The hierarchy trap
David Peterson

Fueling speculation of coming layoffs, Mark Zuckerberg said the following at a recent Meta all-hands meeting:

“I don’t think you want a management structure that’s just managers managing managers, managing managers, managing managers, managing the people who are doing the work.”

I’m no fan of layoffs, but I can’t say I disagree with the sentiment, either. Hierarchy is an important tool for providing structure and alignment, but it can easily grow like a weed if not managed.

We all know this. Many of us probably went into startups to escape the sort of Kafkaesque bureaucracy that Zuck describes. And yet, while no startup endeavors to build layers and layers of hierarchy, I’ve yet to be a part of one that has been able to forestall its inevitable spread. So why does this happen?

I can think of three reasons.

First, scope creep. Here’s an example of what I mean. You hire a fantastic senior individual contributor to run marketing. She mainly manages paid campaigns across search and social, because those are the channels that you know matter for the business right now. One day you start thinking about experimenting with content marketing as well (you will need to diversify your channels at some point, right?). That senior IC is adaptable, so she’s able to get a rough experiment up and running. It only takes her about 10% of her time to manage the project. Amazing!

Fast forward two months and the results are inconclusive. But you have some momentum, and you know it takes a long time to see the results of any investment in content, so when she asks to hire somebody to run it full time, you acquiesce. Because it’s not a full time job yet, she comes up with a few more (largely experimental) projects to ensure the role has a large enough scope to attract the type of high quality candidates you want. The senior IC is now a manager, which gives her less time to do her original job (running paid campaigns), so she asks if she can hire somebody to backfill her.

Now you have a brand new management layer and a full blown marketing team working on a bunch of low-priority projects…and it all started with a little bit of scope creep.

Second, not designing career paths for individual contributors. I can tell you right now that some of your top performing individual contributors have no interest in becoming managers. They’ll hold their nose and do it. But if there were a senior IC career path available to them, they’d jump on it.

I don’t get why this hasn’t become more common. Once a startup reaches 150 to 200 employees, leadership undoubtedly has a laundry list of strategic cross-functional projects that are going nowhere. Senior ICs, especially early employees who know the business inside and out, are the perfect people to take on this work, rather than toiling away in middle management.

There are many challenges with pulling this off. But the most obvious challenge is that this sort of work is not rewarded, which leads us to our third reason…

Third, setting performance criteria that incentivizes kingdom building, not business impact. Once the team gets to a certain size, you need to start adding levels. That’s inevitable. But the way you do it can make all the difference. It’s all too easy to set performance criteria for higher levels based on simple heuristics, like team size. I’ve even seen performance criteria that explicitly require exactly what Zuck denounces above, e.g. that employees can only be made directors if managers report to them. All this does is incentivize employees to build bigger teams. Instead, try to find criteria that reflect efficiency and actual impact on core business KPIs.

More generally, there are lots of reasons, both obvious and subtle, why management is seen as the only way to get ahead. So do whatever you can to reverse that way of thinking. Celebrate the impact of individuals and small teams. Involve senior ICs in strategic decision-making (rather than just people managers or team leads). Promote them.

It’s a cruel irony that the hierarchy trap turns your most effective employees (senior ICs) into your most ineffective (middle management). As somebody who has been there before, all I can say is…do whatever you can to fight it.

David

EVENTS

Feb 8 / Lessons Learned From Investing Early in Over a Dozen SaaS Unicorns Including Salesforce, SuccessFactors, Box, Gusto, SalesLoft, ServiceMax, Veeva, Bill.com, Doximity, Yammer and Zoom Among Others
Jason Green, Founder & General Partner, Emergence Capital

Mar 8 / The Evolution of Collibra’s Product Positioning & How They Created a Category
Stan Christiaens, Co-Founder & Chief Data Citizen, Collibra

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WORTH READING

ENTERPRISE/TECH NEWS

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Done is better than perfect. When searching for a co-founder for his startup, Aaron Dinin did what many founders do and tried to find the most talented person. However, in doing so he picked a perfectionist as a co-founder… a decision which ultimately led to the destruction of his startup. This is a trap founders can easily fall into — focusing on quality over speed, to the detriment of the company. While perfectionists have their place, running an early stage startup is best suited for others. Aaron details why; “the startup world operates differently than most industries. Rather than prioritizing perfection, startups value volume. The reason they value volume is because startups inherently don’t know what constitutes perfection. Our markets are too immature, our customer bases are too new, and our knowledge of what we need to produce isn’t fully developed. Because of this, startup founders can’t be perfectionists. How could we? We don’t know the perfect things to produce.”

Product-led sales. Amplitude’s CPO, Justin Bauer, shares his view of the impact of product-led growth on sales teams in this great piece. “With product-led sales, we’re going to see a change in the role of the salesperson. You’re definitely going to see salespeople shift from land-focused account execs to more expansion-focused account managers. And I think they’re going to have much more of a focus on the customer experience; their job will be identifying areas for upsells.”

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Operational empathy. Operator VCs versus career VCs has long been a debated topic. There is some research that VCs with successful exits under their belt slightly outperform career VCs, while VCs without successful exits tend to underperform career VCs. Why is that? According to Michael Tefula from CIRCA5000, “I’ve come to the conclusion that VCs don’t always need strong operational chops to do well by their portfolio companies. Instead, what they always need is strong operational empathy…”

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