Friday, December 16, 2016

To Start Up: Thinking About Designations

Everyone, it seems, loves an Org Chart. The little boxes of power, those straight lines of responsibility, that one page definition of the hustle of start-up life - neat, tangible and reassuring! It is loved by those who make them, as they see themselves securely placed in one box or another, and by those who demand them, investors, accreditation agencies and bankers, so that they know how to give credit and how to apportion blame! When they are given out publicly, as is usual in countries that thrive on hierarchy, customers treasure them for writing complaints to the big man at the top and salesmen treasure them to cut the chase.

But, it is also one of those old-fashioned things that everybody loves to hate. Particularly in the start-ups, where the rough and tumble of daily lives often do not follow neat structures and fixed boundaries, a secure spot towards the top is as desirable as the lovely cabin at the upper decks of the Titanic. In a world where rolling up the sleeves and getting things done - rather than hiding behind one's paygrade - is the ultimate virtue, Org Charts are often a liability.

So, when a new entrepreneur asked, my suggestion was to go without an org chart and designations. When he insisted - his is a small education business going for accreditation and the inspection agency demanded to see one - my suggestion was to call everyone a 'Partner', defining people by their responsibilities rather than their 'designations'. To this bright idea, he came up with two significant objections almost immediately.

First, a practical one, that designations attract people. It is much easier to hire talent if a good designation could be offered. In the same vein, with undifferentiated designation, it is harder to hire Senior people.

Second, it is easier to communicate the person's decision making remit with a designation. This makes things easy and transparent for outsiders, Partners, Banks, Investors and Accreditators, to understand the organisation. Everyone being a partner is problematic for everyone outside. 

These are common sense objections, but, I have two corresponding questions about the business of Org Charts.

1. Does designations attract the right kind of people who will be successful in a Start-Up environment?

2. Does designations communicate the remit of decision-making within a start-up and can the outsiders reliably make out what the person does from the short-hand of a designation?

The answer to the first question is negative. People who value designations crave for a kind of recognition, institutional rather than meritocratic, which is hard to achieve in a start-up. Besides, this view is based on a fundamental misconception about the nature of the start-ups - that it is a small version of the big company - which is not at all true. The Start-ups are a different organism, with different challenges and growth paths, and running it with formula that may work for large companies - that designation attracts talent - may be a recipe for disaster.

The answer to the second question is also negative. We already knew that different industries had different designation systems - a General Manager in an Manufacturing Organisation would usually have more budget and money than a Vice President of an Advertising Firm would would, in turn,  be equivalent to a Managing Director in a Bank - but this all gets mixed up in the Start-up world. This is because most start-ups borrow their designation systems indiscriminately, most commonly from the heritage of the Founder but often also from their customer companies. So it is hard to tell, more often than not, whether a Director is senior or junior to a VP in a start-up.

In fact, contrarily, an elaborate designation system may say something else about a start-up. If you are the customer and if you sit in a meeting attended by more than one Managing Directors, you may be forgiven for thinking this is to be a classic case of all Chiefs and no Indians. The designation system itself changes the organisation more often than not: It shifts focus away from execution and responsibility to meetings and plans, as this is what people with Senior designations are expected to be do more of the time.

So, in the end, my advice to my correspondent was to define the organisation by responsibility, not designation. And, indeed, do so not to follow a fashion, but with a deliberate strategy to focus on execution.

This means, potentially, giving everyone a say on everything, but that is a good thing, rather than a bad thing, for a start-up. In a start-up, outside intelligence and perspectives are often limited, and more eyes find more bugs, as they say in software.

But, with defined responsibilities, there would be one person responsible for execution in each case, and as long as that person gets primacy, as s/he is accountable, the business will work out fine (capability, in this formulation, is assumed, and getting rid of designations mean that the organisation needs to be more meritocratic, not less). 

And, one final thing about the customers and the partners, the two principal outsiders every start-up needs: The smart ones do not look at Org Charts, at least not anymore. They understand the organisation, and feel the way it works. An elaborate system of designations makes them take less risks and make worse offers, as they sense that an overtly bureaucratic start-up may not last, and therefore, not sharing the risks with.



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