Getting started (July)
Managing to grow A challenging test of entrepreneurs is how they handle the threat of mediocrity.
Picture a startup with high growth potential and ambitious plans to scale up. Right product. Right price point. Solid demand. But if growth is a priority, and if it happens fast, there is a real danger of drifting into dangerous territory with employees, by hiring “warm bodies” and managing to middle-tier performers because you’re simply trying to survive the change. With multiple generations in the workforce, stiff competition for scarce knowledge workers, and change so rapid it staggers even seasoned entrepreneurs, retaining talent and managing performance isn’t simply about setting an example for others to follow. And frankly, your example as the original visionary or innovator might not be quite right when trying to stabilize or scale up. While no startup wants to lose sight of its entrepreneurial, innovative, or flexible ideals, not having the right reporting and talent management processes can lead to chaos in operations and undermine employee accountability and ownership. Dominic Lim, assistant professor and Donald G. and Elizabeth R. Ness Faculty Fellow in Entrepreneurship at the Ivey Business School, notes that when startups begin to expand, they tend to drift into “firefighter” mode, where employees’ “attention spans are tested and . . . only so much . . . can get done in a day. Here, it’s natural to lose sight of the original company vision and drift into mediocrity, to focus on putting out fires instead of keeping an eye on the bigger picture.” By their very nature, entrepreneurial leaders may believe that formal structure impedes innovation and employee satisfaction, when in reality, insufficient guidance can be just as demotivating. Top performers, key to successfully expanding a startup, value feedback and constant learning opportunities. But those can’t happen if senior leaders focus on managing middle-tier performers just to survive — or there’s no real management and reporting structure at all. Take San Francisco-based Cloudflare, for example. A “title-free organization” founded in 2009, Cloudflare specializes in content delivery and security for web platforms. According to Harvard Business Review, chief executive Matthew Prince created the flat-structured organization in hopes of preventing organizational chart conflicts. By July 2012, Cloudflare was serving 500,000 websites and averaging more than two billion page views a day, but that month also saw five of its 35 employees leave, with some blaming a lack of reporting structure and HR practices. Talent and performance management certainly aren’t the only thing in successful scale-ups, but they’re a big thing. Cloudflare recognized the need for more structure and adopted a new, flexible organizational chart. That offered structure they needed to draw senior-level talent without discouraging original team members, a strategy that helped them expand worldwide. To keep mediocrity at bay, ensure leaders and employees can relate to and follow your company’s strategy and core values. That means ensuring they understand what they’re there to do and why it matters, and are managed to perform at a high level within this culture. A key question to ask yourself is this: Will your leadership and performance management approach work as well with 200 employees as it did with 10 or 20?