When growing a business from the Creativity stage to the Direction stage, there are three mistakes I see again and again.
Larry E Griener presents a nice model of the five stages of company growth in his Harvard Business Review study.
The possibility for a crisis exists at the end of each Phase of growth.
This model fits 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 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.
In 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 the person who knows everything in the early days of the business. Experienced staff are hard to come by, pay rates are low, so 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 of the company. Stability and professionalism is valued by staff. Systems, procedures, controls need to be put in place.
This is frequently not what entrepreneurs are good at. Professional senior management is required. Not recognising this, and skimping on the money required to hire or develop strong managers is often a reason why businesses have crises and tread water, or even fail.
3. Not moving from “doing” to “leading”
The entrepreneur often survives 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. They become resistant to interference from the entrepreneur. They want to be trusted and left to get on with the job. 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. At the beginning, the vision, goals and strategy was 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?
The entrepreneur needs to get over the fear of letting go, but still feel she has control over what the staff are working on, and the ability to set direction. This can be achieved by introducing a light touch process of management by objectives. There are several models in use at different companies, but in essence, the idea is to set regular goals for teams of employees, giving the entrepreneur the ability to set and monitor the progress on key objectives, without his team feeling they are being micromanaged.
This approach 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.
OKR is one such process which is worthy of some study.