Week 18: Optimizing a 50-employee business using AI Pt 3: Organizational Chart

Every activity must have a person's name attached to it

After a few weeks of hiatus in China, we are back organizing our business.

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This edition has the following sections:

Adding Value: Organizational Chart Construction

Interesting things: Tweets

Enjoy!

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Adding Value: Organizational Chart Construction

I recently read Elon Musk's biography, and one of the things that caught my attention was how quickly he could improve a company's performance when he got in the weeds. In the book, Walter Isaacson wrote about Musk's "algorithm," a set of beliefs that he uses to optimize his companies efficiently.

The Elon Musk Algorithm

1. Question every requirement. Ask Why? Question every requirement. Assume all requirements are dumb. Your job is to make the requirements less dumb. 

   Ask Who? Never accept that a requirement came from a department, such as from "the legal department" or "the safety department." You need to know the name of the real person who made that requirement. Requirements from smart people are the most dangerous because people are less likely to question them. Be extra vigilant.

2. Delete any part or process you can. If you do not end up adding back at least 10% of them, then you didn't delete enough. 

3. Simplify and optimize. This should come after step two. Because the most common error of a smart engineer is to optimize something that should not exist. Elon ended up deleting parts after spending a lot of time optimizing it.

4. Accelerate cycle time. You're moving too slowly, go faster! Every process can be speeded up. Have quick feedback loops. But don't go faster until you've worked on the other three things first.

5. Automate. This comes last. The big mistake in Tesla factory was that Elon tried to automate every step too soon. Instead, wait until all the requirements have been questioned, parts and processes deleted, and the bugs removed.

Fast forward to our work in restructuring our company, I noticed we needed a proper organizational chart where we specified who was responsible for what. Part of it was because, as a small company, everyone wore different hats; people did not need to answer to other people because it was a small, efficient operation with less volume. As we've grown, we must implement manager positions in each department to hold people accountable. Taking a page from Musk's algorithm, our next step was to develop an org chart where people know where they stand, who they answer to, and what they're accountable for. This also allows us to delete unnecessary processes and people.

I saw this tweet earlier that summarizes it:

We did not do this at the beginning. Virtually all of our employees also wanted to be entrepreneurs, which is excellent for starting a team. Still, as you scale and those people are more interested in their projects than the company mission, it becomes a problem. This is what happened to us. People left. They got frustrated, gossiped, and wondered when they could start their own company. They became focused on themselves. I realized we had to pivot to hire people who want a career with us and want to be part of something greater, not entrepreneurs who want to do their own thing.

We sat down last week and laid it all down. What does our company offer? What are its parts? What are the positions? How do they work together?

This is what we came up with.

Then, we dissected it even further. What activities is each position responsible for? What system do we have in place for each result that we want? Here is an example of what we came up with for our sales process.