Organizational Change
This past summer, I was an intern with a tech company that had grown rapidly and experienced hugely negative media scrutiny and significant turmoil. When I joined, it looked like things were beginning to settle down. Then, the CEO resigned about three weeks after I had started my internship. The company was rudderless for a short period, until a leadership committee was appointed to run the day-to-day operations. This was a strange leadership structure from my point of view. If a group is tasked with making crucial decisions, there can often be gridlock. The transaction costs of group decision making are higher than if an individual chooses.
Fortunately, the rest of the company was well organized. Most tactical decisions were made by city operations teams, which were able to function without executive approval. These city teams were in turn managed by regional teams, which decided how to invest and compete across five regions. Through this decentralized structure, the organization was able to function effectively without central leadership for several months.
When my internship started, I thought I knew what I was walking into. The company had been eviscerated in the press for a variety of unethical actions. Yet, my experience was nothing like I expected. From the inside of the organization, I saw from a completely different perspective. I saw a group of highly driven people dealing with organizational problems stemming from tremendous early growth.
One consequence of tremendous and fast growth is a lack of established internal processes. This, coupled with large amounts of leeway given to top managers, resulted in inadequate HR and feedback mechanisms. Many employees were unsatisfied with things like stack-ranking and the disproportionate compensation for top performers. This was due to an organizational structure that gave managers lots of freedom to choose how to reward their subordinates.
Overall, I really enjoyed my time at the organization over the summer. I was able to experience a strange organizational structure and gain insight into its causes. Ultimately, there are effective and ineffective components in the organization, and I was able to see how transaction costs and human flaws drove these differences.
Fortunately, the rest of the company was well organized. Most tactical decisions were made by city operations teams, which were able to function without executive approval. These city teams were in turn managed by regional teams, which decided how to invest and compete across five regions. Through this decentralized structure, the organization was able to function effectively without central leadership for several months.
When my internship started, I thought I knew what I was walking into. The company had been eviscerated in the press for a variety of unethical actions. Yet, my experience was nothing like I expected. From the inside of the organization, I saw from a completely different perspective. I saw a group of highly driven people dealing with organizational problems stemming from tremendous early growth.
One consequence of tremendous and fast growth is a lack of established internal processes. This, coupled with large amounts of leeway given to top managers, resulted in inadequate HR and feedback mechanisms. Many employees were unsatisfied with things like stack-ranking and the disproportionate compensation for top performers. This was due to an organizational structure that gave managers lots of freedom to choose how to reward their subordinates.
Overall, I really enjoyed my time at the organization over the summer. I was able to experience a strange organizational structure and gain insight into its causes. Ultimately, there are effective and ineffective components in the organization, and I was able to see how transaction costs and human flaws drove these differences.
Typically when a startup experiences some success and begins to grow, some new management is brought in to help the company make the transition to the next phase and to establish a more regular business model that is suitable for a company that is mature. This might take some of the fun out from being a startup, but it does increase the chances that the company can be stable and functional thereafter. There is a questions, then, when that should happen. If the company needs venture capital, the investors will impose these things as a condition of putting their money into the company. If the original owners have enough cash on hand, they may forestall the transition. That, in turn, may have consequences for the company down the road; sometimes things won't go as well as a result.
ReplyDeleteI hadn't heard the expression stack-ranking before. I found this piece. You might have spent more time in your post describing what it was. Later in the class, when we talk about pay for performance and criticism of that, we'll consider whether there are objective measures of an employee's output or not. When the evaluation is inherently subjective, that is one issue. Also, if the work is collaborative, this sort of scheme might discourage cooperation.
You didn't mention profit sharing as compensation and whether that was there too, and/or if some bonus payments were tied to company performance rather than individual performance. Those things do matter, so if would have been nice to elaborate on them.
Then, on a different note, you might have said whether you will consider working for them after graduation or if this was just a one-off thing to experience. Personally, I'd be reluctant to take a job at a company that has had a lot of bad press. It seems quite a risky proposition. But maybe getting a job at a different company in the same line of business would be possible.