How to stop your startup becoming a ‘franken-org’

Organizational design is a topic that often comes up when I chat with fellow startup founders.

I often hear things like “I want to set up a growth team, how should I do it?” or “We’re setting up a multi-country operation, where should the country general managers report to?”

Building an organization based on these individual questions risks creating what I call a “franken-org” This scenario is not unlike constructing a building as you go without a masterplan.

Midjourney AI-generated image: “org chart with a lot of confusion” / Photo credit: JJ Chai

It’s easier to go about organizational design with two key principles in mind:

1. Strategy drives structure
2. Strategy, and therefore structure, involves trade-offs

To illustrate what I mean, it’s helpful to dive into some examples of strategic choices and their implications on organizational structure.

Speed vs. precision

If the strategy prioritizes speed over precision, perhaps in a winner-takes-all industry like the search engine market, it makes sense to design the organization toward more localized decision-making focused on business units.

A classic example is the early days of ride-hailing, when the typical structure was to have the country or even city-level general managers who were responsible for driver supply and rider demand.

The trade-off is that each general manager then formulates localized approaches and less organization-wide specialized knowledge is built or applied.

Autonomy vs. cost-efficiency

If the goal is to favor autonomy at the business unit level, then leaders set budgets and typically create some duplicative functions within their units. At the extreme, entire sets of duplicative functions are built within each unit, such as marketing, tech, and strategy.

In an organization that prioritizes cost-efficiency, you’ll see more functions shared centrally that business units need to rely on – sometimes to their frustration. In this set-up, it’s harder to determine which units are prioritized in resource allocation when there are constraints on any one function. A classic example is what happens between product and tech teams.

Go-to-market focus vs. product focus

If the strategy is to grow mainly via sales and marketing over product, then the organization should take more decision-making cues from sales and marketing leaders. This means general managers typically come from sales and marketing backgrounds.

Conversely, if growth is product-led, then product leaders have to be empowered to make the final decisions, and general managers come from product or tech backgrounds.

Be decisive but not rigid