Minimum Viable Structure

TL;DR Cost of scale is organizational complexity. This is unavoidable and needs to be managed. We propose the smallest set of leadership tasks necessary to keep the spirit of your organization alive.

One of the very few unrealized dreams in Silicon Valley is a one-person billion-dollar company. That this desire exists (and exerts a powerful allure) tells us much about how organizational complexity is perceived among the founders. While hiring talent is rightly seen as crucial for any growth company, it is also seen as painful. Complexity that comes with scale is difficult to manage and pulls founders away from the simplicity of early vision and the attraction of a small high performing team – yearning for “garage days” is a common theme in the industry.

Scaling might mean success, yes, but it might also mean complex customers, differentiated investors, acquisition headaches, regulators and a multitude of new employees. Often, the four riders of the apocalypse - confusion, bureaucracy, complacency, politics - are not far behind.

Generally, we see organizations starting to face increasing coordination costs and complexity at around 50-100 people, and by the time they cross the Dunbar number their coordination costs tend to become acute. The linear increase in headcount leads to an exponential increase in “handshakes” between employees and functions, increasing the sheer quantity of potential sources of misalignment.

All entrepreneurs know this is the dragon to slay. Most have a recipe. Unfortunately, as a group they are optimistic people, and their optimism is their undoing - they are promised that it is possible to scale while remaining essentially a start-up. Day zero, founder mentality and many other management fads do not so much confront this problem as pretend it can be made to disappear.

We believe this misplaced hope is best managed by a dose of realism. Coordinating large groups of people is fundamentally different – it can’t be managed as one would a single high-performance team; by constant in-the moment feedback, fluid roles and assumptions of competence and alignment born out of close working relationships.

What is needed instead is establishing a shared direction, clarity on everyone’s role, a clear way to make trade-off decisions and a good sense of how to measure effectiveness and progress. Task of leadership is precisely to keep (re) creating this clarity.

This is where many high-growth organizations go wrong – they certainly have strategy documents, mission/vision statements, organization charts, OKRs, issue trackers, RACI matrices (heaven help us) and many other tools. The issue is that these tools are often too complex and disconnected from each other (e.g. strategy is not aligned with the org chart, and neither with OKRs) – the attempts to wrestle complexity end up adding even more complexity.

If dose is the poison, the right amount of structure (and no more) is tested by its ability to reduce coordination costs and increase effectiveness and tempo. The ills of bureaucracy, inefficiency and the frequently Kafkaesque world of big organizations and government are all too real and well recognized to add structure and tools for their own sake.

We advocate a middle path – simplest structure that will provide maximum impact. Minimum Viable Structure means defining the task of leadership as completing four essential tasks: clarifying the strategic direction, assigning the right roles and responsibilities to right leaders/units, making trade-off decisions that stay true to the strategy and providing valid reality-testing and tempo.

Thinking in terms of a minimum viable structure is a simple way to focus on the essentials of running a business well. These tasks are not one and done - organizations that continually answer these questions well provide the ground for excellence. Leaders should pick the simplest tools available to do this job well, and spend a lot of time to make sure that they fit with the organizational context, culture and each other.

If cost of growth is complexity, its reward is economies of scale. That is a reward available only to those who can tame that complexity with the right amount of structure at the right time.

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This Substack will be our exploration of the approaches and tools required to build a minimum viable structure – while some answers are clear and others emerging, the topic itself is infinite.