At an early-stage startup, nobody gets paid much unless the valuation grows. Even the rare fat salary is easily dwarfed by equity upside. The stakes are existential, while the differences in rank are trivial. Big swings are not only encouraged, they’re required for survival. Serving customers is far more useful than sounding smart in a meeting. At a scale-up, the stakes dip as the upside splits across more people. Fortunately, there’s usually a path to 10X through expanding into new geographies and verticals. When this path is clear, people are incentivized to grow the pie rather than fight over each slice. As a company grows into a more optimized business though, getting a bigger title with higher salary and headcount becomes more valuable — and let’s be real, easier — than trying to start a new product line that makes a dent. People with appetites for big bets either leave, or shrink their appetite to survive.
Span of control, aka # direct reports per manager, is surprisingly revealing. Let’s say two companies are the same size, but company A’s typical span of control is 8 people while company B’s is 3. Due to a narrower span of control, company B has far more layers than company A, which translates into a longer corporate ladder. This means: Greater need to split hairs re: title and compensation More distance between people calling the shots and people on the ground; this comes with its own set of challenges (out-of-touch strategy, longer reaction time, room for broken telephone communication)
What’s a better use of time: 1 hour solving customer problems or 1 hour politicking (networking, promoting your work, lobbying for more resources)? In many places, especially those with skinny orgs, politicking is the no-brainer answer. When you are buried in the org by default, you gotta figure out how to get noticed.
To put it all together, here’s the formula for predicting behavior inside a company: stakes * span of control^2 * project-skill fit / (return on politics * rank) If your goal is to be rewarded on your merits, look for higher values in the numerator (stakes, span of control - up to a point, project-skill fit); and lower values in the denominator (return on politics, perks of rank).
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