Establishing a Product Organization Structure

Product teams and functional leadership

One of the essential areas of responsibility for product leaders is setting up the organizational structure of the product development department. For an overview, read my high-level article on product leadership responsibilities, or continue reading for a deep dive on org design.

Creating digital products is a complex undertaking. Any non-trivial digital product requires multiple people with different skill sets to cooperate in the discovery, design, development, operation, and distribution of the product. This cooperation needs some degree of formalization in the form of an organizational structure and processes. Org structure determines the “who” (who works together with whom), and processes determine the “how” (what are the steps to take in the work). In addition to these formal aspects, informal aspects like culture of course also play an important role, but in this article I will focus on the formal aspect org structure specifically. I am planning future articles on processes and culture.

In general, the larger an organization, the more formal structure is required. A startup of five people can still get away with very little formal structure. Everyone can still talk to everyone, coordination is relatively cheap. Chances are that even at this size, there will be some formalization, though — likely one of the five has the job title “CEO” and the others, well, don’t.

It’s easy to see why larger organizations need formalized substructures. The number of one-to-one relationships grows with the square of the number of people. In a five-person team, there are 10 one-to-one relationships. In a ten-person team, the number is already 45. For a 20-person team, we’re looking at 190 relationships, and for a 100-person team, a whopping 4950. Another way to think about this: in a 100-person company, hiring someone new means they have potential relationships with each of the existing 100 people. Clearly, we need substructures for larger teams, or people will be so busy just managing their various relationships and interfaces with other people that they won’t get any work done.