July 5

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5 reasons your start-up will fail to scale

If you are looking to scale your company significantly and penetrate new markets in the coming year, you’d better beware.

Recently, as part of my leadership consulting work in tech, I’ve spoken with CEOs and COOs of several exceptional start-ups who are on exactly that journey.

Often the focus is on preparing systems and processes to scale – but there are a handful of regular organisational issues that consistently crop up to put the brakes on high-growth firms.

Here are the top five. Plan for them now and set healthy foundations in place.

1. You’ve “papered over the cracks”

Your leadership team has some exceptional talent – but also some strong personalities! So are the key leaders really aligned, communicating openly, and performing together at a high level?

Often, leadership team relationships have been made to work by ‘papering over the cracks’. Hard questions have not been asked, and frustrations within the leadership team have been studiously ignored.

When the firm starts to scale, however, these kinds of ‘faultlines’ will simply multiply and magnify across the whole, larger, organisation. And it is a lot harder to deal with those problems at that stage.

As one client of mine, a COO, said: “It is clear as we are currently configured [as a leadership team] we will not survive as we scale.”

>> Action point for leaders: address the core issues in your leadership team NOW before scaling out the organisation.

2. You haven’t cracked “cultural onboarding”

You are going to make some significant hires – key leaders in your new, larger, organisation.

Whilst leaders define culture, sub-leaders define sub-cultures. So the danger here is that these new leaders, fresh to the firm and not yet soaked in the company culture, may easily create sub-cultures of their own.

And this means that different pockets of your company will start to develop different attitudes and approaches. The result? Fundamentally different decision-making criteria, misalignment, frustration – and lots of distraction from growing the business.

>> Action point for leaders: you don’t need to build a complicated onboarding process, but you DO need an approach to transfer and embed your most important aspects of your culture in your new leaders.

3. You haven’t built a true recruitment advantage

As a start-up, you have a double recruitment challenge.

Firstly, you probably aren’t paying top-notch salaries, and yet you need first-class recruits. And secondly, you are going to be asking for a lot: intense commitment, long working hours, pressurised deadlines and the ability to cope with the uncertainty around the company’s financial health.

As a result, you need a compelling recruitment advantage to put forward to potential hires. In fact, I’d say you need two.

The most obvious is the potential medium-term financial payoff. You are inviting hires to ‘buy into the future’: if the start up succeeds, riches await.

But in our increasingly short-term world, there needs to be a story for the ‘now’. Fundamentally, this will have to revolve around the working environment – the opportunities for growth, the sense of purpose and shared goals, the ability to learn close-up from exceptional leaders (you!), the overall sense of camaraderie, and so forth.

It’s easy to rely on charisma to ‘sell the culture’, rather than reality. But for sustainable growth you need to make sure your people are absolutely empowered and engaged and on the ride of their life!

>> Action point for leaders: Take a hard look at your employee experience across the firm. Are team leaders creating healthy work environments despite the pressure?Are employees thriving, or just surviving?

4. You haven’t closed the back door

Bringing people onboard is only half the problem. The other half is retaining them.

It’s a common adage, but true: people join firms but they leave managers.

For example, Jerome is a SVP of Sales in a larger tech start-up here in Paris. Clearly under pressure, his attitude towards his team was so toxic that over half of the sales force have resigned in the last year. And in one London-based start-up I’ve worked with, practically all the development team left within 6 months of a particularly difficult experience with the CTO.

So the flip side of having a ‘genuine recruitment story’ is ensuring that the managers in your growing organisation are not just technically smart, but able to create teams that everyone wants to work for.

>> Action point for leaders: If your sub-leaders are not healthy, your sub-teams won’t be healthy. Make sure your critical teams have humble and self-aware leaders.

5. You aren’t developing a multiplication environment

But the biggest and most overriding organisational issue that seems to prevent companies from scaling is “thinking addition, not multiplication”.

  • Addition means looking to solve the company’s issues from the outside, focusing on the ‘big hires’ and solving skill gaps inorganically – by ‘hiring good people’.
  • Multiplication means building a culture where everybody gets to play at their best. Key to this is an apprenticeship ethos where knowledge and skill transfer happens at every level in the organisation. The skill gap is closed organically, allowing everyone to step up to bigger and better roles.

In a multiplication approach, the focus is less on making ‘perfect hires’ than on making ‘decent hires’ and then entrusting them to a leadership culture that develops and engages employees. Addition gets you a immediate ‘quick fix’, but multiplication is the key to scaling.

>> Action point for leaders: Start to put in place simple and sustainable mechanisms to build a multiplication culture that will allow you to transfer skills and build talent from within the firm, and truly scale.

Conclusion

In summary, here are 5 simple organisational tips for start-ups intending to scale:

  • Get the leadership team aligned and healthy
  • Understand how you will rapidly transmit your company culture to new leaders
  • Turn your working environment into a genuine recruitment advantage
  • Identify critical team leaders and ensure their people skills match their hard skills
  • Create true organic scalability by developing a multiplication environment

These activities don’t need to take a lot of time or cost a lot of money. But they do need to be on the radar. Otherwise, organisational strife will increase exponentially as the business grows.

Do you agree with my 5 risk areas for start-ups looking to scale? What’s been your experience?


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