In the first article of this series, we discussed the structure, role, and dynamics of the sales and marketing departments in your early-stage tech services startup. Today, we will discuss the delivery organization. This article will walk you through the different structures, processes, and roles your delivery team needs as you grow.
Before we dive deeper into the delivery team structure, we wanted to address some key assumptions we are making in this article.
People vs Revenue
While sales is more closely related to revenue, the growth of the delivery team can vary significantly based on hourly rate. The management infrastructure your delivery team requires would depend more on the number of people in the organization. For this reason, we are sharing numbers but tying them to revenue with the assumption of a blended on-shore and off-shore team with approximately 100k annual revenue per engineer. If these numbers are not aligned, then focus on the headcount. The management and project management infrastructure would reflect the headcount. Developing a differentiated positioning and fixing your hourly rate is a separate exercise for which we recommend reading this whitepaper.
If you come from a product background, you may be familiar with around six individual contributors (ICs) managed by one person. However, some product companies like Google have up to 30 individuals reporting to one manager. Google wants to actively discourage managers from being involved with day-to-day responsibilities and micromanaging. Both numbers carry different philosophies.
In your services company, time spent managing the teams is not billable. A high employee-to-manager ratio means more profits. The number is more relevant to services companies because their margins are lower than those of product companies. Another factor that affects the numbers is that the manager may not be directly on the project with the individual. So they would not have an understanding of the day-to-day work. Having a matrix management structure, whether formal or informal, is a necessity in a services company. With this support, the responsibility the manager makes a smaller commitment per IC.
Considering this, there is a preference in a services company for a dedicated manager with 30 individual contributors model. But there is an exception. Consulting companies have everyone as customer-facing. The early career engineers may need more hand-holding and guidance. The low-touch model may not be effective for them, and you may want to dedicate more manager bandwidth to them.
What Do The Teams Look Like
With these considerations in mind, we have provided must-have and should-have recommendations. If you don't implement the must-have recommendations, we expect you will experience immediate pain that may result in unhappy customers and employees. The should-have recommendations will allow you to take a more proactive approach to address issues.
0-5 Engineers, 0-500K
The tech leader is directly involved in delivering services to clients.
The tech leader handles everything needed to succeed, including project management, architecture, customer relationship, and coding.
Technical leader leans on team members to create a scalable business.
Be quick and brutal with any personnel issues. Set a high standard of expectation for the team.
Encourage one of the founders to take on a technical leadership role. To provide differentiated services, you need an individual who believes in the company's vision, which ideally means a co-founder performs this role.
Make sure you have enthusiastic learners in your team. These individuals will build the future foundation of your delivery organization.
Leverage off-shore and contract workers to lower costs and commitment as you refine your delivery organization.
6-15 People, 500K-1.5M
A project manager handles project logistics and ensures success. The technical leader would be overwhelmed without this help. We are casually using the work project manager for the individual providing logistical support, visibility, and reinforcing alignment to the team. We highly recommend hiring an experienced ScrumMaster or Agilist for this role.
Established engineers provide guidance and mentorship to newer team members.
The technical leader has no individual contributor responsibilities at this stage.
Transition founders away from direct coding tasks.
Start training promising individual contributors for potential future managerial roles by placing them in mentorship positions.
Mentors interested in leading should manage one or two junior engineers. Management is an entirely different skillset from engineering; the early experiments will provide you with managers when needed.
16-30 People, 1.5M-3M
Up to three part-time managers manage most of the technical team. They report to the technical leader. Very few, if any, individual contributors report to the technical leader.
Hire a second project manager to handle the increased volume of projects.
Invest in project status and customer satisfaction visibility across the project portfolio.
Train senior engineers for part-time managerial roles.
Prioritize the development of intellectual properties like accelerators, test labs, developer environments, and training modules to maintain a competitive edge. The tech visionary guides this initiative.
The technical leader should still do skip-level check-ins with the entire delivery team.
31-50 People, 3M - 5M
Handling team needs requires some full-time managers.
The project management team would need leadership in place. Ideally, the leader is an experienced Agile coach.
Build IP to ease bringing on new team members and achieve better customer outcomes.
Formalize the processes and guidelines to create consistent IP for the team.
Your business may need more specialized roles if the skills between engineers vary vastly.
Coordination work among business units increases, and a delivery manager to handle that role would allow for maintaining technical excellence.
What This Means For Your Tech Services Startup
Your tech services startup will live or die by the ability of the delivery team to make your customers successful. This article provides a blueprint for understanding how the delivery organization will change as your business grows. In addition, we've provided some frameworks to use to understand your delivery team better. The specifics will vary according to your business. Still, this knowledge will allow you to be proactive and not put your team in a position where they are overburdened and unprepared to help your customers succeed.