What is The Organizational Structure For a Startup?

Running a startup is one of the biggest challenges most people face. To ensure effective management of a business, business owners need to adopt the most convenient organizational chart. 

Most businesses have adopted a flat organizational structure and witnessed steadfast growth. However, as the business grows, they forget to change the structure, and this further affects the management. As a business grows, so is the need for a complex layer of management. 

If you want your businesses to be more successful and keep up with the stiff competition in the marketplace, you have to adopt the right organizational structure. That is choosing an organizational chart that is in line with your type of business and the industry you are serving.

Types Of Organization Structure

An organizational chart is just a simple diagram that illustrates reporting or relationship hierarchy structure in a company or business. The following are some types of organizational charts you should know:

1. Functional  

A functional organizational chart is one in which the organization is subdivided into smaller groups. Each group is assigned a specific role and task they should execute. For instance, a company can divide its employees; some may be working in the finance departments, sales and marketing, and others in the IT department. 

In the functional structure, each department or group has a director who is answerable to an executive at a higher level in the hierarchy. The executive oversees multiple departments in the organization. 

2. Divisional 

A divisional organizational structure is most common in large companies that operate across different objectives. In this type of organization, each group operates on its own. It manages its resources and dictates how money is spent on different projects and other aspects of the organization. 

The company can also create divisions in different places, not necessarily within the company. For instance, the company can have its division in North America, Asia, Africa, etc. 

3. Matrix

This type of organization combines the various aspects of functional and divisional models, making it more complex than others. In this structure, employees are grouped into functional structures of specialization and then further into divisional products and projects. 

In this structure, each employee or division is offered some autonomy. They are also expected to be more responsible for their work.

4. Flat 

Most companies adopt the traditional top to bottom organizational model. However, a flat model tries to disrupt this system by decentralizing most tasks. In the flat model, every employee is a boss on their own.  

This model attempts to eliminate bureaucracy and improves communication amongst employees. When a business adopts this kind of structure, it establishes top-down management for most of its short-term projects. 

Related: How Many Startups Fail Within 3 Years Of Launch (Read Stats)

How To Organize Your Startup Company?

Which is the ideal or typical organizational chart? What makes the best char for your company?

Well, every technology company is different on its own, and the variations are also small. Most companies have tried different ways of organizing their operations, but nothing comes up that is new or any better than the four organizational models we have discussed in the previous section of this article. 

In most cases, a typical organizational chart for a mid-size tech company is more like to resemble the one shown below.

If you are starting a tech company, its organizational chart may differ from the one shown above. You may be having different roles. Not all the roles shown in the chart above will be relevant to your organization. You may combine some roles and differentiate the reporting lines.  

To avoid the implication that one of the functions may be subordinate to the other. There are at least nine different reports that the company CEO will get at the close of business.

Let us expound on every section of this organizational chart to help you learn more in coming up with one of your own.

Related: Best Tools For Early-Stage Startups

Company CEO: Keeps The Business Focused On The Mission

The sole responsibility of a company CEO is to ensure the business achieves its mission and objectives. The CEO sets the vision of the business, builds a team that can help the business grow, and avails the resources that the team requires to succeed. 

In most cases, a startup will not start with a CEO but an operator. With time the operator does more work assigning tasks to employees and delegating to create more space for strategic decision-making, team coaching, recruiting, and managing business relationships with partners and investors.

Sometimes a business may have more than one founder who qualifies both to become CEO. However, it is imperative that for investment purposes, a company should only have one CEO. This can also prevent power struggles that arise when the business has two or more CEOs.

COO: Keeps The Company Operations Running Smoothly

The company COO will ensure the business model and the operating system works smoothly. That is why the company COO is always on the right-hand side of the CEO. 

They usually lead all the non-product operations and project management. In earlier stages of the business, the head of operations may be responsible for managing the business’s HR, legal, and financial issues. 

Related: Best Tools For Startups

The Head Of Product: Coming Up With An Ideal Product For Target Customers 

The product team in the organizational chart is responsible for understanding the customer needs and translating them into usable, valuable, and feasible product requirements. 

In the product department, you are likely to find employees specializing in customer data analysis, product design, rapid prototypes, and product owners. 

In some rare cases, the CEO may also play the role of a Head of Product. However, as the business grows and more duties emerge, the CEO may cease to become the Head of Product. They end up assigning the task to a specialized team. The head of product should be a full-time employee of an organization.

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Technology: Build The Right Product

Technology is another essential part of a company. This is usually that part of the company that is more focused on engineering. It majors on developing a scalable, reliable, and high-quality technology-based product that can compete favourably in the market. 

In the tech department of an organization, you are likely to find people like data scientists, system architects, front-end engineers, back-end engineers. 

You will also find those who are concerned with quality assurance (QA) in the company. However, some companies will put the QA tasks under the product organization. The quality assurance team ensures that the products delivered to the final consumer meet all the set industrial quality standards. 

Some of the common metrics you will look into for a tech company include:

• Performance – like the percentage uptime of the service
• Quality – the number of bugs present in a system
• Velocity- for instance, the mean number of Fibonacci points completed in a sprint

Growth: Ensure Growth Reflects On The Final Product 

Another essential function in the organizational chart is growth. Growth is vital for building engineering-based solutions to increase all the critical metrics like referral and conversion rates. You can think of growth as an intersection between marketing and the product.

In most cases, a growing team in an organization will consist of a product engineer and product manager. It can also consist of SEO experts and performance marketers. They are solely responsible for marketing the product and ensuring its growth in the market. 

The basic metrics that the growth may be more concerned about include customer acquisition rate, activation, like the number of new users subscribing to software, retention rate, referral, and revenue generated on a monthly subscription.  

The growth team was born out of the need to improve an existing product to cater to the changing customer needs. This makes it challenging to separate growth and product. However, when a company succeeds in distinguishing the two departments, it can focus more on growing the product. 

Related: Best Places To Get Startup Business Loan

The only limit to separating product and growth into two teams is the cost of doing so. If the business can afford it, then it’s worth the venture. 

Marketing: Driving Traffic And Increasing Conversion 

B2C will normally focus on creating awareness in the market. 

They make the target customer create desire and interest in the product. They need to invest in paid marketing, customer research, brand marketing, and CRM to achieve their goal.  

The B2C team will be more concerned with metrics such as engagement, sign-ups, channel KPIs, and unit cost or cost of acquiring a customer (CAC).

In the case of B2B, they are also involved in acquiring new customers to the business. However, the team is engaged in a strategic partnership with other businesses and event marketing activities. They go through a longer sales cycle, which makes CRM more critical to this team.

Other essential elements in the organizational chart include:

• CFO – The CFO is responsible for managing finances in the organization. They will take care of the financial strategy in the business and ensure the company does not run out of cash.
• HR – the HR team is responsible for recruiting personnel in the company. Some of the people in this team include trainers, recruiters, administrators, and coaches. 

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Final Thoughts 

The organization chart is the most critical aspect of any business that intends to grow. A good organization aligns all its resources based on the business strategy or mission. 

For this reason, the company CEO should know how to allocate the company resources and assign relevant tasks to junior staff. An excellent organizational chart is therefore essential for any startup with a vision for growth.