How do you avoid disaster while growing an early stage startup?
‘How do I scale my business effectively’ is a question we receive a lot from entrepreneurs in companies approaching a tipping point in employee hiring. It is hard to navigate the transition from a small scrappy company where everybody does everything to required rapid growth in the operations department by 50% to meet demand. There isn’t a template for how to scale perfectly. Even worse, there are many public examples of companies that have faced ridicule for doing this wrong. I recently came across an article on Forbes by Ajay Agarwal, a Managing Director of Bain Capital Ventures. He brought up some interesting points, and I’d like to address some nuances that we have seen in our years working with rapidly scaling startups.
Optimize for innovation? Or repeatability?
Early companies optimize their hires for innovation. Switching to optimize hires for repeatability sounds great in theory as companies scale to make more widgets. However, this is much more easily said than done. Shifting away from innovation and toward repeatable processes can cripple your company if your product or service requires continued innovation. It can also drive a lot of your top employees away, especially those that see themselves as start-up guys that thrive on small team collaboration and dislike process and bureaucracy. One step that can help retain your top innovators is clearly communicating that innovation is still a large part of the product development cycle. Then align your actions with your words by allocating resources to R&D and letting the team take ownership – and accountability – for leading that charge.
When to hire a management team?
Building a leadership team is also quite tricky. Tech talent may clash on values, and hiring leaders is not always the right decision for growing a company.
That leads to another important point: the team to build your minimum viable product isn’t always the right team to get you the rest of the way to a commercial release. Adding a management layer eventually is essential but doing it too early runs the same risk of ostracizing talent. Here, too, transparency is key. Have the conversation early so that everybody understands that when you go into growth mode some management layers need to form to help with things like new repeatable processes. Not only will it make the transition more smooth, it will alert you to possible conflicts early on and allow you to handle them before they get bad.
Develop a sustainable culture
As companies scale, the culture grows beyond the outward actions of founders and becomes a larger, and ever expanding environment. Ask yourself, what values do you want to uphold? Are you an innovation company? Do you embrace radical candor? Make these values part of the corporate brand, and discuss them with hiring managers and current employees. Culture does change, but it should always be aligned with the company’s long term strategy.
Scaling a company is never easy, and some founders wait until it’s too late to face changes that need to be made for the people who work with you, rather than for the products you create. Open communication and forethought can be keys to effective startup growth.