Designing Efficient Teams — Part I

A metrics-based approach to organizational design creates clarity of accountability. You end up with a team that reflects what you need to do to make your business successful.

Efficient Teams

A few years ago, I took my then 18-month-old son to watch his cousin’s little league soccer match. There were a variety of age groups playing from 5-year-olds to middle schoolers. The youngest kids just chased the ball around the field. Beyond the goalie, there were no discernible positions.

In the intermediate teams, you could figure out who was a defender versus a forward. The transitions between the defense to the midfield to the forwards was clunky but individual players knew their basic responsibilities.

There was one team of older kids that dominated their opponent. Not only were there clear positions, but the individuals in those positions appeared physically matched to their responsibilities: the forwards were explosive and the goalie was enormous.

Sports teams are great examples of efficient organizational design. Let’s take soccer for example, the most beautiful game (full disclosure, I’m Brazilian). Beyond the goalie, there are no specific rules formalizing forwards, defenders, midfielders, etc. These roles evolved over time as the most efficient way to organize ten individuals to maximize goal scoring and minimize goal allowance. If you told ten players to “score more goals than the other team” and provided no guidance around who is going to do what, it would be absolute chaos.

Organizational design is a huge, complicated topic. There is no correct way to organize your teams. It is very dependent on stage, industry and even available technology. I can only offer broad brush strokes for early stage companies, but the general principles should apply to any org. As companies grow, their orgs become more specialized. The principles outlined here can also be applied within departments once they reach a certain level of complexity.

Good organizational design (1) defines ownership, (2) outlines dependencies and (3) ensures each unit has the resources it needs to succeed. If you design your org correctly, you eliminate fuzziness. Everyone knows what to do, who to go to, and who’s in charge. Your company can move faster with more precision because there is clarity around responsibility and accountability.

In this post, I advise that a metrics-based design approach results in a resilient, networked organization that can efficiently absorb information and output meaningful progress regardless of your business objectives and industry.

Going back to little league, the dominant team was efficient at scoring goals while not allowing the other team to score goals because everyone had clearly defined positions, everyone knew when and how to transition the ball, and the players’ talents matched their responsibilities. The only thing that got in their way was my 18-month-old running into the field trying to pick up the ball.

Define Ownership

This may seem obvious, but you cannot design your organization if you don’t have a deep understanding of your business objectives and key metrics. If you don’t keenly understand your metrics, your company will fail regardless of how you organize your departments.

Once you understand your key metrics, you can start thinking about how to set up areas of ownership that maximize your chances of meaningful progress. I’m going to outline an exercise I’ve gone through a few times that helps uncover metrics-based ownership.

1. MAKE A COMPREHENSIVE LIST OF YOUR METRICS

Break metrics down to base units. For example, “Revenue” could be broken down to “Number of Salespeople” X “Leads per Sales Person” X “Sales Conversion” X “Average Order Size” X “Average Unit Price” It’s important to break metrics down because different teams might own correlated metrics (e.g. “Number of Salespeople” owned by HR, “Sales Conversion” owned by Sales and “Average Unit Price” owned by marketing.) This also helps uncover correlated metrics (e.g. maximizing “Average Unit Price” might reduce “Sales Conversion.”

2. LIST YOUR TEAMS / DEPARTMENTS

If you are very early, outline your best guess or your general resourcing / hiring plan.

3. WHOLLY ASSIGN EACH METRIC TO A SPECIFIC TEAM

There will be overlap in responsibility between departments, but it’s rarely 50/50. One team usually has more control over a metric than another. Fully assign the metric to one team. They own that metric and will be held accountable for it. (NOTE: this step uncovers resourcing issues)

4. DRAFT AN OWNERSHIP STATEMENT FOR EACH DEPARTMENT

Review all the metrics assigned to a given team and draft a sentence or two that connects the main themes around those metrics. This could be something like “Ensure on-time delivery of orders,” “allow users to effortlessly find songs that fit their mood,” or simply “acquire users.”

5. PICK INTUITIVE DEPARTMENT NAMES BASED ON OWNERSHIP STATEMENT

Every time I’ve gone through this exercise, it’s been surprisingly painful. Drawing boundaries is difficult and synthesizing a variety of metrics into one ownership statement invariably oversimplifies a complicated network of dependencies. But the outcome has always been productive. Even though teams often leave the exercise with more questions than answers, they come out with a deeper understanding of dependencies, resourcing and what they need to do next.

Outline Dependencies

Once you define ownership, you simultaneously create an enormous list of caveats, questions and general fuzziness. A company’s metrics never fit cleanly into one team or another. Don’t worry. When you’re creating clarity, sometimes it gets worse before it gets better. At this juncture I like to use the concept of fairness to start exposing dependencies, fault lines and where departments are coupled.

Few things are more frustrating and kill morale more quickly than being held accountable for something beyond your control. Telling someone that you are going to hold them accountable will uncover all kinds of gunk in your organization.

The exercise here is to ask each metric owner what they need from the other teams to be successful. For example the sales team can say that for them to move sales conversion they need marketing to create updated materials and manufacturing to speed up delivery . Each team needs things from other departments to be successful. Every team has the ability to help other departments.

Going back to the soccer example. Forwards are tasked with scoring goals. They are held responsible for shots on target with precision and speed. The more shots on goal, the more chances of scoring. However, they can only take shots on goal if midfielders maintain possession, know when to pass the ball, and pass the ball with high precision to the forwards.

I like the idea of covenants between teams. Once you uncover dependencies between two teams, you should be able to write simple bilateral promises between the departments. For example, imagine a simple hardware company with product engineering (designs), manufacturing (builds) and sales (sells):

• Product Engineering promises Sales functional products that meet customer needs
• Product Engineering promises Manufacturing clear, detailed, ready-for-production specs
• Sales promises Product Engineering access to customers, product feedback and market intel
• Sales promises Manufacturing visibility into pipeline, volume and consultation prior to target setting
• Manufacturing promises Product Engineering accurate scoping, performance fidelity and timely delivery.
• Manufacturing promises Sales reliable products delivered on time

In this simple scenario, if customers complain about a new product being late, the accountability rests with manufacturing as long as they have been consulted about what sales told customers, and as long as product engineering locked their spec within the agreed timeframe.

Asking each team to make covenants with each other has amazing downstream consequences. As a former CEO and COO, outlining covenants allowed departments to self-correct without needing me as a tie-breaker. Teams make compromises and generate consensus on their own.

Resource your Networked Organization

Once you have a clear view around ownership and dependencies, you can move on to resourcing. At first, you are allocating existing resources. An individual’s bandwidth might even be split between two departments depending on what needs to get done. However, over time you will hire individuals directly into each department and hopefully ‘department-straddling’ is eliminated. Going back to my soccer example, this is when you start hiring tall goalies, strong defenders and nimble forwards.

Creating structural clarity makes everything that’s people-related easier. When new employees come into a team with clearly defined responsibilities and metrics, they hit the ground running. When you do planning and set targets, everyone understands what they need from each other and can pre-negotiate resourcing and prioritization.

While you were creating all this wonderful clarity, you also laid a strong foundation for a networked organization.

For a modern organization to be nimble and durable, it needs to foster direct communication between individuals in a variety of roles and departments. Every person in your company should be voluntarily connected to individuals across the company and understand that there are many forms of leadership beyond an org chart. You want everyone to feel like they can interact with people across the org.

Providing clarity around (a) what everyone does, (b) why what they do is important and (c) how what they do affects what you do, gives people the tools to forge these voluntary relationships. You are providing them with a map of the right questions and the right people to answer them.

Coming Up

In the second part of the series, we examine some more general concepts like chain-of-command and matrix organizations.

Prime Movers Lab invests in breakthrough scientific startups founded by Prime Movers, the inventors who transform billions of lives. We invest in seed-stage companies reinventing energy, transportation, infrastructure, manufacturing, human augmentation and agriculture.

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