Engineering departments are very hard to set up and even harder to manage.
And getting it right from the start is crucial.
If you don’t have experience doing it, you might make mistakes that will have serious consequences later.
We’ve recently written a guide on how to set up and scale your engineering department, from a small department all the way to an enterprise-scale department.
This is a companion piece where we go into a bit more detail about setting up a small department in particular.
Let’s dive in!
Table of Contents
When setting up a software engineering department, it’s crucial you get it right from the start.
Setting it up poorly leads to a range of serious problems, including:
Inefficiency in particular is a major problem for engineering departments, regardless of team structure and size, and you can lose up to 30% of revenue because of it.
According to LinearB’s 2023 Developer Efficiency Report, 57% of respondents said their development team isn’t running as efficiently as it should.
And that’s not even the most striking statistic from the same report.
In fact, only 18% of teams on average can be considered “healthy”, meaning they have:
This inefficiency is often a catalyst for other problems, too, like high staff turnover.
On average, 45% of software engineers stay at their job for 1-2 years and 24% stay under one year.
More broadly, a Gartner survey showed that just 29% of IT workers want to stay with their current employer.
Burnout, both among engineers and leaders, is another problem you can often trace to department-level inefficiencies.
The 2024 State of Engineering Management Report, which surveyed more than 600 professionals ranging from engineers to executives, found that 65% of all respondents experienced burnout in the past year.
Looking at this data, it’s no surprise the tech industry has some of the highest turnover rates across the board.
And high turnover rates can seriously affect your bottom line.
A study by SHRM showed that employers on average need to spend around 6 to 9 months of an employee’s salary to find and train their replacement.
Plus, there are indirect costs you’ll have to deal with, too.
source: WebHR
But, even that’s not the whole story.
It’s even more expensive to replace software engineers – these costs can rise to 150% of their annual salary.
So, if an engineer earns $100,000/year, it can cost you up to $150,000 to replace them if they leave. This figure includes:
And that’s just the start.
If you have inefficient processes or a poorly structured engineering department, your team(s) will be less productive and you’ll face unnecessary delays.
For example, if you don’t clearly define goals and priorities during development, your engineers will inadvertently duplicate their efforts or be forced to wait for guidance.
And that will kill their momentum.
Also, this will affect the quality of your product, too.
Inefficient development leads to increased technical debt, especially if you don’t have good quality control processes in place.
source: Asana
Technical debt takes a lot of time and money to fix and negatively impacts your product’s performance until it’s fixed.
And the time you spend on fixing issues is time you can’t spend on making your product better.
So, how do you set up your engineering department to avoid these issues?
It all starts with getting your tech in order first.
The most important decision is also the first you’ll have to make.
Your choice of tech stack will affect everything you do going forward.
This choice affects everything you do going forward, so you need to consider:
And that’s just the start. You also need to consider other factors, like:
Your main goal is (and always should be) efficiently building a high-quality product.
Understand your biases — You’ll naturally lean towards using tools and technologies you’re familiar with, which is perfectly natural.
But, be mindful of your biases.
You need to carefully weigh the pros and cons and have a rational reason for every choice. Don’t choose based on familiarity, but on what’s best for your department long-term.
Ivan Trogrlic, Android Team Lead at DECODE
This should be your North Star, no matter the decision.
Of course, there’s also the question of new and emerging technologies – if you’re not on top of them, you risk falling behind.
But, jumping on every trend can be even riskier.
The key is finding the right balance and only choosing tech that will help your team build a better product, faster.
Flexibility and speed should be your top priorities, so don’t sweat processes too much.
But, this is where you also set a foundation for future scaling, too.
We’ll start with the most important thing – your team. We’ll discuss how to hire the right people and how to structure your department.
To start, you want to focus on hiring generalists who can work across the stack, e.g. full-stack developers who can work on both the backend and frontend.
Like we mentioned in the introduction, flexibility should be one of your top priorities when running a small engineering department.
In small teams, roles are often fluid and priorities can change rapidly mid-development.
So, you want engineers who can wear multiple hats to ensure your team is flexible, adaptable, and efficient.
Plus, if you hire generalists, you’re less likely to need external contractors to fill skill gaps, which will save you money.
At this stage, referrals will help you find strong candidates without having to invest a lot of time and money into recruitment.
Here’s why it works so well:
Use your network to find your first hires.
Later, ask your team members to recommend candidates who fit your culture and offer them referral fees for successful hires.
When you have a small team, every new hire has a huge impact on team culture.
“Hiring in small teams is personal. But as your team grows, step back, get help from recruiters, and fully focus on the bigger picture.”
Toni Vujevic, Engineering Team Lead at DECODE
And one bad hire can cause a lot of damage.
They’ll crush the rest of the team’s morale or in the worst case scenario, cause good team members to leave your department.
You need to make sure the people you hire align with your company’s values and fit in with the rest of your team.
A good way to ensure cultural fit is letting candidates meet the team during the hiring process.
Your team’s feedback will help gauge if the person is the right fit.
In small teams, you want flexibility.
Each team member should have ownership over their work, so rigid hierarchies are a bad fit.
Instead of adding an unnecessary layer of management, focus on giving team members ownership and the freedom to manage their work.
A flat hierarchy will allow them to make decisions quickly without endless approval loops, which will keep the team agile.
And that will help you build a high-performing culture in your department.
Pick a team member and give them ownership over a functional area (e.g. backend, frontend, testing) based on their strengths.
You’ll give every team member a clear role to play without them stepping on each other’s toes.
Plus, when someone “owns” an area, they become the go-to person for decisions which helps the team move faster.
So, you’ll avoid duplication of efforts and ensure accountability.
Talk to your team to identify their strengths and preferences before making the decision.
Allow your team members to take on different responsibilities, like testing and deployment, to build a truly versatile team.
Cross-training is a great way to help your team grow professionally and it pays off in more ways than one.
For example, a developer who spends time on testing, will write cleaner, more testable code.
And that will make QA easier and improve your product’s quality.
Plus, doing this will keep your team flexible and reduce reliance on specific individuals for mission-critical roles.
Next, we’ll cover the key processes you should implement.
Code reviews are one of the simplest yet most powerful processes you can implement.
A peer review process for pull requests ensures your code stays clean, consistent, and reliable.
Beyond catching bugs or technical issues early, code reviews also promote knowledge sharing within the team.
Junior engineers learn from senior ones, and best practices are naturally reinforced.
Also, your team will thank you – in one survey, 76% of developers described code reviews as “very valuable”.
QA isn’t sexy, but it’s invaluable.
You need a comprehensive testing strategy from the start, including unit tests, integration tests, and automated end-to-end tests – even if you don’t have dedicated QA specialists yet.
Here’s the most important tip – automate, automate, automate.
Manual testing is time-consuming and error-prone, while automation reduces repetitive work and provides faster feedback on bugs.
Tools like Selenium and Appium will be your best friends.
Make testing part of your team’s culture – strong QA processes save you time, money, and headaches in the long run.
Define a structured bug tracking process to solve issues quickly.
Start by defining a clear workflow for logging, prioritizing, and resolving bugs.
This ensures that critical issues are addressed as soon as they happen and that your team isn’t overwhelmed by minor problems.
Bug tracking tools like Shake or Bugzilla will help you debug and report problems faster.
Also, regularly review bug reports to spot patterns and recurring issues, as they might point to larger problems in your codebase.
Start building a robust CI/CD pipeline as early as possible to automate testing, builds, and deployments.
You’ll reduce manual errors, speed up release cycles, and ensure every change is thoroughly validated before going live.
Use tools like Github Actions, Jenkins, and Bitbucket Pipelines to set up your pipeline.
Integrate automated testing at every stage, so you can catch problems early in development and avoid last-minute firefighting.
For deployments, add staging environments to test features before pushing them to production.
The benefits are clear: faster releases, fewer bugs, and a more reliable product.
Hold quick daily stand-ups (10-15 minutes) to keep everyone on track and on the same page.
These meetings aren’t for deep dives – they’re for clarity. Your team should share what they’re working on, highlight potential blockers and their overall progress.
Complement these daily stand-ups with a weekly sync for bigger-picture discussions.
Use it to discuss priorities, review team progress, and address any ongoing high-level issues.
Keep both meetings short and focused to avoid meeting fatigue and wasting your team’s time.
For small teams, documentation should strike a balance – enough detail to be useful, but not so much that it becomes overwhelming
Start by documenting key architectural decisions and processes for easy reference.
This will help you avoid confusion, especially as you add new features or systems, and ensure everyone is aligned on how things work.
Use tools like Google Docs or Notion everyone on the team has access to create and store your documentation and keep it lightweight and easy to update.
If other departments or stakeholders are involved in the project, communication can quickly become a bottleneck.
Regular check-ins ensure all stakeholders are aligned with the project’s direction, progress, and challenges, so make sure to update them on a regular basis.
Focus on progress made, upcoming priorities, and any blockers or risks that require their input.
A consistent schedule, whether weekly or bi-weekly, will build trust with stakeholders and give them confidence that the team is delivering what’s needed.
Regular demos, both internal and with other departments/stakeholders, are the best way to communicate progress to everyone involved.
Seeing tangible progress will help your team gather real-time feedback and ensure everyone understands the product’s direction.
Schedule demos at key intervals, like at the end of a sprint or after completing a major milestone.
Keep the focus on what’s been accomplished and how it aligns with broader goals and requirements.
Also, make the demos interactive, invite questions, and encourage discussions.
Project tracking is essential if you want to ensure tasks don’t fall through the cracks.
It also gives your leads a clear overview of workloads, bottlenecks, and overall progress without micromanaging.
Use tools like Jira or Asana to track tasks, milestones, and status updates so everyone can track overall progress.
For small teams, simplicity is key.
A basic board with columns like “To Do,” “In Progress,” and “Done” is often all you need to get started.
When it comes to individual performance tracking, small teams don’t need overly complex metrics or dashboards.
Instead, you should introduce simple metrics like task completion rates and sticking to deadlines to track individual progress.
These metrics provide a quick and easy way to identify areas where your team needs more support or where you need to improve processes.
For example, if someone consistently struggles to complete tasks on time, it might be due to unrealistic workloads, unclear expectations, or a need for additional training.
The key is to use these metrics as a tool for improvement, not punishment.
You should do one-on-one check-ins with your team to understand the story behind the numbers.
Hold retrospectives and internal demos after each sprint or major milestone.
Keep retrospectives structured but conversational.
Start with a quick overview of the sprint or milestone, then ask questions like:
Encourage open, honest feedback while keeping the conversation constructive.
Internal demos should also be part of the retrospective process.
Show off what’s been completed, celebrate wins, and gather feedback from the whole team.
Document key takeaways so the team has a clear plan going into the next sprint.
In a small team, especially in startups, you might end up doing a little bit of everything.
This can be anything from architecture design, coding, project management, hiring, and so on.
And while wearing multiple hats is part of the small-team dynamic, it’s also a recipe for burnout.
So, what’s the solution?
Start delegating early and hire versatile generalists who can take on these responsibilities.
You want generalists who are adaptable and can step into different roles, whether it’s coding, testing, or managing deployments, without needing constant oversight.
Then, you can fully focus on strategic leadership and building a technical vision for the department.
Culture will make or break your team as you scale, so you can’t leave it to change.
A strong culture will keep your team motivated and resilient, even during bad times.
A bad culture, on the other hand, will cause low morale and high turnover that can completely derail your progress.
So, you need to get it right from the start and make culture a priority.
Start by defining your core values that reflect how you want to team to work together, make decisions, and solve problems.
Encourage open communication and create an environment where feedback flows both ways to build a positive culture
Also, you need to lead by example – your behavior will set the standard for the rest of your team.
With a small team, it’s easy to skip documentation and assume everyone always knows what’s going on.
But, this becomes a problem when your team grows.
Team members might forget decisions, misunderstand requirements, and struggle to bring new hires up to speed quickly.
So, you need to set basic documentation standards early, even if they’re minimal.
Focus on documenting major decisions, product requirements, and basic processes.
This will prevent knowledge gaps, speed up onboarding, and ensure everyone stays on the same page.
Finally, here are some tips on how to scale to the next level.
In small teams, roles are often fluid and everyone pitches in where needed.
And while that’s a strength, it becomes a problem as the team scales.
To scale smoothly, you need to clearly define roles and responsibilities at this stage.
Start by outlining the key roles you’ll need going forward, like:
Define each role’s core responsibilities and expectations in detail to hire more effectively and everyone understands who owns what.
This will make scaling to the next level much easier and more efficient.
Now is the time to start introducing structure and hierarchy to your department.
Start by appointing team leads to manage key areas, whether it’s functions like backend or QA or specific projects.
And you need to make the right choice here. So, here are 2 ways you can choose a team lead:
But, you want to make sure you don’t lose flexibility by introducing a hierarchy that’s too rigid.
Mid-size teams still thrive on flexibility and collaboration, so avoid adding too many layers of management or rigid reporting structures.
If you want to effectively scale, you need to start thinking about workflows.
Informal workflows that worked for a small team lead to chaos and inefficiency as the team grows.
So, where do you start?
Start by formalizing your SDLC and investing in project management.
Define key stages like planning, development, testing, deployment, and review, and make sure everyone understands how work moves through each phase
But, remember to leave room for flexibility and don’t be too rigid at this point.
Every team is different, and workflows should evolve with your team’s needs.
And if you keep them formalized but flexible, you’ll strike the right balance between structure and agility.
Focus on setting up strong fundamentals early.
Implement code reviews, automated testing, and build a robust CI/CD pipeline.
These processes ensure quality while allowing your team to move quickly without accumulating technical debt.
For small teams, a flat structure works well.
As you approach 8-10 engineers, you should identify high performers with strong communication skills who can start taking on leadership roles in preparation for future scaling.
And once you cross 10 engineers, introducing team leads becomes non-negotiable.
Always start simple with a monolithic architecture.
Microservices add unnecessary complexity for small teams. It’s a common misconception that they’re the best solution right from the start.
Giants like Facebook and Google mainly adopted them to better manage huge teams, not because they necessarily offer superior technical performance.
Only once your department grows to about 60 people, or 6 teams/squads of 10 people each, should you start thinking about microservices.
We hope you’ve learned a thing or two from this article and our guide on how to set up and scale your engineering department.
But, we do have a confession.
We don’t know how to build a huge, enterprise-scale team – we’re not there yet.
And that’s where you come in.
If you have more experience than us in building departments with hundreds of engineers, no one will be happier to hear it than our department managers.
So, feel free to reach out and shoot us an email with the details.
Mario makes every project run smoothly. A firm believer that people are DECODE’s most vital resource, he naturally grew into his former role as People Operations Manager. Now, his encyclopaedic knowledge of every DECODEr’s role, and his expertise in all things tech, enables him to guide DECODE's technical vision as CTO to make sure we're always ahead of the curve. Part engineer, and seemingly part therapist, Mario is always calm under pressure, which helps to maintain the office’s stress-free vibe. In fact, sitting and thinking is his main hobby. What’s more Zen than that?
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