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While I totally buy what this espouses, I think it is probably incredibly hard to scale. They are doing well if they keep things flat(ish) for 26 employees. I can't really see it working at all for > 50.

And while they may not have anyone with the job title CTO, I'd be very surprised if DHH was anything other than the de facto CTO.




Why does it have to scale? 37signals took 11 years to get to 26 people. It might take us another 11 to get to 50. We can optimize for that future when and if it arrives. But making your environment worse today because you worry about some possibly maybe future is the essence of premature optimization.


For 37 Signals it doesn't have to scale any time soon, but the grandfather was (tacitly) in reference to how many look to 37 Signals as exemplars of how to run small to medium tech businesses (why else write about it in Inc?)

I think if I already had a business of 10-15 people this would be a good model to attempt to follow. If I had a business of 40+, I would be far more wary; the question of scale is for those who may try to fit the model to their existing business.


Many companies need to scale up people as they grow because their ratio of human involvement to revenue produced isn't as high as 37signals'. Almost anything other than the specific style of product development that you guys do falls into this category.

The assumption when you publish an article is that you're doing it to provide examples to others, not just talk about how good you are. In that situation, I think it's fair to point out the limitations and areas where this strategy might not work.


I agree it doesn't have to scale, and you certainly shouldn't setup an organization around projected growth 2 years out. That may never come, and you also may not want it to come.

However, if you want your company to grow into a Groupon or Zynga, and you have the rapidly expanding demand to support that, then you need to scale. I don't think Groupon could run on 26 people, so they needed to scale to get to such massive revenue figures.

I specifically didn't use Facebook as an example because I know your feelings about them. I figured Groupon at least has the revenue to support their valuation :)


You have it backwards. You don't design your company structure in the hopes or anticipation of becoming Groupon or Zynga. You deal with that growth when it happens. You optimize for that scenario when it occurs.

You can't "want" your company into becoming a Groupon or a Zynga by design a certain organizational structure. Startups try that all the time by preemptively hiring tons of people to sit around and wait for the hockey stick growth that never comes.


I know, I'm not saying you should design your organization or hire around the idea that you'll be at Groupon's level in a year. That would be a waste.

Well let me ask you this. When is it the right time to reorganize and evolve from the flat structure because you are growing like gang-busters and can't keep up with the pressure on all areas of the company (support, development, sales, etc.)


I'll tell you when we get there, if ever. Although, as mentioned elsewhere in the thread, there are some good examples of enormous companies running counter-intuative-for-thier-size organizational models and doing great.


Its a different industry, but take a look at Semco SA:

http://en.wikipedia.org/wiki/Ricardo_Semler

Their industrial democracy approach has scaled quite well, with 3000 employees.


Maverick: The Success Story Behind the World's Most Unusual Workplace, by Ricardo Semler. Costs $10 at Amazon. Worth it.


His book "The 7-day Weekend" is good too.


Definitely a great example... but I find it disappointing that it is pretty much the ONLY example of this kind of company at that kind of scale that is brought up when topics like this are discussed. If it worked for Semler, why hasn't anyone repeated it?


Well, there's also worker-run democratic cooperative corporations like Mondragon:

http://en.wikipedia.org/wiki/Worker_cooperative

I think the biggest reason most companies don't recreate Semco's example is that nobody wants to think of themselves as expendable, especially people who can decide whether they're expendable or not, as the top management positions of a company are in a position to do so.

By saying "yes, our employees can make these decisions without us, we just have to give them the structure and support to do so", people at the top are admitting that they're not as important as our society tells them they are.

In Semco's case, Ricardo Semler was happy to admit that, because he felt the stress of running the business was killing him, and he welcomed the idea. A lot of people in his position would take anti-anxiety medication and something for acid reflux, and keep going, convinced that their position holding the reins is indispensable.





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