Home

Organizational structure is challenging. Public companies struggle with it as much as startups do. When I was at Google, I was charged with calculating PM/Engineer ratios by team as part of the research into our company structure. When startups ask me when they should hire a PM or what the span of control should be for a sales team, I share this experience.

First, I’ll share two general observations: flatter reporting structures are better and smaller teams are better. These two conclusions have the same root: Metcalfe’s law. The fewer people within a team, the less communication overhead is required to keep everyone on the same page.

Second, a company has one goal but leverages 4 teams to achieve that goal: engineering, marketing, product and sales.  In well run companies, these teams should exert tension on each other. Sales advocates the path to short term revenue growth. Product should advocate the strategy for medium and long term growth. And Engineering should advocate realistic development schedule. It’s the job of the CEO to ask for clear tradeoffs from each group and then decide the relative priorities based on recommendations.

Third, a company’s constitution varies. For early stage companies, engineering teams tend to dominate the staff. A ten person team might have 7 engineers, the CEO, one salesperson and one marketer. As the company scales, though, the corporate strategy determines a company’s staffing. I work with two SaaS companies about thirty people. Their constitutions are very different. One company is 15 sales, 10 engineering, and 2 product, 1 marketing and 2 management. The other is 25 engineering, 2 product, 1 marketing and a CEO.

Fourth, each team in company requires a different structure with different management types.

At Google, PM/Engineer ratios varied depending on the product but typically it was about 1:7, one PM per 7 engineers. I think that’s about right for most companies. Often, the founder/CEO is the first PM. The goal of the PM is to articulate and define a strategy and product and inspire the team to build it. Smaller groups work better for this kind of task. Product managers and product marketers tend to be staffed in 1:1 ratios.

Tech lead/Engineer ratios varied much more and ranged  from 1:10 to 1:25. At Google, many of the tech heavy projects like infrastructure had much higher TL/Eng ratios. Some teams had 35 or even 45 engineers reporting to the same person. That might be a bit too high for most companies that aren’t developing pure technology (eg search engines, databases). Front end teams (search, GMail, etc) worked more effectively with much smaller ratios: 1:5 or so.

Sales manager/account executive ratios varied from 1:3 to 1:20 depending on the product and the strength of the sales manager and the value of the product sold. The greater the value of the product, the smaller the ratios. Much like engineering teams, sales organizations can be relatively flat. More than most, sales teams are very quantitatively managed and tends to be lighter touch.

Every organization is different but these are the rules of thumb I share with my companies about organizational structure.

Advertisements

3 thoughts on “Your Startup’s Organizational Structure

  1. Reblogged this on hippotential and commented:
    In start-ups that are not tech companies, most of this advice still applies. Substitute “operations” for “engineering” and think of “product” as either a good or a service and you have an idea of best practice. We love the recommendation to keep the structure flat in order to foster collaboration. In reference to Metcalfe’s law and its application to structure, keep in mind that the strength is in connectivity. Structure is but a part of culture that fosters connectivity. In short, think about the impact your structure has on nurturing collaboration and creativity in order to have greater potential for success!

  2. Pingback: Startup finance and organization | For the love of spreadsheets

Comments are closed.