How Companies Become Traffic Jams



I read this quip about organizational structure in a book I recently read.  This was a traditional, old school manufacturing company that over a few short years eschewed the usual trappings of corporate management, org charts and best practices, to invent a wholly new type of company.  One quote stood out because it gets to the heart of how and why most companies become stifling places to work, and in short, it is the corporate hierarchy to blame:

“The pyramid, the chief organizational principle of the modern corporation, turns a business into a traffic jam. A company starts out like an eight-lane superhighway – the bottom of the pyramid – drops to six lanes, then four, then two, then becomes a country road and eventually a dirt path, before abruptly coming to a stop. Thousands of drivers start off on the highway, but as it narrows more and more are forced to slow and stop. There are smash-ups and cars are pushed off onto the shoulder. Some drivers give up and take side roads to other destinations. A few – the most aggressive – keep charging ahead, swerving and accelerating and bending fenders all about them. Remember, objects in the mirror are closer than they appear,” quoted from “Maverick” by Ricardo Semler.

I am seeing this in fast growing startups as well that are on a hiring frenzy.  What starts out as a lean and fast company quickly slows down.  Some of this is just process, but the other thing that happens is decision making gets caught up in extra layers of management that did not exist before.  You get fiefdoms and clashing agendas and turf wars.  The front line employees feel disempowered and minimized, spending more time working through management rather than selling deals, helping customers, or getting product out the door.  That is especially damaging for startups because the pace of change has profound effects on early employees, the perceptions of founders, the expectations of customers, and the culture of the company.

Most startups are still pretty lean with few layers of management.  It is easy however to start adding more and more layers as the company expands and people want promotions and internal politics starts churning away at morale.  The question to ask then is not to how to best “structure” the company, but whether you trust your employees to make good decisions, and whether it is necessary for managers to decide every decision or even any decision.  If you say employees are your number one asset, then trust them to make the decisions on the ground.  Then maybe you will not end up with an organizational dirt path.


Reprinted by permission.

Image credit: CC by hillman54

About the author: Mark Birch

Mark is an early stage technology investor and entrepreneur based in NYC. Through Birch Ventures, he works with a portfolio of early stage B2B SaaS technology startups providing both capital and guidance in the areas of marketing, sales, strategic planning and funding.

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