At a venture-backed startup co-founders and direct reports to the CEO carry significant weight in the eyes of your employees, regardless of whether you have officially labeled them as “executive team members” or not. In the early days of your startup, this may not matter much, since you likely have a direct relationship with each of your employees, but as your employee headcount increases, the perceived importance by your employees of who is a co-founder and who is a direct report to the CEO increases exponentially.
It can be a worthwhile exercise to take stock of your current organization. Make a short list. Add yourself, any co-founders, and all of your direct reports. That’s actually the current version of your executive team in the eyes of the employees of your company. But do you define your executive team differently? Do you have an office of the CEO, director of strategic projects or other employees that fall outside of your executive team? Think critically about why any of those exist outside of the standard reporting lines on your organizational chart and consider the following point.
Creating “dotted line reports” or roles that exist outside of the primary organizational components at your company adds confusion and will cause misalignment. Here’s an example to illustrate:
Jamie is the company CEO of a rapidly-scaling 50 person team selling B2B SaaS software to pharmaceutical companies. She wants to launch a new product in the next twelve months and be very hands on, but she recognizes that she doesn’t have the time anymore to run every step of the process the way she did a couple years ago for their first product launch, so she hires a head of special projects to report to her and help launch the new product.
Awesome! Jaime gets to be as involved as much as she wants, but doesn’t have to worry about every detailed step. While this solves Jaime’s immediate need and sound like a win, it also leads to some questions:
- Is there a product team in place today?
- Who’s managing the current products in-market?
- Why wouldn’t that product leader be responsible for driving a new product launch?
- Is there a skills gap?
- Does Jaime trust that person?
- Does the existing product leader have too much on their plate already?
End scene.
We hope this example highlights specifically why:
- Reporting structure optics are important and can impact the morale of others at the company;
- Clear reporting lines allow for more efficient transfer of information; and
- Clear reporting lines avoid a diffusion of responsibility, ensuring accountability across the organization.
Avoid alternative structures as much as possible; they have hidden costs that you will pay for across your organization. If you’re already in a situation like this, carefully consider whether it’s truly an asset or liability in the next version of your org chart.
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