Stage-Fit Product Organization Design
Choose functional or GM reporting based on stage, complexity, and autonomy
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 4
- Confidence
- 94%
Stage-Fit Product Organization Design chooses reporting lines from the needs of the product rather than from a universal preference. A functional model keeps product, design, and engineering reporting through their respective leaders. It works well when a company is smaller, teams solve related problems, shared product-development process matters, or many practitioners need coaching in their craft. A GM model puts multiple functions for a business under one leader. It fits a distinct, nascent opportunity inside a large organization when the business needs dedicated resources, unique processes, and autonomy from the parent company's competing priorities. Begin with what must be built, then assess organizational complexity, functional-development needs, and the initiative's need for independent execution. Adopt the simplest suitable structure and expect to revisit it as the company and opportunity change.
Origin
Skarstad contrasted Etsy's functional organization with Airbnb Experiences' GM structure. Etsy's model supported product development, while Experiences needed a business leader spanning operations, marketing, and product so the nascent opportunity had enough autonomy and dedicated resources.
Core principles
- 01Organization design should follow what the product and business need
- 02Functional structures strengthen craft development and shared process
- 03GM structures give a distinct business autonomy across functions
- 04Small companies usually need less structural separation
- 05No reporting model is permanent or universally correct
How to run it
- 1
Start with the work
Define the product, customer, business model, and stage before drawing reporting lines. Identify the processes and capabilities the team needs in order to learn and execute.
Pro tip Phrase the design problem as a delivery constraint, not as a preference for one org chart.
Watch out Copying another company's structure ignores differences in product and stage.
- 2
Assess functional-development needs
Estimate how much product managers and other practitioners need coaching, standards, and a shared craft community. Favor functional reporting when those development needs are high or teams work on related problems.
Pro tip Newer PM populations benefit from strong functional leadership and a consistent product process.
- 3
Assess business autonomy
Determine whether the initiative has distinctive operating, marketing, product, or resourcing needs that the larger organization may not serve well. Favor a GM model when a single business leader must coordinate those functions and protect space to run.
Pro tip A GM unit is most useful when the opportunity would otherwise compete unsuccessfully for parent-company resources.
Watch out Creating a separate unit without a genuinely distinct need adds unnecessary complexity.
- 4
Choose and revisit
Select the simplest model that provides the required development and autonomy, then monitor whether it removes the original constraint. Change it when company scale, business maturity, or the team's needs change.
Pro tip Treat the structure as an operating hypothesis rather than a permanent identity.
Watch out Organizations often move back and forth between models; change alone does not prove the previous structure was foolish.
In the wild
At Etsy, product managers reported through product leadership while design and engineering had their own functional leaders. Skarstad saw this as sensible for an organization that needed shared product-development practice and support for people growing in the function.
→ Practitioners received craft development while cross-functional partners coordinated through a common operating process.
Experiences was a new and unusual business inside a very large Airbnb. Its business leader managed operations, marketing, product, and other functions, giving the initiative resources and a distinct way of working instead of forcing it through the parent product structure.
→ The nascent business gained enough autonomy and dedicated support to pursue its specific needs.
Common mistakes
Searching for the one right model
Functional and GM structures solve different constraints, and companies may reasonably switch as those constraints change.
Over-structuring a small company
A separate GM unit may add little value when the company has low complexity and teams already solve similar problems.
Underfunding a distinct business
A nascent opportunity inside a large organization can fail when it lacks the autonomy and dedicated resources its unique model requires.
Is it for you?
Best for
Founders and product executives deciding between a functional organization and a GM-led business unit.
Not ideal for
Teams looking for a permanent universal org chart or reorganizing without a specific product-development constraint.
From the episode
Nickey Skarstad (Airbnb, Etsy, Shopify, Duolingo) on translating vision into goals, operationalizing product quality, second-order decisions, brainstorming, influence, and much more