Startup org design: Design power centers intentionally

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This is the beginning of a series on lessons I’ve learned about org design after designing and working in many, many orgs and seeing allllll the mistakes. I hope it helps you avoid some of the ones I’ve made!

I’ve met more than one founder / CEO whose story goes something like this: their company reached $10M ARR with minimal investment in marketing or sales because they had a great product and an active community. Their profit margins were healthy, with most revenue coming from a high volume of low-revenue customers.

Then someone – usually the board – told them they needed to hire a CRO or a VP of Sales. And they get introduced to someone who was “an amazing leader” at this other company. They hired that VP of Sales and that leader built out a 20-person sales team. Six months later, the sales reps were meeting their quotas and selling larger deals to larger companies, around $10k ACV… so far so good.

But under the hood, the company’s unit economics didn’t look so great anymore. The margins on those $10k deals were much lower and the sales staff threw off the company’s burn rate. The founder thought of this as an initial hump and started asking what other investments sales might need to get to the next stage… Unwittingly, this founder / CEO has made a definitional mistake that will have a long-term effect on the health of their business.

This post is not about the dangers of hiring a sales leader too early. It’s about how this founder, by hiring an early executive, made an investment. They went all in on one function – sales – while unintentionally building a functional blind spot into the company’s leadership team: marketing. It’s also about the fact that they ignored the natural motion of their revenue – a high volume of low-revenue customers – when thinking about what leader to hire first. 

Hiring is emphasis. 

Bringing on an early executive means you’re placing a bet. Every leader comes with biases about what to focus on and who to hire, and also blind spots. Your early leadership team is the blueprint for your company’s functional bias and the strategies you will try as you grow. 

Before you build your leadership team, determine which functions your company needs to be most extraordinary at. Then, design power centers around them and use this to guide who you hire and in what order.

When I say “power center,” I mostly mean a leader or function that is a locus of resources and decision-making authority. But it can also mean that other leaders report to this person (like product reporting to engineering or vice versa).

Companies work more efficiently if it’s clear who is responsible for a decision and whose agenda trumps the others. If you don’t designate power centers, they will spring up organically as a result of who was hired first, who is most senior, or who the CEO listens to. We’ve all seen it: the buck stops with so-and-so executive, even if it is not explicit. 

One of the most powerful things you can do to accelerate your company’s growth and reduce wasted energy is to design your org carefully including where you want the power to sit. 

Often, when we draw org charts, they look like this: 

Picking your company’s functional strengths often means forcing a choice between:

• Sales versus Marketing: who is truly running and driving the business?

• Product versus Eng versus Design: who drive the roadmap?

• Operations versus People versus Finance: who is helping you operate the company?

• GTM org versus Technical org: who is in the driver’s seat on deciding priorities?

Designing conscious power centers could mean an org structure that looks more like this: 

I’ll explain this picture below and share some exercises to think through your org design as you hire your first leaders. The goal is to make your bets on the functions most likely to get you to $100M.

Designing power centers

One of my big pieces of advice to founders and CEOs hiring their first executive team is to start small. Pick just 2-3 executives to invest in if you can. Don’t be fooled by this picture!

Hiring nine executives with equal power & experience is not only a waste of your time, it will also make your company slower. The execs will end up duking it out over who has power and who gets to make decisions. The amount of time spent in debate and coordination will go up exponentially. Hiring a leadership team that looks like the picture above in an early-stage startup is inefficient, demoralizing, confusing, and expensive.   

To start small requires you to make conscious choices and to bundle some functions underneath others. To get specific (and probably controversial) with my advice, in your first 3 executive hires in a B2B or B2C-type business, you should only hire:

1. ONE tech executive (not both an engineering leader and a product leader).

2. ONE executive to lead GTM (pick between a sales leader and a marketing leader ).

3. ONE ops executive to lead finance, people, and legal.

In all of these choices, if you want to make your life simple, just have all the other leaders report to the executive you’re hiring (so director of marketing reports to VP of Sales, Head of Finance reports to VP Ops, etc.)

The org might look like this:

You can hire people to lead the other functions if you need to, but the execs at the “top” should be more senior and should be hired first. They’ll be the ones who set the vision, while other functions serve that vision.  

At Google (at least when I was there a LONG time ago), Product was the power center. On the go-to-market side, Atlassian has always been very clearly marketing-led. At Pinterest, the product and technical process was significantly design-led in the early days. At Facebook, Growth was the most powerful team for many years.

If you were to make Sales your main power center, your org might look like this at the beginning:

Your marketing leader can be more junior for now and report to sales (thus the red box). It won’t be perfect and you’ll eventually want to split functions out, but it’s always easier to add senior executives than to subtract them. 

I also recommend talking about power centers openly. It’s clarifying and it helps with hiring. If you were a marketing leader interviewing with the company above, wouldn’t you rather know that the core of your job will be to empower the Sales team? If you wanted more power or didn’t like the head of Sales, you could decline the job and go to a company where marketing runs the show. Nothing is worse than being told you’re going to be a certain type of leader and role, and then discovering after you started that the true nature of your job is subservient to someone else. Being open and clear about power centers reduces thrash. 

Consciously designing power centers also makes it clear where to source candidates from. You tell your search firm, “75% of our product roadmap is determined by our customer-facing organization. We are GTM-led, not product-led in our product development. I’m looking for an engineering leader who’s not only okay with that but has been inside a company like that before.” For some engineering leaders, that’s what they do – build technical organizations that serve customer organizations. You could specifically source from other GTM-led companies like yours. Wouldn’t hiring be better if everyone disclosed this stuff in the job description?

Map your power centers to your business model

Ok so (1) start small (2-3 execs) and (2) design power centers explicitly… but how do you decide which execs to hire and where the power should sit?

Start by looking at your business and map your organizational design to that. 

For example, look at your average deal size: 

[Image: Christoph Janz]

If your ACV is low and most of your business momentum comes from consumers, prosumers, or SMBs (flies, mice, and rabbits), then your GTM should be marketing-led. (Lots of people call this product-led growth, but for this post, I’m calling it marketing-led since it makes the org design point clear.) Marketing should be your most powerful go-to-market function, and to the extent you have sales, it will likely be an inside sales team that is down the funnel from marketing. 

If your business momentum comes from midmarket and enterprise (deer and elephants), you should be sales-led. There is probably a defined customer set for your product and your business is all about building awareness within that customer set and then building strong, high-value customer relationships. Your main go-to-market leader should be a sales leader and marketing will serve sales. 

You can usually tell if a product is Sales-led when its entire website is covered in pointers to “schedule demos” or “talk to a rep.” Salesforce (until recently) was the classic example of a sales-led organization. They may be extraordinary at marketing, but fundamentally, their marketing serves their sales. In contrast, Atlassian is marketing-led. They have always invested heavily in marketing and product to convert their customers – engineers and engineering teams – without requiring them to ever have a convo with someone in sales (perfect match with their customer base of engineers who stereotypically do not want to talk on the phone). Atlassian didn’t build out their sales team until around when they went public. Early on, they would experiment with salespeople to try and beat their marketing funnel, then take what worked from those sales experiments and automate it in marketing and product. Power center = marketing. 

Map out how your business really makes money – the core engine of where customers are coming from – and prioritize the functions that amplify that. If you’re small and early, look at the patterns in your first 100 customers and think about how to amplify the natural momentum. If you can easily close customers without talking to them and your ACV is below $10,000, DO NOT invest in Sales first. If you find that your product is hard to understand or the customer typically needs implementation help AND your ACV is above $50k or 100k, then invest in Sales. If you’re in the middle, then proceed with caution. I’d argue that investing in marketing first almost always leads to more efficient unit economics (Sales leaders often solve problems with people…) but the most important thing is to think through your buying process – what you know about it – and figure out how to amplify the natural momentum and strengths of your business. Do not focus on hiring for your weaknesses. You can do that later. 

Also, if you’re experimenting with a different go-to-market motion (SMB → enterprise), that’s fine, just invest in staff proportionally. For example, if you’re marketing-led and want to test an upmarket sales strategy to close larger deals, can you have a small sales team report to the marketing leader for now? Or a tiger team of true enterprise folks that is split out, but keep it small?

Last thing: When you are thinking about what your org should look like, make sure you’re looking at companies with business models similar to yours. 

At ad-supported consumer businesses, like Facebook, Snapchat, etc, growth and revenue BOTH come from user eyeballs coming to the site, so Growth is often the strongest executive at those companies. A D2C company like Glossier might emphasize a function like brand marketing. A marketplace company might look at Airbnb, while a corporate/local company like One Medical might get clues from Uber and Lyft. 

Don’t just copy the leadership team of Google, Facebook, Salesforce (or insert random other companies here) if your business model doesn’t match theirs.

Don’t forget about the CEO: Factor in your strengths

If you’re truly going to start small and hire right, your goal is to staff your leadership team with the people and seniority to complement the founder’s strengths and weaknesses — no more than what’s necessary and no less. 

So once you figure out the functions you need to be exceptional at, but BEFORE hiring your executives, factor yourself in as CEO. Are there any functions you’ll be responsible for?

If you’re an amazing product leader who will never let go of product strategy, don’t duplicate yourself by hiring a chief product officer. You’ll just smother them (that link is a great perspective from Gokul) and use them as order takers, and they’ll probably leave. Instead, use yourself as the chief product officer, hire an engineering executive to lead an EPD team, and have a more junior product leader report to them to execute your roadmap. 

Ask yourself: 

• What are you exceptional at?

• What do you love doing?

• What do you hate?

• What are you bad at?

You’ll also want to ask: Do I like management? If the answer is no, make “fewer direct reports” one of your org design principles … and start bundling functions together like the examples above.

Betting slowly

To recap:

1. Before you hire executives, figure out what your company needs to be exceptional at, then design power centers around those functions. Focus on building on the natural momentum in your business.

2. Add executives slowly, carefully, and in the right order, taking your strengths as CEO into account.

3. Bundle functions at first and split them out later.

4. And communicate which executives run the show — it’s easier for everyone that way. 

When founders accidentally let power centers grow around the wrong functions, the most common patterns I see are:

• They think they need 9 executives to report to them for each of the 9 main functions, and just start checking the boxes.

• They’re modeling after the leadership team of a company they admire, but it has a different business model than theirs.

• They vibe well with a candidate and hire for their leadership ability or cultural fit over fit with their business.

• They’re following recommendations from their board, which might default to a certain type of executive based on past experiences (Boards and VCs are, frankly, terrible at giving customized org design advice. I see a LOT of pattern-matching type intros from boards and investors – “here, hire this VP of Sales who was great at this other company I invested in…” – without regard for YOUR business or YOUR strengths). 

• People tend to bring in people with similar backgrounds to them. I’ve mistakenly hired salespeople first because I’m stronger in sales than in marketing. I’ve seen countless founders do this too. 

With a limited number of bets to make, your early bets on leadership team hires can either put you out of the game by slowing you down or distracting you, or they can massively accelerate you. The wrong hire can waste so much time and money. You’ll be stronger overall when you go slowly, focus on mapping your org to your business, design your power centers explicitly, and start small.