Scaling organizations

Small organizations can coordinate activities organically because it's still feasible for everyone to be aware of what other people are doing. But, when that's no longer possible due to increased headcount, organizations introduce:

• Formalization: Roles become more well-defined (and less fluid) when it's harder to change relationships with customers.
• Standardization: Processes are designed to ensure consistency to meet customer demands.
• Differentiation:
  • Horizontal (functional): Teams are formed to take responsibility for different areas of the business.
  • Vertical (hierarchy): To streamline decision-making among an increasing number of people, lines of authority are made explicit.
• Specialization: New hires need to have expertise and be better suited for their roles than current employees who have been filling in. This may mean that they've solved similar problems before or that they can perform similar tasks with fewer resources, by being more efficient or less expensive.