When Startups Give Accountability Without Authority
Top-heavy organizations are costing them the talent they need most
"Everyone, please welcome our new Director of Product here at Accelerant Software!" She’s justifiably excited as the person hired to lead product development at a rapidly growing tech startup. The company successfully launched its flagship product, and now it’s seeking sustainable profitability. Accelerant’s leaders clearly value her experience if they’re putting her in charge of the firm’s most important lever of customer growth and retention. What could be more important than keeping clients satisfied with new, more powerful versions of this platform, with improved user experiences and high-quality, next-generation, AI-driven capabilities?
She quickly learns, however, she’s not the one actually leading what matters. She 's leading the most important work, but she doesn’t have the freedom to fully use her expertise. She’s micromanaged, and she’ll be the sacrifical lamb when something goes wrong. This is because she reports to the division’s Vice President, who reports to the Senior Vice President, whose chain of command extends to the Chief Product Officer. She’s the one who has to deliver, but she’s not in control. She’s simply who they blame when results they’re looking for don’t materialize. The bosses hold the decision rights, while she holds the accountability.
Why Startups Pile on the Layers
Over and over, we’ve seen growing startups with so many layers of leadership it’s almost absurd. What are they doing? What possible reason is there to hire an experienced Director, only to bury her in a bureaucracy that adds little value? We see at least two closely related causes:
- Many of these companies simply don’t seem to know how to build an efficient, effective organization. Their founders weren’t funded because of their ability to run a business. They got investments because they had a compelling idea and convinced someone they could execute it. Early-stage investors typically gave companies a grace period, looking for sales first with the expectation profitability would soon follow. The initial goal was to build a prototype, find customers, and get the product out the door. Startups hired the talent they needed to make that happen, fitting roles to people rather than people to well-defined roles. Eventually, though, these firms have to turn a profit, and they’re stuck with a model that’s expensive and no longer makes sense.
- In the endless race to attract talent, we’ve observed tech startups regularly inflating job titles. Many of the people they want, especially at earlier stages, won’t join without both the pay and the perceived status that comes with a senior title. Firms hire Chiefs, Senior Vice Presidents, and Vice Presidents when they don’t actually need those levels. Because they haven’t taken the time to define these roles thoughtfully, they end up with layers of people chasing career credibility rather than doing the ground-level work. However, someone still has to do that work. As startups grow, the title problem compounds. They have to create Director-level roles that sit three or four layers below the top. Those Directors inherit the accountability without the authority to go with it.
Who Feels the Heat (and Who Doesn’t)?
At initial launch, titles aren’t too much of a problem, if only because there aren’t that many people. With growth, however, they become a serious issue. As new people are added to support more customers and more revenue, there are significant implications:
- These professionals expected something different when they took roles with Director- or other leadership-type titles. They get frustrated when the people they report to don’t value their knowledge and experience, and get sick of taking the heat for bad decisions they didn’t make. As startups mature, they’re the ones who actually know how to identify what customers actually want, not just what’s “cool new tech.” They’re the people who can design enhanced capabilities, user experiences, and other product attributes. They’re closest to both the clients and the technologies, but they’re often left out of company strategies and decisions, expected to “do as directed” by people who aren’t as well-positioned to make key choices. Not only that, when customers aren’t happy with what’s being released, the “seniors” take the credit as the “brains” behind the operation. When clients aren’t pleased, it’s the fault of the execution, and the Directors take the heat.
- The consequences for under-performance don’t reach the top levels. When money gets tight, it’s the lower end of the chain that gets cut. Those with the lofty-sounding titles have a lot of influence, and may be threatened when their subordinates push back on their instructions. Because of what they perceive themselves to be, they don’t take the experience of people at “inferior” levels seriously, if they understand what those people do at all. Directors are expensive, are often not respected, and lack authority. They’re the perfect fodder for senior leaders who can’t possibly see themselves or their colleagues as the problem, and may be replaced by less experienced people who are easier to control. When decisions about product design and delivery are made at the right levels, though, firms don’t need what is effectively middle management masquerading as progressively important leadership. It’s the Directors they need the most.
This isn’t just a theoretical proposition. We’ve seen so many tech startups struggle when the true expertise behind product advancement walks out the door. The ones that don’t close down completely become shells of how they started off, struggling with customer satisfaction, losing major clients, and shedding key staff left and right to even approach the profitability their investors demand. But they rarely let go of the Chiefs, the Senior Vice Presidents, or even the Vice Presidents. They’re all in on them. Instead, they downsize the very people who could turn things around, if they had the authority and freedom to act on their expertise.
What Successful Companies Do Differently
Getting a new idea off the ground and running a maturing company require different leadership and workforce skills, and too many firms never make that distinction. The companies that are able to last and grow invest in their organization as deliberately as they invest in their product. They’re taking the time before they advance to new levels of maturity to ask essential questions about how to achieve future objectives from a business management and operations perspective, which goes beyond the task of launching a new product as an early-stage startup. For example, they’re taking a close, purposeful look at:
- The functions they will need, and how they should be structured
- Where accountabilities should lie, and where decisions should be made
- The knowledge, skills, and abilities each function needs to be effective
- How to distribute work across jobs and determine what layers are truly necessary
- How to brand the company as an employer without over-titling and over-paying
- Strategic sourcing and recruiting approaches to find and get the right talent
They’re figuring out what they need to look like to get to, and stay at, the next level. One of our tech clients, for example, had tremendous initial sales, but profitability was low and growth stagnated. Its focus had to shift toward business development, high-quality delivery, and continuous improvement of products and services, which required a new approach. After investing in a redesign of its operating model, the firm’s revenue increased 300% and profitability improved substantially in just a few years. This came in large part because of a flatter structure, letting the right people use their expertise to drive long-term customer satisfaction.
As for that new Director of Product? She’s a real person, and her employer didn’t take advantage of her experience. Instead, the people comprising the layers took advantage of her, rewarding themselves for work she did and throwing her under the bus for their poor decisions. When she left, it was the company that was the loser. Perhaps someday, as it watches its competitors’ innovations bypass its own product’s capabilities, its leaders will realize they should have trusted and empowered her, not suffocated her under layers they kept adding on without a second thought. If you’re a startup leader yourself, learn the lesson now, before it’s too late.
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