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I was always very interested in how big companies such as Google, Facebook, or Spotify work. Not purely from a Product Management point of view but how the organization functions as a whole. Hiring, budgeting, marketing, sales, and everything else that keeps a business ticking along, were always of interest to me. The organic organization model became a popular way to structure companies. It meant less hierarchy, making them more autonomous in themselves, as well as more flexible when it comes to change. I believe having a holistic view of an organization helps a lot when you’re trying to be a great Product Manager and Leader.
When I started working as an employee for a large-scale fintech company with 600 employees, I was taken aback by the large number of people. Over two years, the company grew to more than 2,000 people. Such extreme growth comes with challenges. Once the company hit 600 people, the Leadership team decided it was time to change and restructure the organization. The Spotify model was the foundation and inspiration driving this change. The Spotify model covers many aspects of the organic organization model. Unfortunately, with some trade-offs.
I’m going to share the learnings I’ve had as a Product Manager using the Spotify model as well as a coach & consultant helping companies to change to more organic thinking and improved structures.
Let’s first take a look at the “classic” mechanic organizational model. The structure of companies using this is very mechanical and it works best in certain times and markets. It’s also known as the “bureaucratic structure.”
These organizations have well-defined hierarchies and the Top Management makes all centralized decisions. Due to the top-to-bottom hierarchy, employees are usually very specialized in certain areas. A mechanic organization can be seen as a running engine that doesn’t need much maintenance. Okay... some need more and some less… maybe you can relate to that. 😉
Examples of such organizations could be bigger insurance companies, healthcare companies, or even universities and governmental facilities. For employees, the responsibilities are clear as well as their career path. Change is harder in these organizations due to the stiff and fixed structures. Changing routines and processes can take longer as they need to go through so many levels and could fail due to bureaucracy. This can be problematic for companies in times of uncertainty and rapid market change. See: the health and economic crisis of 2020.
The term organic organization model came to be in 1950, thanks to Burns and Stalker. This model has many attributes. Hierarchies are very flat, and the level of specialization is “lower.” That means the company still has experts, but people attempt to work more on a little bit of “everything.”
This model is great for fast-changing markets, times, and environments. Communication and decision-making happen on a horizontal level rather than a vertical level. The goal of horizontal communication is for employees to communicate directly instead of battling through the extra layer of a manager or supervisor. This allows for a better exchange of information between employees without a gatekeeper. Especially in creative environments, employees benefit from fast and direct communication as well as autonomous and decentralized decision-making.
The role of managers is more subservient by empowering and coaching employees instead of dictating and directing. This type of leadership is beneficial for managers with a large (and growing) number of employees. Communication happens more on a verbal than written level, and such organizations have fewer procedures and are more agile.
The Swedish music streaming provider invented a specific company structure to grow fast and scale their (agile) processes. The idea was to have autonomous teams working in specific business units/value streams. Let’s have a look at the organizational structure and deep-dive into each function:
A tribe is a business unit or so-called “value stream.” A tribe consists of multiple teams (also called: “squads” because it’s “cooler”) who work on and in the same value stream. Each tribe has a tribe leader who leads and empowers the teams within that tribe. Tribes have a broad range of autonomy and freedom. The whole tribe can set business goals and decide on the strategic direction (as long as they’re aligned with the company vision).
Let’s imagine a company like “Canon” that produces and sells cameras.
A value stream within that company could be an ”Acquisition Tribe” that focuses on, for example, the building and maintaining of the marketing website, as well as the connected Online shop. Another value stream could be a “Hardware Tribe” which focuses on hardware development. On top of that and connected to the other tribes is a “Logistics Tribe” focusing on logistics and shipping processes, 3PLs, an ERP system, and a connection/integration to the Online shop. You may already sense a bit of dependency. 🚨
More about that later!
Squads are cross-functional development teams within each tribe. The goal is to staff every squad with a broad variety of skills to make them as autonomous as possible so that they can work and fulfill their visions, missions, and purposes. These teams work with a Scrum or Kanban framework. Some teams work independently and don’t belong to a tribe such as tooling or infrastructure teams. Some companies work with independent teams and other staff squads with these skill sets.
A squad setup could look like this:
On top of that more (specialized) people could be part of a team such as
This will occur to ensure the squad is as autonomous as possible and empowered to build and launch features independently.
Having other functions next to Product & Engineering as part of a squad does raise some questions though:
Another topic I’d like to keep in mind and look at later. 2️⃣
How about team size? 🤔
You may have heard of the two-pizza rule from Amazon. A team should be big enough to be fed with just two pizzas. This magic number is between 5-10 people. If you’re interested in the science of this rule you can read more 👉 here 👈.
A chapter is a group of people who have similar skill sets and work in a particular domain or competency area. Examples could be “Mobile Development”, “Web Development”, or even “Quality Assurance.” These chapters are defined individually and depend from company to company.
Mobile Developers of a squad of different teams and tribes report to the Chapter Lead. The Chapter Lead is the classic Line Manager for each chapter member. They have traditional responsibilities, such as personal development, salary negotiation, etc. In some companies, the Chapter Leads have more responsibilities such as an architect role. This can be challenging if the number of chapter members increases with scale.
The reporting line and idea of a Chapter Lead create open and challenging questions for those within the chapter.
Another couple of questions to look at later.
Guilds are interest groups that share knowledge and best practices. Good Guilds define and agree on common standards. Guilds are open and self-organized communities and everyone can join. Synonyms for Guilds are
This can be relevant topics like “Product Management”, “Java Script”, “Performance Marketing” or “Testing.”
Note: That’s a great concept that can be applied to every company model.
Departments such as HR, Marketing, Finance, and accounting function on a horizontal level and work towards the whole organization and each Tribe. Budgeting happens for each Tribe but finance is not part of one Tribe. With Marketing and HR, it’s more complex. Each Tribe works very autonomously and independently. Questions arise whether, for example, Product Marketing or Hiring Managers should be part of a Tribe or not. Let’s have a glance at that question later as well.
The Product Managers or Owners report to the Tribe Leads. Product Management is decentralized in each tribe. That means you’ve small Product Teams in each Tribe. Global “product alignment” happens between Product & Tribe Leads. Let’s look at that in the next chapter.
The Design Team can work in two ways:
Both ways have pros and cons. A chapter can be better for global alignment. Problems will occur with growth and scaling because it’s hard to manage 20, 30, 40 people. To solve this problem, you need to integrate a new layer of, for example, “Design Heads.”
An independent Design Team in each Tribe can cause inconsistencies in the design language and in the design system. Good review processes can help but aren’t a guarantee, especially when teams work on similar problems at the same time. (More about Product & Design in a later article)
In theory, this model sounds very good. In reality, it can look a little different. There were many times I saw people using freedom and autonomy as an excuse for chaos and misalignment. Let’s look at this in more detail.👇
We’ve collected 5 topics that need a deeper look into:
1️. Dependency between Tribes
2️. Enhanced squad members from other functional departments
3️. Reporting lines: Engineering Manager vs. Chapter Lead
4️. Tribalization of functions such as Marketing & HR
5️. Product Management planning & alignment
The points and open questions I’ve highlighted don’t just come from me. Many people in fast-growing companies ask the same questions. Some of them aren’t easy to answer.
Let’s have a closer look at the questions and learning I’ve made over the years.
Before we look at each point let’s start with “Why?” Why do companies want to e.g. implement the Spotify model? Why do companies want to become more organic rather than mechanical? The promise people expect is “faster growth & scaling” and to build the best product & services that’ll deliver the biggest value to their customers in the shortest time.
These days you can see a “Cargo Cult”. That means copying what others do and expecting the same results. My biggest learning is that you can’t achieve that by just copy-pasting. Organizations are complex and each company has its own culture and belief system. Putting a “rigid” framework on a complex system is like trying to bake bread without water.
Identifying business units and value streams are great ways to better understand and structure an organization on paper. Value streams are always connected and therefore depend on and build upon each other. Slicing into value streams via Tribes/departments creates the danger of building silos and bureaucracy. Let’s look at that in the next learning.
Spoiler: Spotify itself doesn’t use this model anymore.
Vertical and horizontal structures are common and sometimes necessary to build up functioning organizations. Departments such as HR or Marketing aren’t only functional, they’re also global. Trying to “break” the split such as hiring or Product Marketing into a tribe can give more autonomy. The trade-off is that alignment within these teams becomes harder due to isolation. The “personal agenda” of each Tribe can cause a lack of communication and with that, unnecessary dependencies.
Product Marketing Example (simplified):
Let’s look at the multi-product company Canon and those three Tribes again. If we just look at email communication with customers, you can imagine a lot of initiatives and campaigns going on. If the Product Marketing Team is decentralized, every Tribe will push its campaign and call it the highest priority. The problem is, you can’t write 3 different types of emails in one day like:
Now imagine you have 10 or 20 tribes and 10 different products or services….
My learning is that members from other departments are better off working part-time rather than full-time in Tribes (or teams). They should continue reporting to their department heads instead of Tribe Leads to avoid bureaucracy and politics. It’s important to make sure that marketing strategies are aligned globally. This requires more alignment and planning from the Leadership Team(s). That’s better than leaving it up to employees who aren’t clear on priorities and feel the need to push their own agendas or the agendas of their Tribes. Controlled structures do support organic growth, while overly autonomous structures don’t.
Reporting lines and strategic planning are far closer connected than I thought. As I mentioned above, it’s important to have clear structures in place. If Tribes and Teams work too autonomously you can lose sight of the bigger picture very quickly.
Next to Chapter Leaders, Engineering Managers work in squads and Tribes as well. Due to unclear responsibilities, you have no clear counterpart as a Product Manager which makes your life and work harder. Both Chapter Leads and Engineering Managers can be part-time squad members. They’re involved in the day-to-day business plus their work as People Managers as well as Technical Domain experts (not necessarily). Knowing who to talk to and getting the information, buy-in, and feedback you need is hard.
Responsibilities become more unclear and due to each Tribe’s agenda, things end up in chaos and misalignment (see simplified marketing example). On a Product Management level, planning this becomes even more complex, especially with cross-team and tribe dependencies.
My learning is that companies working with the Spotify model need a lot of additional processes and alignment on a Leadership level. With the growth of people in the company, you need to introduce more levels such as Head of, Director, VP, etc. which does the opposite of flattening and “autonomizing” the organization.
🎙️ Tune in to this podcast episode and hear us talking about mistakes to avoid while establishing and changing the organizational model.
With more growth comes more complexity and also more Leadership levels. That’s a natural evolution. However, adding unnecessary complexity with silos and “too much” autonomy causes poor results.
What can companies do to be more organic and grow faster? 🤔
Spoiler alert: There is no one-size-fits-all solution!
I think the first and most important step is to analyze and improve existing structures and processes, instead of fixing problems with “man/woman-power.” Most Leadership Teams believe they will be fast with hiring more people and “experts.” In fact, in 90% of cases, the opposite is true. Focusing on quality instead of quantity as a mindset is the very first step to take. It takes way more effort to align 1,000 people than 250.
Empowering teams to make their own decisions based on a clear company vision and strategy is, in my opinion, the best framework that gives clear guidance as well as autonomy. These things should be in place before you start restructuring an organization.
It’s about the mindset, not the tools.
Here are some great book recommendations that helped me get a better understanding of how to approach organizational change and growth:
Reinventing Organizations - Great overview of different types of organizational models as well as examples of self-organized and autonomous companies.
Exponential Organization - Good examples of why and how startups are outplaying big companies, as well as examples of how big companies implemented successfully better structures.
Company of One - How to focus as a company on quality, the main purpose, and scaling healthy.
