How companies organize its structure when they grow

How companies organize its structure when they grow

When companies grow, especially startups these days, they merge from being small organisations to coordinating hundreds of workers. This article will look at whether or not the positions and departments change their structure during this process and how they evolve.

Perspective from within a growing startup

Dani Martos, Recruiting Operations Lead at Preply, and former Talent Acquisition Manager at TravelPerk, has seen several teams grow from small to large corporations.

In a recent interview, he stated that in the early stages of software companies, the team usually focuses on product and engineering. When the product is ready for sale, other departments such as human resources, customer service, sales, and finance start hiring. 

Dani Martos also recalls seeing companies with nearly a hundred employees with a single person in HR, or companies that outsource these activities until they experience severe pain.

Early stages

Everyone reports directly to the CEO when a business begins. As the startup grows, so does the need for managers. This is due to the impossibility of everyone reporting directly to the C-level. Managers are responsible for reporting to the management team.

Managers, directors, and vice presidents are required in every business, no matter how small. These roles, however, can be filled by a single person in very small businesses.

This situation, in which a single employee performs multiple roles, is common in many departments. This is evident in the IT department, for example, by the presence of only “developers” in small businesses and specialized positions in larger organizations.

Other general roles found in small startups include “consultant,” “designer,” and “engineer,” while more specialized roles such as “SQL developer,” “user experience designer,” or “sales consultant” are found in larger organizations.

Distribution of hierarchy levels

The levels of hierarchy are a clear example of the structure’s stability across company sizes. The average is 93% individual contributors, with the remainder made up of managerial roles. Managers typically account for 4% of all positions, with this figure dropping to 3% in large corporations and rising to 6% in small ones. This means that no significant changes are made.

To put it another way, there is a change in departments, but it is not a drastic reorganization. This analysis could lead to the conclusion that businesses grow organically and must maintain an established balance between departments.

Hierarchy distribution pyramid. Data source: TalentUp's database.
Hierarchy distribution pyramid. Data source: TalentUp’s database.

Furthermore, hierarchy positions are distributed in a pyramid fashion, with the vast majority of employees always being individual contributors. Managers have a small share of the workforce, directors have a smaller share, and vice presidents and C-level employees have the smallest share of all. This pyramid structure is also consistent across various company sizes.

Distribution of departments

Product, engineering, and sales are common areas of focus for businesses of all sizes. These departments typically represent a startup’s core activities.

Furthermore, as a company grows in size, the financial and analyst positions take on a larger share of the positions as their workload increases exponentially. Larger organizations require more coordination and control, which these roles provide.

Having said that, the distribution of positions is more or less stable across startups at various stages of growth. There are no discernible changes. The proportions of departments and hierarchy are constant regardless of company size.

For example, in businesses with up to 100 employees, sales account for 20% of the fleet. They make up 25% of the workforce in large organizations with more than 5,000 employees. Management accounts for 13% of small startups and 11% of large ones. With only about 10% of the workforce, production remains stable. There are numerous other examples.

Differences in the distribution of department depending on the size of the company. Data source: TalentUp’s database.

The only department that has undergone significant change is the IT department (here referred to as “computer and mathematical”). It is the one who loses the most market share as the company grows larger. Furthermore, it falls from first to second place because sales are more important in larger corporations.

Having said that, department sizes vary depending on the industry. In information technology firms, the IT department is the most important – one out of every three employees is an IT professional – and sales are pushed to second place. That is, different positions are more or less represented depending on the industry of the company.

How to grow and hire

The key to grow is to tailor the structure to what you need at each stage and surround yourself with the right people. Employees must also bring a perfect balance of technical knowledge, a competitive salary, and a willingness to work and learn.

Mass hirings are common in start-ups because they are backed by VCs who invest in them in stages. A group of sixty people can be easily hired in a hyper-growth company in one quarter.

According to Dani Martos, the larger the company, the more specific the position. Not only are specific technologies required, but so is specific work in various sectors, such as frontend developers with payment experience or any IT professional with market experience.

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About Author

Èlia Adroher i Llorens

Content Writer. Èlia studied International Business Economics with a focus on digital marketing. She is also interested in learning about data analysis.