Vaclav Muchna, CEO
3 min read
Based on the traditional company management concept, organizational business structures are created to serve managers. But what happens if you adopt a team-based organization structure that is organized around how the company creates value for the market?
What if companies lean into the idea that the classic talk about customers being the centre of the universe could also be reflected in the organizational structure?
The Relationship Between Structure and Value
A reorganization in our R&D department got me thinking about the relationship between the business structure and the way we create value at Y Soft.
Back in 2020, we broke away from the standard organizational arrangement in which teams were assigned to individual product components. To replace it, we introduced cross-functional teams.
The characteristics of cross-functional teams that stood out to us were the inherent focus on overall product value (in the customers' eyes) over component fixation (to satisfy management), the ability to diversify our engineers’ skillsets, and enhanced collaboration.
Sure, we lost a high level of expertise in individual components, but it significantly simplified planning and increased knowledge of the overall product between teams.
Why this route, you ask? Because we can’t create real customer value by modifying single components alone. And with 120 developers, the granularity of component ownership is too high. To deliver a product increment that represented real value for the market, we already had to adjust three, five, sometimes more components at once. This came with increasing complexity in planning, especially with the growing number of teams.
Of course, this is a very niche case for product development. But it served as a guidepost for me and made me realize that the organizational structure was adapted to the teams (component organization is convenient for developers), but didn't correspond at all to how we added value to the product.
The side effect of that was that it couldn't scale. In other words, change was necessary.
Broadening the Cross-Functional Teams Scope
With the cross-functional teams, we implemented a managerless approach to R&D. Instead of relying on managers, the teams were encouraged to define success together, always navigating towards opportunities that deliver real market value.
I began to wonder if I could apply this principle more broadly. My next mission became “how do we deliver value in the field?”. How do we build a team-based organization structure that puts customer value at the front and center?
As late as 2023, we still had silos (that's what I called "divisions") for sales, support, consultants, and ordering. Each of them had a senior manager. In sales and support, we even had regional "middle" management. And in Europe, there was another layer.
The organizational structure was made up of 15 managers for 90 people.
Each silo ("division") had its own KPIs. Sales had KPIs on sales and renewals (renewal of support services). Support had goals to meet our SLA (Service Level Agreement) and the number of open tickets. Ordering had goals for the number of processed orders.
I can honestly say that I don't remember if the consultants had any KPIs. But each of these roles was needed to create real value. It's not enough to just sell. Someone has to design the architecture (consultants), and someone has to manage implementation and support (technicians).
And yet, they all had different goals.
A “Frontline” Organizational Business Structure
In 2023, we merged these four departments and created the "Frontline" unit (because they are all on the front line, in direct contact with our customers). We created twelve teams, geographically divided. Each team has all the roles they need to deliver real value.
The teams do not have a director and are free to define their roles.
Their main "constraint" (as we call the axiomatically given rules) is that they have to possess all competencies from A to Z to deliver value. They don't have to have a dedicated person for every competency, but they can. How they arrange it is up to them.
They now plan their own goals, and their compensation is based either on profitability or on their growth (depending on the company's current situation).
Final Points
You’ve probably got questions. How big are the teams? How do we manage or control costs? How does teams setting their own goals work? How do we deal with performance management? What about hiring, firing, promotions, wage increases, and all that?
We will answer these questions and more in future blog posts. You can also join me for one of our two-day workshops with PACE designed for top management and business owners. Here, we’ll discuss the aspects of managerless cross-functional teams with practical examples.
Original Publishing (in Czech): PACE
