centuries, and convincingly shares his thoughts on how a whole new paradigm is emerging.

In January 2015, as the company was working through its transition stage, Gascoigne describes the challenges the team were facing:

Perhaps one of the biggest changes that we have made in the last month is moving away from having long-term, static teams within the company. Instead we have shorter-term, more fluid task forces which are formed for a specific purpose and then disband once that task is completed.

organizational structure buffer task forcesFinally, before we move to the practical efforts Buffer took to implement this more horizontal structure, Gascoigne can define two key pieces of terminology for us, in the way these terms were viewed and used within the company at the time:

Self-management means that we believe there is a way for the whole company to manage itself. As a result, we no longer have any managers within the company.

Wholeness is the belief that we should bring our full self to work, something that is often hard to do. We think that if people can bring their whole self to work, then people will be happier and the company will benefit from the full skills everyone has.

As we can see from the examples in the quotes above and the nature of Buffer’s core values, the theoretical motivations behind these structural changes differed from those of Zappos. At Buffer we see a focus on the individual which is emphasized much more than in Zappos.

How did the new horizontal Buffer operate in practice?

We can start by outlining what task forces are and then jump through a number of example policies and strategies.

According to Gascoigne, anyone could create a task force to lead work on a new project:

Anyone in the team can propose and create a task force, and people choose which task forces to be part of. This is a truly self-managing way for a company to run, and so far we have seen great results.

Employees’ responsibilities are flexible and they can find themselves working on multiple projects all at the same time:

With task forces, everyone in the team is generally a member of 3-5 task forces, and this is what makes up their role. Whereas previously people would have a job title, now they have a role which is made up of them being part of a number of task forces.

There are no designated leaders on task forces, simply people who step up to leadership at any given moment:

The idea is not that there will be no leaders or hierarchy, but that the hierarchy should form naturally and change more fluidly and organically. There will naturally be people who contribute more and take on more tasks and accomplish a lot, and these people will naturally be regarded as leaders and looked up to.

Beyond this, Buffer had, and still has, a number of other quirks and policies:

Decision making

  • Decisions were to be made on the basis of consensus.
  • They aimed to create a marketing plan which didn’t contain any goals; the company all but abandoned tracking metrics.
  • Processes were to be documented as you went, along with creating new regulations and work patterns autonomously.
  • Employees had the freedom to choose their own pay and could opt to have a portion of their salary paid in Bitcoin.

Working practices

  • Employees were encouraged to work remotely and base themselves wherever they felt they would feel most fulfilled, meeting up for a company-wide retreat every 5 months.
  • There is a tone guide to follow to make sure everyone uses the most helpful language at all times, and the use of the 5 Whys technique to diagnose problems through discussion.
  • No one had a job title in order to break from constrained roles and do away with hierarchy, while all official mentoring and coaching which reinforced hierarchy was stopped.
  • They held Mastermind sessions, which appear to double up as self-improvement meetings and therapy, along with everyone having a daily pair cell; a person who they can talk to each day about goals and problems.
  • Everything about the company is open and transparent to everyone, including all financials.

You can check out how the founders of Buffer manage a Mastermind session in this video below:

So, how did it all work in practice?

What Buffer learned from their horizontal experimentation

organizational structure buffer failureThanks to an article by Buffer writer Courtney Seiter, sitting down with the co-founders Joel and Leo, we can gather some of their reflections on how the move to self-management went. What worked for the company and what did not.

For a company with such a tight focus on the individual, it appeared that the lack of structure was inhibiting employees rather than freeing them.

Leo: “The way I would describe it is that the amount of freedom people had, with absolutely no guidance, expectations or accountability, was pretty overwhelming.”

After learning this, Joel and Leo chatted with many different teammates to discover that, generally, “people felt quite lost,” Joel said. “We learned that they appreciate the one-on-ones that we used to have and mentioned the guidance a lot.”

As a reaction to these reflections and discussions with the broader team, there was an attempt to be flexible and reintegrate certain elements of the previous structure.

As a result, we brought back one-on-one mentoring meetings with a slightly different structure—instead of performance updates, it’s become a more open-ended way to work through challenges, get advice and brainstorm together.

Since this interview, Buffer have changed even further and reverted more toward traditional performance reviews:

So in 2016 we tried our first “performance reviews lite.” These were simple emails from each team lead to teammate that celebrated achievements and offered some specific thoughts on areas to grow. They focused on a few categories:

  • Things the teammate is doing well
  • Things the teammate is picking up on and encouragement to keep going
  • Things the teammate could improve on

organizational structure performance reviewsWith this change in tack, Buffer have moved on to 360 reviews which involve a team lead along with peer reviewing. This still holds true to many of the principles they have as a company, but also instills a hierarchical role in the process.

The notion of team lead wouldn’t have necessarily existed during the flat-Buffer period. So, what changed?

After Joel and Leo talked with many teammates to discuss their role, vision, goals, and commitments to the team, we started to transition away from the task force model and back to more stable, long-term teams.

It continues:

“We learned how much people enjoy having more structure, and that structure and hierarchy are not the same thing,” Joel said.

Buffer, in moving back to this structure, have admitted the struggles which can be found in the fundamental premise of self-management. It’s hard. The Stanford papers reflect largely the same findings as Buffer’s practical exploration.

One other key area where the old approach needed to be abandoned was in the collection of data and metrics of organization performance. Admittedly, I still don’t fully understand the justifications for getting rid of them to begin with; data can be simply descriptive as much as it can be instructive.

As we’ve transitioned to a more data-driven philosophy on the marketing side, it’s been interesting to see the results of our “year without goals.” Not a lot of growth occurred on the blogs, and on the social media side, we saw a bit of a decrease in our numbers.

organizational structure buffer baremetricsThe co-founders’ reflections aren’t limited to merely operational elements. They also provide us with an insight into what it felt like to work in a company which had, in its own words, “[thrown] out the ideas of management, skills, leadership, experience.”

Was it because we weren’t motivated? Reflecting on this time period, I do feel a different mindset was present. It’s tough to be motivated in a vacuum, where it feels as if any action you might take is as good as any other. It feels great to return to metrics for context and wayfinding.

I think it was a great learning experience; it did set us back,” Joel said.

Buffer still have a fairly horizontally organized company with a high focus on the importance of the individual, but their overall pursuit of complete self-organizing egalitarianism in the workplace was ultimately a failure which probably contributed to the co-founder and CTO leaving.

Massive structural changes to your company present large risks, but reflecting the opportunities to operate more horizontally doesn’t have to involve extreme risks like Buffer took…

Zapier take advantage of new opportunities while innovating with code not organization

organizational structure zapier-logo

Zapier are a great example of a modern startup. Their service to provide a library of third party integrations has helped users connect platforms, and provided significant value.

More than this, they are a remote team with a high emphasis on creating a company culture which is beneficial for both employees and customers alike.

However, unlike Zappos and Buffer, they haven’t endeavored to revolutionize their organizational structure – rather, they have taken proven elements suited to their company and implemented them well.

In an interview with Ben Oliveri, Zapier’s CTO Bryan Helmig provided a number of key takeaways which guide Zapier’s approach to managing a remote team.

  • Hire passionate, knowledgeable, and amicable talent with strong communication skills
  • Streamline onboarding with entrenched processes, mentors, and regular feedback
  • Document all processes and communications so information is available when needed
  • Sample and select the best tools to create your virtual office
  • Be explicit in communication, provide a variety of tasks, listen to concerns, set up weekly updates
  • Focus meetings with a predetermined structure, a speaker roster, prepared and shared notes
  • Set up flexible expectations and boundaries for keeping in contact
  • Trust starts with good people and builds with good practices

As you see, there is an emphasis on good planning and structure through creating actionable processes and policies. Not, as we saw with Zappos and Buffer, a hope that those processes and policies would arrive organically.

Helming justifies these decisions through an article he wrote about his journey as CTO from a 3 person startup to a large international company.

He describes beginning of the journey:

In the early days, it’s one or two engineers. You spend all your time hacking. It feels great. Everything’s wonderful. Whenever you get that small team of up to 6 people, it still feels pretty good. You’re spending about 80 percent of your time hacking, maybe 20 percent communicating. And you still feel pretty good.

But gradually, as the company changes and grows, the responsibilities or organization and management begin to rear their heads.

And then when it gets to be a bit of everything—that’s where it gets much more difficult. You spend less than 50 percent of your time as you get more and more people. There are more and more people to facilitate, and it just doesn’t feel as good, because you’re trying to do that while maintaining your hacking schedule. That is when you have to decide whether to go manager or hacker.

organizational structure zapierAccording to Helming, Zapier tackled this problem the way that many companies in the tech field deal with it: they have a CTO who is responsible for knowing everything about the code, and a VP of Engineering who creates processes, aims to increase productivity, and brings in new tools.

Helming describes how he reached out to people across the industry to try to understand how their IT should be structured, but realised that no one really knew and they were all trying things out and trying to make things work. What Helming did discover were a series of common patterns which emerged across successful tech-centric startups. It was this pattern of successful structures which informed the organizational decisions Helming made.

Helming interviewed around 15 founders and CTOs while making these decisions and he gives us 4 key takeaways:

  1. Embrace the difficult points where you’re stretched and worried about things not working. You have to go through this to become a better CTO, manager, or company.
  2. Be prepared to over-communicate as your organization grows because it’s important to make 100% sure everyone is on the same page.
  3. Pick one big project at a time and focus on it. Direct your team’s energy into the highest priority tasks. A philosophy which is inherently opposed to the Zappos style structure.
  4. Mimic the structure of other successful companies and learn the lessons from their experiences.

This last point is Helming’s key contribution on organizational structure and business systems. He summarises it nicely:

As a tech company, if you’re innovating, you should not be innovating in management. You should not be innovating in how you organize your company. You should be innovating with your technology, with your code, and with your product.

He goes on to explain that over time you might find your company experimenting with organizational elements other companies aren’t employing, but if this happens it will be a natural shift which results from the company culture you have developed.

Organizational change and innovation should be, for Helming, as much a natural process as a directed one.

Basecamp’s company handbook: A blueprint to synthesize competing ideas

organizational structure basecampThere are a lot of places to go to learn about Basecamp’s work practices and ethos, notably the book Rework by Jason Fried.

Yet the key thing to check out now is their company handbook.

This text is open to all to read and comprises contributions from 18 collaborators. Basecamp felt the need to produce this handbook outlining their company policy to meet the demands of their growing business. The handbook opens by stating the reasons it was needed:

For over 10 years, we didn’t have a handbook. In those 10 years, when a new person joined the company, they were expected to figure things out for themselves. But when we grew from a company of 10, 20, 30 employees to a company of over 50, our “introduction by immersion” style stopped working. New hires felt lost and isolated, and their first weeks or even months on the job were stressful because of it.

Basecamp did the same thing we advocate for in almost every article: they documented their policies and processes.

The kind of company this handbook depicts meets with some of the expectations of a modern organizationally innovative tech company without going as far as the experimental approaches of Zappos or Buffer.

A key recurring theme in the text is the importance of employee happiness. This attitude mirrors elements of Buffer’s approach, but does so in a more relaxed tone; have a herbal tea after work vs have a glass of wine.

Employees are encouraged to live in the places which make them happy – Basecamp’s 50 staff are spread across 32 different cities. These staff utilize the minimum number of tools possible to increase productivity and ease of communication while reducing managerial needs. This reflects aspects of Zappos’ practical structuring; make all work visible within the same organizational platforms and it increases oversight while reducing the need for oversight.

One key example to pull out to demonstrate the synthesis of the competing organizational practices is Basecamp’s approach to getting tech done.

At Buffer, staff were encouraged to build what they liked and work on what they were passionate about. At Zapier, the technical team focus on single issue priorities at a time.

At Basecamp they have a mix of these two approaches:

Roughly every six weeks we start a new cycle of product work. Each six week work cycle contains two type of projects:

  • Big Batch: Big Batch projects are big features or stuff that’s probably going to take up the full six weeks to get done. We typically take on one or two Big Batch projects in a six week cycle.
  • Small Batch: Small Batch projects are smaller things, tweaks, minor adjustments, and easy adds that should take anywhere from a day to two weeks to complete. We typically take on between 4 and 8 Small Batch projects in a six week cycle.

Basecamp then employ a technique they call scope hammering, where they reduce the scope of the challenge to fit into their 6 week blocks. The work is undertaken by small teams which are assembled on an ad hoc basis:

Before a cycle begins, we ask each person what kind of work they’d like to do over the next six weeks. Teams either coalesce around areas of interest, or we assign people to a team based on their preferences. Teams often change up after the cycle so everyone gets a chance to work with different people, but sometimes they stick together for a few cycles. There are no hard and fast rules about this.

This reflects the Buffer-style emphasis on having employees work on features and tasks which they’re passionate about.

Basecamp’s organizational structure and work practices therefore combine many of the best aspects of the experimental structures of Zappos and Buffer while retaining an adherence to tried and tested reporting and management. An emphasis is placed on employee satisfaction and collaboration while guided by direction from above.

Basecamp hold the attitude that their company is their key product. As long as they continue to iterate and improve that product, then the customer-facing service will be the best it can be.

Process Street helps you build your primary product: your business

process implementation process street overviewAt Process Street, we employ a number of the organizational structures and philosophies mentioned throughout this article, including but not limited to:

  • Remote working and a dispersed team
  • Collaborative creation of processes and policies
  • An emphasis on self-development and a promotion of good work-life balance
  • Focused development practices

At the centre of the Process Street operations is the platform itself. All our processes are documented and accessible to all. This allows staff to jump into new tasks easily and efficiently.

We also play with elements of internal entrepreneurialism, launching related products like Inside SaaS Sales which records and shows the sales and marketing cadences of top SaaS companies; a product we were interested in and know can service the needs of our userbase well.

Utilizing Process Street allows your employees to document their processes simply and easily, creating organic structure within your company’s operations.

Create the right organizational structure for your business

How you structure your business depends on the size, the industry, and the existing culture.

There is no one right answer.

However, if you’re thinking of experimenting with organizational structure, be sure to consider that you’re doing it for the right reasons and with the right reasoning.

Zappos advocate for their model drawing from the fact mentioned at the beginning of this article: as a city doubles in size its productivity per person rises 15%, while companies experience the opposite.

But there’s an ontological issue there: cities and companies are different. As cities increase in size the demographic proportions shift resulting in a proportional reduction of low productivity residents like children and elderly with an increased proportion of young labor force flooding in.

However, the larger a city becomes the higher the specialization of labor, labor market pooling, and knowledge spillover, amongst other factors. To what extent these variables could act for or against the Zappos model remains to be seen.

To make as drastic a change as Zappos have requires supreme confidence in your model, and it does mean accepting a large increase in risk.

The Basecamp organizational structure, on the other hand, pulls from effective proven structures while simultaneously promoting the kind of ethos apparent in experimental elements like Buffer.

Whichever you go for, we at Process Street will be here to support you and your business on the journey.

Have you worked in flat companies? Do you want to see more or less horizontalism in your business? Let us know in the comments below!

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Adam Henshall

Adam Henshall is a content writer for Process Street and dabbles in other projects inc Idyoma on the side. Living in Sevilla in the south of Spain, Adam’s current hobby is learning Spanish! @adam_h_h


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