I am frequently fascinated by the incredible ease with which some individuals can start businesses. They seem able to do everything required to build a product or service, get customers and deliver it.
But things must change for a company to grow beyond this so called creativity stage.
Larry E Griener presents a nice model of the five stages of company growth in his Harvard Business Review study.
The possibility for a revolution or crisis exists at the end of each Phase of growth.
This model explains well what I have often observed as a business moves from the initial phase of being driven by the entrepreneur, to the next phase of growth which Greiner calls “direction”. As he notes: “ Creative activities are essential for a company to get off the ground. But as the company grows, those very activities become the problem”
The size of business we are talking about here may vary depending on the industry and the founder, but in my experience I have observed this as businesses move from 8-20 employees, where everyone reports to the founder, to a size of 25-50. At this larger size, it becomes necessary to start having teams, and not everyone in the business can be personally inspired by the founder.
So talking about the challenges of moving from Phase I (creativity) to Phase II (direction), there are three major mistakes I see time and time again.
1. Not letting go of the detail
Entrepreneurs are the creative force, and usually the person who can do everything in the early days of the business. Experienced staff are hard to come by, pay rates are low, and the successful entrepreneur lives by the mantra “if you want it done right – do it yourself”. Letting go of that detail and control is scary and not every entrepreneur manages it.
2. Not hiring senior managers at the right moment
At some point, maybe 25 employees, maybe 50, the new staff coming on board identify less with the passion of the founders, and more with the direction, stability and professionalism of the company. This is a time where systems, procedures, controls need to be put in place – and this is frequently not what entrepreneurs are good at or enjoy. Professional senior management is required. Not recognising this, and spending the money to find strong managers is often a reason why businesses have crises and tread water, or even fail.
3. Not moving from “doing” to “leading”
The entrepreneurs and founders often have survived during the early years by “doing” stuff. Whatever it takes basically, to win the deal, deliver the product or satisfy a customer. As the business grows, the employees become naturally more capable and resistant to interference from the entrepreneur. They want to be trusted and left to get on with the job. And they want the entrepreneur to spend his time on figuring out the overall direction of the company, resolving the big strategic questions. This represents a major change in way of working for most entrepreneurs. Whereas once the vision, goals and strategy could be maintained unwritten in their heads, and communicated by frequent informal contact with team members, now its a bigger thing that needs documents, Powerpoint presentations and staff updates. Consistency in direction, policy and staff treatment is valued highly in the next stage of growth, and many entrepreneurs find this a straight jacket which doesn’t fit well.
So how to avoid these mistakes?
One way to resolve both the fear of letting go, and the risk of upsetting employees through micromanagement, is to introduce a light touch goal setting and continuous feedback process. This also has the advantage of setting a regular communication channel that reinforces the key strategies of the business on a regular basis.
The leader gets to engage regularly with the goals of each of his teams, and follow progress through the check-in process. But the teams get to define their own goal success measures, and give regular updates without necessarily having face to face meetings. Senior managers get more information to focus their attention on resolving blockages to progress.