I’ve worked in a leadership role with many businesses over the last four decades – service providers, mature operating companies, turnarounds, and high growth startups. For me, startups were the most fun – I guess I enjoy managing chaos?
For this article, my focus is on startups that have made it past the starting gate. They have a credible plan, they are generating sales, and they are in rapid growth mode. For obvious reasons, these are the most rewarding and fun.
This early growth stage is also a critical time to put the foundation in place for growth. And a key piece of that foundation is your organizational chart – and your willingness to adjust it going forward. New specialities need to be added, and early employees frequently reach their growth ceiling. Think of it like a relay race. As one team member is at the top of their game, they pass the baton to a fresh player who has the skills for the next phase of growth. This might sound harsh and pragmatic, but if you are serious about growing your business, please take note…
For new companies that have a solid strategy, a great product or service, and working capital, about the only missing piece is….people. Many early stage founders surround themselves with generalists whom they know and trust (“friends and family”). These jacks of all trades can be great for getting a company launched. They wear many hats, get their hands dirty, and they have enough general knowledge to get the ball rolling. It can also be hard for early stage companies to attract professional talent. The company might be too small, its future too unproven and risky, and financial resources might be nonexistent.
This acknowledged, the skills needed for garage startups are not necessarily the same skills needed to grow a company. Maybe you get lucky and find the rare employee who can thrive in the hectic and disorganized startup life, then have the talent to scale, build teams, then introduce systems and structure. What happens more often is that as companies grow and add complexity, these early friends and family generalists run out of gas. Founders begin recruiting specialists, and the old guard (I’ll term them “legacy warhorses”) find themselves marginalized or displaced.
What to do…what to do…
These early months and years are the time to intentionally and deliberately prepare for future leadership transitions – i.e., the “seasons of management.” Navigating these transitions is never easy, but here are a few suggestions to ease these sometimes painful changes:
- Be clear with early stage employees that change is inevitable. The reality is that at some point, the entire leadership org chart could turn over. This includes the founder and/or CEO in many cases. Folks who don’t have the expertise and emotional intelligence to grow and deal with change will end up feeling left behind.
- Aggressively anticipate and act on the need for talent upgrades. One of the most common regrets I hear from CEOs (myself included) is that they waited too long to make a critical upgrade.
You can make money back, but you can never recover wasted time. Click To Tweet
- Be prepared to move past the grumbling and entitlement mentality of the “legacy warhorses.” Many will never be happy, and they are organizational poison. The good old days are gone. I can’t tell you how many times I’ve heard “we’re getting all corporate” or “it’s all about the money.” [Imagine these phases being mouthed with a whiny, high-pitched voice…]
- For the players that helped you do the heavy lifting in the early days, you might consider giving them small pieces of ownership in the company. Not only will this encourage performance in the early days, it can also soften the blow of future transitions. Of course, you can just kick them to the curb, but that’s not how I like to operate. Warning: Don’t get ahead of yourself and give up too much early on. I’ve seen this happen too many times, with much regret. Some early employees adapt to change and continue to add great value, but others become legacy warhorses. With any equity awards, structure them to vest slowly, e.g., over 3-5 years. This should give you time to assess performance and make changes, if desired. If the employee has been a rock star, you can always accelerate vesting to reward exemplary performance. This can create a win-win for founders and the early stage employee.
As with most any organizational changes, the sooner that changes are made, the better. Delays create greater expectations and feelings of entitlement, and create more pain when changes ultimately have to be made.
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