Pick the right agency Team Structure: 5 options to scale

See how to choose the right agency team structure, based on 5 org structure options from agency advisor Karl Sakas.
Written by: Karl Sakas

Will your current agency Team Structure support your growth goals? Be careful: your old structure likely won’t work in the future, and it might be struggling today.

Agencies have five high-level options for org structure, which I describe below. If you get the structure right, your agency can run more smoothly and profitably. As an agency CEO shared after we did a consulting project together:

“We had positive comments from the team saying, ‘I feel like I have bandwidth to think again. I can get stuff done. I don’t feel like I’m underwater all the time.’ The team was a lot happier when we made that shift in team structure.”

But if you get it wrong, you’ll lose good clients and team members… and it would have been better to leave things as they were.

And you might not have even chosen your current model—agencies tend to “fall into” three by default. Meanwhile, one model scales well, while two specifically don’t scale. And only two are robust options if you want to sell your agency.

Be deliberate about making sudden changes to your structure. Restructuring has significant implications around change management—which impact profits and morale. But if you don’t make critical changes, you’ll struggle to reach your long-term growth goals.

Let’s see where you are today—and start thinking about the future. Want even more details? My 1:1 clients have access to a mega-reference spreadsheet showing 28 factors for each option—with 140 data points.

Overview of Agency Team Structure: 5 Options

In my experience working with 600+ agencies worldwide, there are five high-level ways to structure your agency. These apply to agencies from a few people to 100+ people in size. The five structure options are:

  1. FLAT structure: Everyone in one big “room”
  2. MATRIX structure: Account managers + departments
  3. POD structure: Agencies within the agency
  4. ON-DEMAND structure: Flexibility from a mostly-freelance team
  5. ECLECTIC structure: The “homegrown” solution

Let’s take a closer look at each one.

FLAT structure: Everyone in one big “room”

In the Flat structure, everyone—or almost everyone—reports to the founder(s). This is how most agencies start, as the founders keep adding team members. People tend to wear several hats—sometimes reluctantly—including your SMEs serving as Account Managers. Other than the owner, there’s not a clear hierarchy.

The Flat structure doesn’t scale well beyond 8-12 people. If you like being hands-on, the Flat structure can be a match. You can get to know the entire team really well—partly because it’s small and partly because you’re involved in a bit of everything. Team members tend to be generalists rather than specialists. It may make it easier to operate as a boutique agency, if you choose.

Flat agencies are difficult to sell, because the founder touches many or most aspects of the business. That means an acquirer can’t easily step in to do the founder’s job, or to hire an outside CEO. Or if the owner does find a buyer, it’s likely a relatively low valuation—and with significant earnout commitments that keep them from stepping away as fast as they’d like.

If you prefer a Lifestyle agency and don’t want to become 100% Optional, you can stay in the Flat model. Just be sure to pay yourself enough now, since you won’t have an exit.

Flat agencies tend to have some hierarchy even without a formal department structure. For instance, the owner might delegate tasks to a deputy, or one of the team members emerges as a “de facto” #2.

To keep growing—and reduce some of the headaches—owners usually try a version of the Matrix model (below), by organizing into departments and sub-teams. This will also require shifting your mindset—in trusting others to do the work.

MATRIX structure: Account managers + departments

Traditionally, agencies with 15 to 100+ people operate via the Matrix structure—a la Mad Men. Standing teams are organized in a hierarchy around the function (e.g., design or development) or client channel (e.g., SEO or social media).

The “matrix” name comes from most production-related SMEs having 2+ bosses—their “people manager” (a director or VP) and one or more “project manager” colleagues (e.g., the person assigning their day-to-day work). Clients work with specific account managers (to reduce confusion about which sub-team handles what), who interact with an ever-changing internal team. AMs are responsible for client service and client results.

The specific departments depend on what services the agency provides. If you start with teams around client channels, you’ll likely consolidate—for instance, a VP of Search now oversees the directors of paid, content, and link-building.

Be careful about job titles, since you now need to think about how titles work within and across teams. Over time, the owner(s) typically delegate client work to the team.

If you stick with the Matrix structure, you’ll eventually need to add a “traffic” or “resourcing” role, to resolve resource conflicts—like when multiple PMs want the best talent on their project or retainer. This also helps reduce internal silos, which otherwise hurt collaboration and communication.

The Matrix structure gives you flexibility on having an exit. But it can get creaky before then—and that’s when agencies tend to try Pods. Speaking of that…

POD structure: Agencies within the agency

I see many agencies considering a Pod structure—because of the benefits around scalability and client experience. The definition? Pod-based agencies will have two or more self-contained teams (typically 3-6 people per pod) to deliver work for a fixed subset of clients.

For example, a pod might have an Account Strategist (who serves as client strategist and account manager) who manages a designer, a developer, a copywriter, and a project coordinator. Pod leaders have significant authority regarding client strategy, account management, and budget management—so you’ll need competent leaders for each pod. And to have backups in mind in case someone resigns.

This “agency within an agency” approach can be a good way to grow—because you add new pods as you add clients, and clients benefit from dedicated subteams. But pods also introduce new challenges. For example, what do you do when one pod doesn’t have enough work, while another has too much? This creates problems around efficiency; clients technically aren’t “supposed” to span pods, because they lose the pod’s institutional knowledge about each client. And employees can get bored in the pod system, working on the same subset of clients.

You’ll also need the right team lineup for pods. That includes deciding which roles to include in each pod (e.g., who are the 3-6 people, and who’s the leader), as well as which roles will operate across pods (e.g., if you do occasional video-related projects, you might have a staff videographer who assists pods when they need video work). There’s also no clear path for “promotion from within,” since each pod tends to have just 1-2 people in each role. Because they aren’t promoted for growing their expertise, this can hurt long-term employee retention.

I’ll dive deeper into the Pod model in a future article; sign up for my newsletter to get notified when it goes live.

ON-DEMAND structure: Flexibility from a mostly-freelance team

On-Demand agencies use primarily client-billable contractors to deliver client work, plus a small core team that handles sales, account management, project management, and operations. This structure technically includes most firms in the Front-End agency model—because they intentionally outsource all or most of client fulfillment.

Depending on the owners’ goals, the On-Demand structure can be a starting point or a destination.

  • As a starting point: When a founder is an “accidental” agency owner—they kept hiring freelancers to help, and now it’s an agency—they technically have an On-Demand structure. Many shift to hiring full-time employees, since the per-hour profit margins are better. In this case, the structure moves to a Flat or Matrix model.
  • As a destination: When owners don’t love managing people, they may choose to have trusted freelancers do the work. This lets them build a custom team for each client, while reducing fixed payroll commitments and potentially reducing their management overhead. Of course, you need the right freelancers, and you have to be careful about worker classification.

The On-Demand structure is popular for agency owners who are tired of managing flakey employees—and who love (or don’t mind) being hands-on with [typically high-paying] clients. That is, you likely won’t have separate account managers—and the owner or senior contractors handle client strategy and quality control. This can help with coordination.

Due to the small “permanent” team, the owner likely won’t become Optional, but they can choose to outsource elements of work they don’t like. And they can be pickier about team members, since they’re generally hiring contractors rather than full-time employees.

Similar to the Flat structure, you probably won’t be able to sell an On-Demand agency—so likewise, be sure to pay yourself enough now. I’ll explore this model in a future article, too.

ECLECTIC structure: The “homegrown” solution

I use the term “Eclectic” to describe an agency structure that doesn’t fit the other four. Eclectic agencies have typically improvised a “homegrown” solution that mixes some of the other four options.

The biggest challenge is around equilibrium—if one or two key people leave (or join), the structure tends to fall apart. Eclectic agencies often don’t follow industry “best practices”—either because their leadership team intentionally avoids them, or because they’re unaware of what high-performing agencies do. I’m reminded of this article from The Onion.

Recruiting can be a challenge, because you can’t just recruit a “designer” or a “project manager”—you need someone who does both, plus A/R collections, plus they live within a certain radius of a PO Box because they also check the mail, and they know what you mean when the job posting says the title is “Chief Pizzazz Officer.”

The Eclectic structure can work on a short- and medium-term basis, but it’s rarely sustainable long-term. I don’t recommend pursuing this structure—and if you have it now, I recommend moving away from it ASAP. Speaking of changes…

How to Choose the Right Team Structure

Consider the five models: Which one sounds closest to your current model? And if the current model isn’t working, which alternative seems like the right next step?

Choosing the specific org structure for your agency—and particular roles and responsibilities—is beyond the scope of this article. But let’s take a look at how to organize the process.

My step-by-step process: How I approach this with agencies

Here’s a summary of my Sakas & Company consulting process for recommending team structure and roles:

  1. Be clear about your unique Values, Goals, and Resources. This includes considering your current team and your long-term goals. You’ll also want to think about what you like doing and don’t like doing each day—because this is an opportunity to craft your ideal role. In my consulting, I do a deep dive into your agency to understand what makes you tick and where you want to go. If you have a business partner(s), this process helps get everyone on the same page.
  2. Define the right long-term structure and roles. This is what you’ll aspire to reach, for your long-term goals. This is especially important if you want to sell your agency, or hire a CEO so you can move to an investor-style “chair” role. We start discussing this in the Agency Growth Diagnostic—but don’t get into specific details or designs. You’ll likely identify future hiring needs, and invest in leadership development training to promote current team members.
  3. Outline the right short- or medium-term structure. This is the bridge between today and your long-term future. If you’re growing faster than ~30% a year, set a medium-term focus, because you’ll likely “burn through” the short-term plan in under a year. Depending on the Phase 2 scope, my team and I will help you define the right structure and roles. Or we’ll focus on structure, and your HR advisor will define role descriptions. We’ll use my proprietary calculator, to ensure that you aren’t over- or under-staffed—and you’ll get ongoing access to the tool, to “test” future scenarios.
  4. Get your team’s feedback on the changes. The goal is to “break” the plan before you launch the plan. That includes getting feedback from your executive team, and perhaps from managers, too. The process can take several weeks or even months, but it’s better than changing too fast and regretting it later.
  5. Launch the short- or medium-term plan. You’ll need to turn your strategy into an implementation plan, and get your team’s help along the way. Optionally, I’ll do Executive Coaching with the founder(s) or hired CEO, to help create a smooth and profitable transition.

For additional perspective, see articles from Melanie Chandruang on defining your agency org structure, Bob Sanders on ad agency org structure (including helpful charts), and Punctuation (David C. Baker and Jonathan Baker) on agency strategy.

What Next?

You likely now know which structures to explore… and which to discard. Don’t want to wait for the deeper-dive articles, on the Pod and On-Demand options? Please reach out to me, and my team can recommend options to help you find the right custom structure.

Either way, good luck as you work through the team structure decision! If you get it right, brighter days lie ahead.

Question: Which team structure do you want to explore next?

Book Cover: "Work Less, Earn More" by Karl Sakas

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