We’ve all seen a “standard” organization chart. It has (1) the CEO at the top, (2) Four to eight Vice-presidents below, each in charge of a business function and reporting to the CEO, (3) Directors in the reporting chain below the Vice-presidents, and (4) a variety of folks with different (and non-standard) titles in the reporting chain below the Directors.
I would claim that this “standard” org chart is actually a good template to follow in organizing a start-up through, say, the first 40 people. I’m not sure if the converse is true, but I can say (without having done a rigorous study) that, in my 35 years of working with start-ups, there is a strong correlation between (1) start-ups with org charts that were “contorted” in some way (compared to the “standard” one) and (2) start-ups that ended up with some kind of founder trouble. Thus, if there are “odd” lines of reporting, or if there are “odd” titles that don’t fit in a standard org chart, it usually raises a red flag for me. If you’re having trouble fitting one of your co-founders into a standard org chart, you should think about whether he’s the right person (or, at least, in the right role).
A few examples may make this clearer:
(1) “Founder” is a ceremonial title, not a functional one (such as CEO, Vice-President). It has no legal significance, and should not appear in an org chart, even for a start-up. Beyond the very early stages of a start-up, it does not describe a job role. All co-founders should give some thought to what they’re “real” job is when their start-up grows beyond, say, 8-10 people and starts to need some organizational structure. Said another way, if your title is “Co-founder”, you need to be “Co-founder and Something Else”, where the Something Else describes a job with a business function attached.
(2) almost no start-up needs a “Chairman”; the office has no real meaning in a setting where most of the board members represent major stockholder interests (including holders of founders’ stock); rarely, it might make sense to give the Chairman title to an outside board member who brings particular prestige and gravitas to the Company, and who is “active” in helping the Company in some way. My advice to founders: avoid extraneous uses of Chairman.
(3) Almost no early-stage start-up seeking VC funding should ever have one founder as the “CEO” and another as “President” or “Chief Operating Officer” (and, God forbid, per the immediately preceding point, certainly no Chairman!). This is almost always a sign of title inflation (usually to assuage/massage someone’s ego). Almost guaranteed, any start-up that has a Chairman and/or a CEO and/or a President/COO has the wrong person in one (or more) of those roles. This sort of title inflation and proliferation is almost always – like most other “contortions” of the standard org chart – a red flag to VC’s. It will be interpreted as indicating that some of the co-founders are more worried about titles (and ego’s) than success.
(4) Almost no start-up seeking VC funding should ever have anyone with the title of “Executive Vice-president” or “Senior Vice-president”. Maybe when your start-up has 1,000 employees, but not when it’s just getting off the ground. This particular kind of title inflation has almost always been a bad sign: either that someone (the one with the highfalutin’ title) is overly concerned with ego and resume-building instead of rolling up his sleeves and actually working, or that “room” in the org chart is being “cleared out” for someone else, who though not ready, nevertheless demands it.