Top 5 myths about scaling

We started in 2006 with just 4 people. We steadily grew to about 30 people and stayed there through 2009. In 2010 we grew to 80 people. By the time we ended 2011, we had 450 employees and opened up three offices and we had made over $100 million in revenue. It was safe to say we were in the growth phase of our start up and trying to scale up. Here were the top 5 myths about scaling:

We just need to hire more people to reach product-market fit.

This is a very tempting thought especially if you do not have product-market fit yet. The thought is maybe we just need to hire more people to put out more features or to do more BD — if we just had more (or better) resources we could get it done and everyone would be using our product. After all you will do everything in your power to give your company the best chance at life.

Stamp these thoughts right now. If you are just beginning your startup, if the following things are not happening, then don’t consider hiring someone unless someone on your current team cannot absolutely do the thing that is needed:

• If your servers are not melting — you do not have product-market fit.

• If you do not have 100% of your staff working overtime to answer user or customer support because of volume — you do not have product-market fit.

• If every time you refresh your admin tool, the numbers do not change (for the better)— you do not have product-market fit.

Even if these things are happening, consider consultants and talent models where you can try before you buy. Hiring people to add to your small team is a large investment that costs a lot more than you expect. You should make sure you have your product-market fit nailed before you scale or you might have to have a really tough conversation with folks.

We just need to hire more people in order to meet our revenue targets.

This is also a common thought, but equally dangerous.

If your revenue plan depends on hiring many many people to achieve it, think of another revenue plan.

I am not saying that you need to come up with a new revenue target, but you should consider another plan to where you achieve your revenue target does not require tens of thousands of new employees to make it work. First, talent is expensive, especially if you are in the US. Secondly, your business becomes operations heavy which means it is hard to be defensible, and difficult to scale. This also allows more populous countries with cheaper labor to come in and compete / win quicker than you. And, thirdly, what happens when your company does not make its revenue targets? (See the first myth)

We need “professional” managers.

This is the dilemma that all startups encounter — someone who is skilled and knowledgeable about their function but doesn’t want to or have to people manage. Then the infamous phrase “(s)he doesn’t scale”. Then they get a “professional” manager, someone who has managed an org of hundreds or thousands. More often than not one of two things happens: (1) the “professional” manager gets fired or leaves because they were not a “culture fit”, could not move fast enough, or is frustrated at the lack of infrastructure (2) the entire team leaves below him/her and they have to re-build. While how you transition matters, we have found that if you get someone who has been managing a team that is about 3x larger than its current team, that manager has difficulty being seen as “get shit done” in their new environment. They may be used to an EA (executive assistant) or an HRBP (HR Business Partner) already there, instead of building it. People will see them only as a people manager and not able to be able to give strategic input. If the manager comes from an environment whose team they managed is about 5x smaller than its current team, they will have a lot of manager issues that are related to “not scaling” or first time manager issues.

The biggest caveat is that you choose someone who wants to manage and has recently managed the current size of the team. We had an executive who was fell into the “professional” manager category. He quickly grew one of our groups from 50 to 200; however, by the end of the year it resulted in a layoff. Partly, the executive was doing his job of scaling the org, but was not as attuned to growing it with product or else the layers upon layers of Sr. Manager, Director, Sr. Director, etc would and should not have been introduced all at once.

If you are in the growth and/or the beginning of the scale phase of the organization, lean towards managers who have managed smaller or equal sized teams but are more than likely hungry to go to the next level. If you nurture these types of people in your organization, you will be able to scale will having continuity, which in the end can buy time for you to get that next success into the marketplace.

Otherwise you end up with a lot of management and no one doing the work — and who likes that?

We don’t need any managers.

It’s easy to swing the other way and say we don’t need managers at all, we can home grow them. Experienced or “professional” managers are extremely useful in getting the organization to the next level. The trick is finding the right “professional” managers. These managers need to be able to not only manage their current team, but they must understand, and be excited about, the idea that their boss could have less managerial experience. This gives the manager opportunity to lead from behind as well as well as open to pushing her as a leader. Because, more than likely the CEO or a top executive is a founder and comes in rough around the edges — strong vision, strong execution but maybe poor communication, poor at management, or something else.

This rests on the idea that being a manager or leader is a skill that can be acquired through practice, which I believe can be done. After all, most success in life requires zero talent.

We can keep our culture exactly the way it is.

I remember sitting in a room with an early employee. He had just walked past an entire team and spewed his frustration in a public verbal manner. Yes, the team was stunned. Yes, he knew immediately that it was wrong and he was remorseful. He had said the organization was changing and he could not handle it getting bigger. Before, when he would lose his temper he could individually go up to every person and apologize; however, with now over 100 people it would be too hard to not only apologize but for every person to know the context of his apology and his history.

Unfortunately for the early employee he had felt the culture was changing because the sheer number of people coming in. He couldn’t reconcile the way he was used to — individually. And he was right. The culture was evolving to intake the influx of people. Why not get a handle on it?

I remember before I left on maternity leave my CEO pulled me aside and asked me to head up HR. I was shocked as my background was in product design. First, he said we will be adding a lot of people into the organization and he needed someone he could trust. Secondly, he said that he needed a builder who could focus on culture and values because that will get everyone on the same page when it comes to talent. We would be adding a lot of people and he would soon need visibility through around top performers and more importantly the right filter to figure out who those were. Values and culture was the quickest way to get eveyone who enters into the organization on the same starting block.

If done right culture will evolve based on a set a values that pushes the organization and business forward. The amazing thing about culture is it is happening every day and it’s never too late to focus on it, but the later you focus on it the more painful it will be to reach your goals (like retirement :/). So think strategically about your goals and how it can support your vision and mission.

For us this has been manifested in the evolution of our values. You will read many many management books (and myself) say your values should never change. However, I believe that your values should evolve as the organization and the business evolves. I have seen our values evolve from the from descriptors (like Netflix) to now “we” statements to evolve our mindset and behavior on how we need to attack the marketplace.

I leave you with this question:

Culture is happening everday, why not shape it for the good of your vision and mission?