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Looking for feedback on organizational structure

We are preparing our financial plan. A big part of the plan is trying to figure out what the organizational structure is going to look like and evolve over the next 5 years. We're about 8 people today, so I'm putting in the core management and organizational foundation. I have some questions that I'd like to validate and get feedback on:


1. Post funding, we will recruit a VP Engineering. This person will build and manage the dev team. For companies with multiple, integrated products, how are dev teams optimally set up these days? Is it recommended hire "product" lead developers that will form small teams dedicated to specific products? Or, do you flatter structure where everyone works on different products according to their skills? If we go with teams, I'm guessing that UX designers are cross-functional and support the different teams.


2. Our platform is web-based but due to laws in Canada, we can't always deploy on cloud infrastructures like AWS. For some clients, we have to install directly on their servers. The acceptance of the cloud is starting to change in Canada and we are going into the US market. So we are going to setup on some type of cloud. Do we need to hire a full time infrastructure architect to manage our cloud operations and oversee security or are we better going with an outsourced service for this?


3. Who would a person in the role of "Product Management" typically report to? CEO (me), VP Marketing?


4. I often see the role "Chief Revenue Officer". How does this compare to a VP Sales? We will need to build out our sales org (inside sales, outbound sales...) and will need someone to recruit and manage the team.


5. What do typical marketing departments look like for a B2B healthcare company? We sell to hospitals, doctors, health insurance companies... Our marketing stack will consist of trade shows, content marketing, digital marketing (web site, lead gen, marketing automation...). Marketing will also provide support to product management and sales (collateral, presentation material...). My idea is to bring in a VP Marketing right away to build the team. Below the VPM, I'm envisioning a coordinator, a digital / marketing automation person, and maybe someone to develop content & manage blog. Any thoughts on this type of structure?


6. Finally, what about the role of COO for a software company? Is this person typically responsible for client services, support, training, finance (until we hire CFO), office operations, HR, IT? So if we hire a director of client services, HR or controller, is it best to have them report into COO?


Thanks!


3 Replies

Rob Gropper
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Rob Gropper Entrepreneur
Director at PetHero, SPC - Member at Eastside Incubator - Principal at Tuxedo Technologies Group
Richard; good questions. i'm assuming you are going through this exercise now so you can build your bottom-up budget and talk intelligently to investors re use of funds... for some reason this is an all-to-rate exercise for startups... other's should take note. I'm short on bandwidth right now to offer extensive details (and in the area of marketing i don't have the expertise), but: as a general comment, flexibility should be high on your list. i find it pays off when hiring and managing rapidly growing teams when i specifically filter for and hire 'athletes' as opposed to 'specialists'. When you are growing quickly from such a small base you need leaders who can step into new roles quickly, roll with the punches, hire and quickly train their own replacements and then step into ever more challenging roles. Flexibility is that much more important in the early days. I'd rather have 1 leader who's played several different positions over their (at least) 10 year career than 3 'experts' who only know one thing. That said:
1. i like flat teams, especially in product development where turnover can be high. when the only guy who knows X leaves someone else on the current team will have to step in anyway, better now than when things are on fire. Flatter orgs where everyone works across the product offerings also helps prevent product leads from fighting over and hoarding resources. It also helps to level out your resource utilization - the 'x' team is not twiddling their thumbs while the 'y' team is burning out. When The sales team is trying to close a big contract that needs some enhancements on product 'y' it's easier to shift resources.
2. I don't have a lot of experience here, but I'm working through a similar issue now myself and i haven't made a decision yet. I like contract-to-hire when i don't yet have a clear picture of the demands of the job (in terms of part time V FTE), especially if the head count will likely be less than 1 FTE and in the area of security it just feels like you are better off with more than 1 person holding all the keys. I'm leaning toward outsourced to start. I'd be curious as to how you proceed here.
3. product manager should report to you, especially early on and especially in a SaaS company. You will eventually max out at 10-12 direct reports, but product mgt is so important that i'd find a way to keep that as a direct report for as long as possible - like forever. There's a reason Bill Gates took the title of "chief software architect" when he let go of the CEO role.
4. "CRO" is usually associated with companies that generate revenue through advertising and partnerships rather than direct 'sales' to customers per se. But you also see it in product companies where all revenue sources report to the CRO. I like that model. I prefer to have a CRO who owns all revenue streams (sales and business development) plus marketing. Marketing people often balk at this but the revenue teams and marketing need to be joined at the hip. You could certainly start with sales and biz dev and marketing each reporting directly to you to start and then consolidate under a CRO later when you need a break :) .
5. I'll have to punt on this one.
6. I've always found the title "COO" rather odd for small companies, but the reality is that someone has to pay attention to all the other stuff that is not product (including development) and sales and marketing. The CDO - chief doer. Not all of these disciplines need to report to the COO, but someone needs to own the planning and hiring. I would not have engineering/IT report into this person - they should report directly to you. If you are offering a SaaS product (as i recall) then i can't see a day where 'IT' does not report directly to the CEO. Client services should be closely coupled to the revenue team and client support should be closely coupled to the engineering and product teams. HR and finance should report directly to you.

in short, as a SaaS company, revenue, product and engineering (product dev and 'IT') all should be separate and each report directly to you. You don't want the CRO owning product or engineering otherwise product and engineering will be constantly randomized chasing whatever 'huge deal' the sales team or biz dev is working on at the expense of current customers.

none of this is cast in stone of course. good luck.
Tom DiClemente
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Tom DiClemente Advisor
Management Consulting | Interim CEO/COO | Coach
Hi Richard, You can get a number of valid answers and good advice that differs with these questions. It's often a matter of the style of the existing management team and who you're bringing in. But let me try to give you a view from my experience, as best I can, item by item:

1. Assuming you have the right mix of skills, how you set up dev teams is more a factor of your product/tech roadmap and the type of dev process you choose to use. A multiple, integrated set of products sounds more like something that you will roll out in increments, adding new features and functionality as you go. This fits more with integrated product teams, perhaps agile/scrum driven, pushing out new builds every several weeks or so. In my opinion, in this scenario, great project management is far more important than the VP Eng, unless that VP is also a great architect or super-highly skilled in your domain, and that's what you need. If you want to stay under the radar and build the platform complete or nearly complete before release, then a distributed functionally organized team possibly using a traditional waterfall approach or a pull system may work for you. We tend to use a variety of dev processes depending on need.

2. You're better off outsourcing simply because there is no need to duplicate the great resources out there. But you still need a key security person. This is not only for the cloud, you need this person to make sure you have protection in the cloud but also in your own code. Security in the cloud is not purely a function of infrastructure security. It is first of all a matter of good coding practices. Coding errors result in vulnerabilities. Also consider a layered approach rather than simply going with a cloud host. As an example, in one of our companies we run on Engine Yard on top of AWS. This gives us a higher level of security, great flexibility, almost instant scalability, and load balancing - it fits very well for a very high reliability application and I'm thinking of moving more to this setup.

3. The product manager should report to you and can also be the chief architect and VP engr. Like I said, you will probably find good program/project management a better driver for a fast moving cloud platform development than a VP engr, unless that VP engrg brings high skill levels and experience in your domain.

4. In a startup, I prefer to combine the top sales and marketing and have combined sales & marketing teams as well. You can call this person the CRO or anything you want. But the purpose is to manage the entire cycle from attracting leads through the sale and after sales service in an integrated manner.

5. You may want to outsource internet marketing to a top agency that will provide content marketing, continuous website updating and builds, SEO, etc. You still need content development and traditional marketing inside, the latter especially if you're doing trade shows. In healthcare, you want to build a great whale hunting capability. I mention that here because it's a talent that bridges marketing and sales although done right, it is a very personalized process.The right whale hunter will rarely be working for your CRO.You may also want to do this yourself at this stage. If you're not a competitor to them, look up and try to make LinkedIn contacts with DataMotion. They've already met the challenges you're describing and have a finely tuned marketing and sales function.

6. I agree that a COO is a great position for you to establish and to be responsible for development and continual improvement of all your internal processes.

I hope that is of some help. Tom
Richard Pridham
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Richard Pridham Entrepreneur • Advisor
Investor, President & CEO at Retina Labs
Thanks Rob, Tom.

Yes I am working, bottom-up, on the financial plan. I'm just trying to come up with a flexible, yet justifiable staffing plan. I've done this many times before, but just want a sounding board as I know there are more ways to skin a cat.

The incremental release approach is probably best for us. We already have a flagship product in market generating revenues. It was built 5-6 years ago, is stable but at some point a next gen version will need to be considered, especially as we grow and bring on more users. We also have some other newer products at various stages of development. Each needs to be worked on incrementally and continuously.

The product manager for us is a bit tricky at the moment. Currently, the co-founder is that person but he wears a few other hats (defacto CTO, VPE, client services, project manager, ops...). That's OK when you're small but unsustainable once you start growing. He knows the products inside out but might be more tactically oriented. He might indeed be the Chief Product Officer but I also see him running client services operations. Interestingly, what's happened in the 6-7 months since I have been involved is that more and more product strategy has fallen onto my plate. As I have come to know the eye care / health industry, competitive landscape and market opportunity, the co-founder is relying on me to determine strategic product direction. I'm good with this...it's one of the things I do well.

On the marketing front, I have used agencies before either for specific tasks or to manage your marketing on a fully outsourced basis. I find them really good when you have no team but limited financial resources. They work well when you you need fractional expertise. In a funded situation, I think I'd lean towards a small internal team, but outsource non-core tasks and one-off type requirements (periodic SEO review, graphic design..).

Combining sales and making....the big question. Over my career I've swayed towards the idea of having them separate but highly collaborative. Marketing has become far more complex today than 15 years ago. VP sales types are usually lousy marketers (in my experience). VP marketing types are not always great at managing sales teams. That said, the idea of having a CRO and below that person a Marking Director (with a few resources underneath) and Sales Managers (with sales people below them) makes a lot of sense. So you have a senior exec responsible for the entire revenue cycle with full control over marketing, lead gen, demand creation...This might be the way to go.
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