Profitable R&D Structure and Growth

For the vast majority of tech executives, profitability was an entirely foreign concept for years. Startups rarely aimed to reach that goal in general, and even more rarely was R&D viewed from that lens in startups. Continuing this series on profitable tech teams, this article will focus on the people in your organization and what they do.

This is part 3 of a 4-part series:

  1. Highly Profitable Engineering Teams
  2. Making Profitable Software
  3. Profitable R&D Structure and Growth
  4. R&D Innovation for Fun and Profit

Hiring for Value

Gone are the days when most CTOs would get a quota of roles to fill based solely on X% of growth, regardless of the company’s actual roadmaps (or loosely related to it). However, talking to dozens of tech executives recently revealed that many are still making simplistic hiring plans. They’re thinking about beefing up a specific team where they’re lacking some seniority, for example. That’s fine, but that’s also obvious. Let’s consider the value.

Even if it sounds cold or harsh, each new hire should provide positive value to the company at the end of the day. I know it might not be trivial to demonstrate for some startups, but you should at least have that in mind when hiring. So, consider whether staffing a particular position even has the potential to become profitable, or are you making a team larger unnecessarily?

This simple cue by itself can sometimes fix half of your unprofitable R&D problems. It turns out that when you have this in mind, you tend to make decisions mindful of it. Huh! So, for example, you don’t have to automatically refill a position if someone leaves unless the gap they created will affect the business.

Likewise, some roles maybe made sense in the Old ZIRP World™, but that’s no longer the case. Project managers? Perhaps once you grow really big. Full-time scrum masters? Not sure. QA? For some products. Architects? Hmm. This is all part of profitable growth, as detailed in Capitalizing Your Technology.

Sensible Structures

Next, let’s reduce your organization’s overhead. It is no longer in vogue to create “teams” for anything, even though those teams might include a single person other than the manager and only exist for a few months. Heck, I literally saw “teams” that consisted solely of the manager for months on end.

These nano-teams produce micro-managers and introduce a lot of communication and process overhead to your company’s simplest of actions. My rule of thumb, as described in The Tech Executive Operating System, is to aim to have about six people in each team (and so forth; thus, a director should usually have about six managers reporting to her).

Needle-Moving Projects

Here’s a thought experiment: what would you cut if I told you that you had to cut 40% of everything your team is doing and focus on the top 60%? When asking clients, they often have at least a few things that come to mind. That, by itself, already means that you likely have projects that aren’t driving profitability fast enough and that aren’t impacting the business as they should. If that’s the case, consider why you’re allowing that to happen and why not put a stop to it without waiting for a hypothetical emergency.

Further, if you think that is entirely impossible because your team is already swamped or because you need all those hands merely to keep the lights on, I’d say you’re in deeper trouble. If that’s the case, it often means the team is working harder as opposed to working smarter. KTLO shouldn’t be such a significant part of your time allocation, for example. It might indicate there’s a need to innovate, automate, replace, or entirely drop some of the things you’re doing.

Keep It Up

Lastly, you owe it to your team to ensure that whoever is on it is pulling their weight. If some people are underperforming, you should definitely not wait till things become so dire you have to lay them off out of necessity. Instead, start by incorporating real coaching and mentoring practices right now, before it’s too late. Otherwise, they’ll end up reaching the point of no return, after which their future in the company will be doomed, and it will not be entirely their fault.

However, if you do have people who you think are not a good match and can’t be coached into it (or you’ve genuinely exhausted that option), then, again, don’t wait for massive layoffs. In today’s day and age, every position counts. The team you’ve got is your biggest asset. You cannot waste a position—this is what we opened the article with. Therefore, be the leader you ought to be and make the move.

Make sure to subscribe to my newsletter below to get more articles about building profitable product-engineering teams!

Get a sample chapter

Get the best newsletter for tech executives online, along with a free sample chapter of The Tech Executive Operating System đź“–. Tailored for your daily work. Weekly, short, and packed with exclusive insights.

No spam, ~4 mails a month Powered by ConvertKit