The Four Step Process to Scale a Startup into an Enterprise

February 14, 2022

Chris Slowe

Chris Slowe

CTO at Reddit, Inc.

Chris Slowe, CTO at Reddit, shares his experience growing a company from a startup to a major tech conglomerate.

At the time of writing this blog, Reddit sits at around 1,200 employees. However, that wasn’t the case when Chris joined the company as founding engineering in 2005. In the past ten years or so, he’s watched the company grow and develop, from a tech startup to an enterprise.

Scaling an organization can be broken down into four acts:

  • Startup Phase: The company can be fed by a reasonable number of pizzas (on a shoestring budget).
  • Dawn of Managers: The company becomes large enough where the structure is necessary, but there’s no need to optimize.
  • Directors Phase: When there’s a need for strategy and an end plan.
  • The Age of VPs and GMs: The organization becomes increasingly complex and fractal (where Reddit currently sits).

Act I: The Startup Phase

Most engineers, leaders, and executives have experienced the startup phase before. In act one, there’s a lack of an org chart and rather a group of people who are working towards a goal.

The initial team is usually comprised of domain experts, one working heavily on the backend and client generalists working on the product. This is assuming startups are lucky enough to have multiple engineers. If not, it’s a one-stop-shop; they’re working on everything.

During the startup phase, there are maybe a dozen people, each one knowing what the other is working on. There’s no coordination overhead, meaning there are no backups or backstops. Simply put, a bad hire can be fatal to the future of the company in the startup phase.

Hiring the 10x Engineer

When hiring for a startup, founders should look for those labeled as 10x engineers. If a company can find someone with wide domain expertise, it’ll be much easier to cover all the necessities with fewer hires. It provides the team with autonomy speed and cuts down coordination overhead.

The result of hiring a handful of 10x engineers is ideal for the startup phase: they can cover everything in an efficient manner. Of course, it’s never quite that simple, but ultimately the goal for most startups is a small team that functions with complete autonomy.

Act II: The Dawn of Managers

As an organization grows, the purpose of new hires is to fill in the gaps. That’s not to say that these new hires are going to have less of an impact, but they’re going to start acting as redundancies and backstops for previous members.

At the same time, coordination overhead begins to become important as there are around 25 individuals and 300 possible relationships within the company. In Chris’s experience, teams that are upwards of 25-30 members probably made a bad hire along the way, meaning it’s time to deal with those consequences as well.

Due to the layering of work processes that begins during this phase, good overlap, bad overlap, as well as friction becomes apparent. Instead of picturing the overlap, founders should actually start thinking of their company in terms of conceptual units.

There are usually two product lines combined with a technical foundation team that focuses on infrastructure. Splitting these teams into conceptual units makes it easier for teams to begin hiring managers, the next step in this phase.

Hiring the First Set of Managers

Up until this point, the founders have probably acted as managers along with a few tech leads. While that can be successful, long term, these individuals don’t usually have much leadership experience. If they do, your company is lucky, and they will be able to take on that role.

Let’s say the company is around 20-30 members, plus two or three founders. If you hire a couple of managers, they will each need the span of control over ten employees. That means each manager will carry a fair load in team size and add a decent amount of coordination overhead.

Managers will need to start talking about people in a manner new to the company. Team members will move between teams, and conversations around career progression will begin, usually leading to the formation of HR.

The Entrance of HR

HR is often treated as a dirty word in startups – it’s not, though. HR is a great resource to start thinking about processes such as onboarding, offboarding, and career ladders.

This second step in the company is the phase in which companies need to develop consistency. HR introduces structure to a lumpy ORG by providing managers with the tools needed to do their job effectively.

Act III: The Director Phase:

As the team continues to grow, coordination overhead becomes increasingly important. This phase usually involves executives losing track of the company strategy, meaning documentation becomes essential.

At the same time, statistics work against you, meaning you’ve probably got at least one dysfunctional team. Rather than being perfectly adjoined, the teams face the same overlap problem, just on a larger scale.

The question leaders need to ask themselves at this point is if they want horizontal or vertical teams. Horizontal teams function across all initiatives, while vertical teams focus on individual products.

The differences between org structures become apparent in the way they communicate with the infrastructure team.

The Importance of Directors

Directors are not just the managers of managers. They have a specific set of requirements that are as follows:

  • Independent of a horizontal or vertical org structure, directors have to be able to ensure the consistency of strategy (and mission) across a group of teams.
  • Directors define an internally consistent org structure based on the business requirements and the needs of other orgs.
  • Directors mint, hire and grow managers as a specialty. Teaching a skill requires experience, but growing something requires comprehensive capabilities, which is where directors come in.

Running a Successful Reorganization

With directors come reorgs, another “dirty word’ in the startup world. Reorgs are usually associated with layoffs, but rather, they should be connotated with the alignment of the company.

Reorgs are often needed when products shift, either due to success or failure. When this happens, teams will need to pivot to work on other products.

A regorg usually starts at the most senior layers (director and executives) and moves down into the ICs. Here’s a successful process for conducting a reorg:

1. Executives and directors should generate a plan for: a. What needs to change b. Why do things need to change c. What the new setup will provide d. How many people will pivot

2. Senior leadership should bring in the layer of management directly below them. These managers should: a. Iterate the plan (as they are the domain experts). b. Pull in the next layer. By working with the next layer of management, the company is holding these members accountable for the result of the reorg (our plan v.s. your plan).

3. Bring in the IC’s. The organization should have a company-wide All Hands with plenty of time for questions.

Act IV: The Age of VPs and GMs

At this stage, the system is not about breaking anymore but rather focused on scaling. Chris knew that Reddit was entering this phase when the weekly hiring number was larger than the initial startup team – a terrifying thought.

There are four teams during this phase (at least for Reddit):

  1. The Core Engineering Team: primarily engineering centered but inclusive of the infrastructure stack, as well as the ‘primary’ product teams such as growth, community, and video.
  2. Data IRL: made up of data science and analytics as well as search, relevance, ML, and their related infrastructure teams.
  3. Trust: covers user safety, inclusive of operations; engineering and product teams for user-facing and operations facing tools.
  4. Economy: filled with direct-to-consumer monetization efforts.

What’s changed in the VP’s phase is that horizontal/vertical org structures don’t fit anymore – most teams are both. It adds a level of difficulty and challenge, as each org is generating a business.

For example, the infrastructure team will perform as a horizontal org structure when engineering teams are typically more vertical. It gets complex when the Data teams come into the picture, as they have to interact with each individual product team.

It’s important to remember that in this phase, each org has a business capability that needs to be run as a business function – where VPs come into play. It can be difficult, but the GMs can help by creating cross-functional initiatives that need a cohesive vision.

Moving a Startup Through These Phases

The biggest challenge startups face is scaling their companies through each of these steps. Many companies lose their initial ideas throughout this process, but the ones that stick are usually the strongest.

Reddit is currently in the last phase, adding VP’s and GMs to the company. The problem phase is (mostly) over, and the company is focused on scaling its platform.

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