How to restructure your company's organization as it grows from 20 to 100+ employees

In a team of 20, everyone knows each other, and decisions are made in the hallway. At 100, this stops working: people don't know who is responsible for what, and teams duplicate each other's work. You are not making a mistake; you are going through a typical stage of growth. Let's look at how to get through it.

The classic explanation was given by Larry Greiner, a professor at the USC business school, in an article for Harvard Business Review. A company grows through periods of calm development, followed by a crisis that forces it to change the way it is managed. Practices that worked in one phase create problems in the next. He calls the first such crisis the crisis of leadership: informal communication can no longer cope, and the founders must make way for professional management and hire the first middle managers.

A practical benchmark comes from investor Tomasz Tunguz of Redpoint. He describes the typical breaking points of a management structure: around 8 people, around 60, and then when the company reaches several hundred. At each point, a new layer of management is needed. The reason is the number of connections. A manager's typical team is about 7 people (this is what internal measurements at Google showed). Graicunas's formula shows how quickly complexity grows: a manager with 7 direct reports has about 490 possible relationships, and with 10 it is already 5,210. That is why a founder with 15 direct reports won't cope.

How to restructure in practice:

First, build a layer of functional leaders: product, engineering, sales, customer support, operations. The founder stops being everyone's boss and works with a small team of leaders.

Second, define roles and decision rights: who decides what and who is only consulted. Without this, arguments go in circles.

Third, prepare new managers. They are usually your best specialists, but managing and doing the work yourself are different skills, so they need training and support.

Fourth, replace informal communication with a rhythm: weekly priorities, clear goals, written updates.

Fifth, don't restructure too often. Every reorganization costs time, so change the structure at moments when growth truly requires it. Former Skyscanner COO Mark Logan puts these moments at around 50, 100 and 200 people.

A good example is Thumbtack. Founder and CEO Marco Zappacosta has described how, as the company grew, he went from individual contributor to manager, then to manager of managers and leader of leaders. And each time he had to relearn what it means to be a CEO. So it is not only the company that has to restructure, but the founder too.

Sources:

1. Larry Greiner — Evolution and Revolution as Organizations Grow, HBR and a Rework overview
2. Tomasz Tunguz (Redpoint) — Recognizing the Breaking Points of Your Startup's Management Structure
3. Sifted — Founders, chill out with hiring
4. Rework — How Team Size and Roles Change at Each Startup Stage