Past performance does not guarantee future results

That safe harbor statement is as well known as it is counter intuitive.  Why wouldn't success breed success?  Why wouldn't a company that is crushing it with 1000 employees not double their dominance with 2000 employees?  One big challenge is talent management, which I rambled about in an article for Delta Associates a few years ago. < Link to Delta Associates > But another challenge is the structure of your company itself.

Companies in rapidly changing or growing markets that are organized into classic functional areas (i.e. Sales, Support, IT, HR, Legal, Finance, etc.) at the executive level are chronically ill.  Depending on what life-cycle stage they are in the symptoms may or may not be present, but if that company is successful and grows it will start to die from the inside out.  Specially, a large portion of the company will lose focus on what truly matters and cause grid lock of decision making.  This will frustrate your most talented and passionate employees and they will leave.  Its a non-virtuous cycle that plays out more times than it doesn't.   Pretty dramatic claim for sure.  Let me explain.

Been there, done that, have the t-shirts 

I have been fortunate to work in multiple industries, servicing multiple geographies in companies of various sizes, numbering from a hundred to tens of thousands of employees.  While the products and services these companies delivered and their customer base varied widely, these companies all had several things in common.  The most important common thread was the companies all had super smart and talented folks. Talent is the fundamental building block for success and we did succeed (I told you, I've been fortunate).   The other common thread was that the more successful we became, the more we grew in numbers to meet the demand.  The more we grew in numbers, the harder it became to actually get work that mattered done. Emphasis on work that mattered, because those smart and talented people we added absolutely got things done.  Yet it just seemed to create more to do and the need for more people to do it.  At some point, the need to grow to get everything done lost a clear and direct link to number of customers or revenue.  As support functions grew to service the growing company or government mandated regulations in the case of going public or entering new markets, decision making slowed resulting in reduced ability to react to market changes or competitors.  The internal results in every case was a feeling that we were understaffed despite the fact we were hiring consistently and a growing frustration that we couldn't move fast enough.  Bottom line was that somewhere along the journey, the focus changed from delivering the best product or service possible to the customer to optimizing for functional capabilities or compliance or risk.  Perhaps not in every group, but in enough of the company to create confusion and friction and eventually a form of progress grid-lock. 

Thanks a lot Captain Obvious

Granted that this is no epiphany on my part as there are literally dozens of books written about how hard it is to remain innovative or agile as you scale.  My personal favorites are The Innovators Dilemma by Clayton Christensen and Great by Choice by Jim Collins.  Both of these books layout a formula for keeping an innovative edge as you scale.   However, I believe a more drastic change in organizational model must be considered.  A model where companies organize at the top level on two axes only.  First is customer.  THE Customer.  I've seen cultures where companies try to promote team-work by saying that other departments in the company are customers.  This is poison.  There is only one customer and that is the person or business paying your company do deliver your product or service.  Everyone else in your company is a peer who is working with you to service the real customer.  Second is product.  THE Product.  This is the product or service as it is seen or described by THE Customer, not the bits and pieces that it may take behind the scenes to pull that customer product/service together.   Using an example from my past experience, if your company is delivering customer care via call center for telecom customers, handling the customer call is THE Product.  The knowledge base software or the telecom systems that are absolutely necessary to deliver that service are not a product to organize around as THE Customer does not care about them individually.  What THE Customer does care about is that whatever they called about gets resolved in the best experience possible.  Therefore priority on resource (human and finance) should be hyper focused on making that call experience the best it can be. Of course there will need to be investments made in software and telecom, but the decision to allocate resource to that effort should ultimately be made by the person responsible for delivering the service and not the head of software nor telecom.   If improvements in these sub-components of THE Product can't be rationalized against the other customer and product needs then they don't happen, period.   This is only possible in a organization where the customer/product leader has full P&L control for efforts contributing to his or her results. 

So what?

I'm guessing those two points aren't all that controversial; however, my suggestion is that all company functions should be subordinate to one of these customer or customer/product leaders.  No stand alone support functions at the CEO direct report level unless that company is at the one customer type / one product stage in which case the CEO is effectively is THE Customer leader.  In a company with more than one customer type and/or more than one product per customer type, this would certainly result in role duplication and be considered financially inefficient by the church of matrix management.  However, if you are in an industry that is dynamic and places high value on speed to market I believe the additional cost would be more than worth it.   There will still be a need for CxO level expertise to support the customer / product org leader as you scale.   Perhaps that is even a peer to the customer/product leader that also reports to the CEO.  But in that case I suggest the roll would serve an influencing function that sets standards and provides active guidance (or consulting if you like), while the day to day direction and execution happens within the Customer/Product org.   

There is no such thing as a perfect org structure and no org structure can succeed without the building blocks of great talent and a clear strategy.  But if speed to market and rapid decision making are important, I suggest this would be an improvement over the internal focused, self-optimizing functional organization.