As small companies grow to around 100 employees, the skills of their managers are challenged in new ways. Julia Austin describes how leaders themselves must scale
I’ve experienced first-hand the excitement and pain that come as companies with a few founders scale to hundreds or thousands of employees. At somewhere around 75 to 100 employees, running a business becomes more complicated, demanding more of leadership, teams, and individuals. It’s important to recognize and try to stay ahead of these changes brought by scale.
Here is advice for the CEO/founders of early-stage companies, but it also applies to leaders of any scaling organization, even inside a large corporate entity.
Leadership changes at around 100 employees
As a company approaches 100 employees, founding leaders confront an important reality: It’s time to let go. It’s simply impossible to be plugged into everything. At this stage, you are probably managing managers, and more than ever have to empower your leaders to, well, lead! They will not always do things the way you do them, but at this stage, if you don’t have the confidence and the right people to do things without you, it will be a rough ride. In fact, when founding CEOs don’t learn to step up into their roles and empower their leaders, investors and board members begin to lose confidence in the founding CEO’s ability to operate at scale and consider whether to replace them. Here are a few tips in areas I find to be the most challenging at this stage:
When it comes to employees, there are two areas where CEO/founders often get tripped up as their companies grow: hiring and people management. Stay close to the hiring process for as long as possible in the early stages. The first 10-15 employees will set the culture of your company, and how you lead them will set the tone for leadership going forward. As you start to bring on more members of your team, however, you can’t handpick everyone. Here’s how I recommend approaching early-days hiring:
First 20-30 employees. If you have inexperienced managers, review candidate resumes together with them and establish selection guidelines for what qualifies a candidate for a round of interviews. Be part of the interview and hiring process as much as possible to set expectations on what makes a good hire at your company (even if the hiring managers are experienced) and serve as a role model to managers who will eventually do this themselves. If you are new to hiring, get help from advisers or investors with more experience. Books like Who or The Five Dysfunctions of a Team can be helpful, but mastering the art of hiring takes practice.
From 50 to 100 employees. This is a transition period in which you may sit in on candidate reviews for key hires, when the team is deciding whether to make an offer and why. Your role is not necessarily to make the decision, but to guide and mentor the team through the decision process. You may interview candidates at this stage, too, but I suggest this be to help a junior manager resolve concerns they have about the candidate or probe more deeply on areas in which they feel less experienced, or to sell the business and its potential to a candidate during the final closing stages.
More than 100 employees. Let go! If a company lacks clear guidelines at this point, which manifests as bad culture or heavy voluntary or involuntary attrition, then you need to rework the wheel with your hiring team. Otherwise, it’s time to set your team free to make the right calls for their teams’ needs. At this stage—other than your direct hires—you should only be on-call as needed for key hires. For example, when VMware was nearing 800 employees, our founding CEO Diane Green was on standby to interview me for the first non-Palo Alto leadership role, both to assess my abilities and sell me on taking it (and I’m so glad she did!).
For the people management side of things, consider the following:
Zero-20 employees. Early on, just like hiring for the first time, you may be learning how to manage people for the first time. Get help—don’t try to figure it out yourself. You will spend more working hours than you ever imagined learning how to navigate people things while running your business, fundraising, etc. Hire a coach or find friends with management experience and lean on them. Read as much as you can and listen to podcasts like Reboot or Masters of Scale. Put your ego aside! Managing is hard, let alone learning how to do it when you’re also trying to launch a company.
From 20-30 employees. The best practice for team size is eight (recently termed the “two-pizza team rule” by Jeff Bezos). If you’re reaching a point where you or anyone have more than eight direct reports, it’s time to scale out a management team. Ideally, bring in some managers who know how to manage versus just promoting from within. I like to build teams with a balance of both, which allows growth within the company but also introduces new role models and mentors from the outside for those who are growing.
More than 30 employees. As managers start working for you, you need to trust them as leaders of their own teams and, similar to setting the hiring guidelines, your job is to set the people-management guidelines. How does one lead at your company? How do you give feedback? How do you establish an inclusive culture, develop employees, and create a great place to work? Your job is to answer these questions and provide managers the support and tools (compensation/equity, budgets, training, and systems) to meet these guidelines.
Companies at this stage often wait too long to hire people experts—both human resources managers and experienced recruiters who get the startup-to-scale scene. That’s a big mistake. Investing money in these roles early will save you tons of time and money as you scale. The serial entrepreneurs and co-founders of Drift hired their lead people-person as one of their first five hires; they learned from past mistakes!
Bonus tip: Every early-stage CEO/founder I know is shocked to realize the power they wield. Even if you consider yourself to be “one of the people,” everything you say and do has more impact than you can imagine. A simple eye roll in a meeting could make a subordinate think they’re about to get fired. A “great job” on a new idea proposal could be heard as an official “OK” or even a directive to proceed. You are powerful and potentially dangerous! This means that you should tread lightly. If you do skip-levels (talk to employees of managers that report to you), never be directive and only listen during this time. If you like an idea, say so, but be clear that they should discuss them with their managers. If you are unhappy with an employee that reports to one of your managers, bring it up with the manager and put yourself in their shoes as you help them with this employee. Be empathetic and manage your power carefully.
If you’re a product-centered CEO/founder (versus, say, marketing- or sales-centered), the thought of stepping too far away from product details probably sounds frightening. That said, if you have to be part of every product session or review before release, your company will never get anything done—or learn how to do it at scale. I have seen countless teams wait at a standstill for the CEO to review their latest product designs because she was out fundraising or handling 27 other fires. Here’s how to avoid this:
As early as you can in your company’s lifetime, articulate your company’s True North and product guardrails, and evangelize it like crazy until it’s in the company’s DNA. The True North may evolve as the company matures, but keeping it clear and not wavering too often is critical. When I was the chief technology officer at DigitalOcean, our True North was to empower developers to build great software, and our guardrail was simplicity. If a new proposal didn’t help developers build great software or the design wasn’t simple, it wouldn’t get on the roadmap. It’s the job of CEO/founders and their leadership teams to make sure this is clear to every employee, and to explain why if it changes.
Establish a high-level product roadmap that extends no more than 12-18 months; you have no idea how your products or the market will evolve beyond that. Keep it at the broad strokes level—major products within product lines and with clear, measurable outcomes. Your job is to set the tone at the top, and at fewer than 100 employees, you can stay pretty close to the details. Once teams get bigger, you will rely on this roadmap and the measurable outcomes to track performance and empower your teams to execute. As the company scales beyond more than 100 employees, you will shift from attending routine product meetings and reading PRDs or briefs to trusting that your team knows what to build and how to follow the high-level roadmap. If the roadmap changes over time, so will their work. Just don’t thrash too much; it takes time for new ideas to flourish or major product changes to make an impact. Patience is important here.
Once you have a decently sized product team (at least 20 employees), you must have great product leaders and designers. At this point, you will spend more time obtaining customer feedback and downloading it to your team, and brainstorming and selling ideas. It’s OK to stay close to a passion area, but the bottom line is, let your team execute.
As you scale, you must shift your attention from how to what. At fewer than 100 employees, you will think about “the how” of every aspect of the business (including many of the issues above, but also how to manage funds, manufacturing and shipping if applicable, payroll, insurance—the list is endless). As you scale and hire experts in these areas, the goal is to let go and empower them to decide how. Your job is to make the desired outcomes clear. Outcomes are not just financial either–everything from the culture of your company, the reputation of your products and services, and your brand is for you to make clear.
As a mom who still shudders every time one of my kids borrows the car, I like to use the teen getting their license metaphor here:
Zero-30 employees: Learner’s permit in-hand, understands the basics, but still needs close supervision and training.
From 30-75 employees: Passed driving test, but still on probation. Can’t drive during certain hours (equivalent to making all decisions solo), and still needs some oversight.
More than 100 employees: Capable of borrowing the car for a weekend road trip with friends. Hand over the keys!
If your leaders feel that you won’t give them the keys, that you are backseat driving or monitoring their every move, you will not establish trust or allow them to move your company forward. Creating this type of toxic, micromanagement culture of leadership can contribute to CEO/founder burnout as you try to manage “all the things.”
Changes for teams and individuals at about 100 employees
I’m going to keep this part simple. The bottom line is that there are people on your team who will grow beautifully as the business grows, and there are those who just don’t do well in a mature environment. Some tips on how to manage this effectively:
DNA. I’ve seen too many talented people become poor performers once a company started to scale simply because they did not have big-company DNA or because the company did not ensure they were in roles in which they could continue to thrive. Think about who on your team has real startup DNA–do they thrive with ambiguity and constant change? Are they scrappy and just get stuff done, even though it may not be polished and perfect? Do they break the rules in a good way?
Now, what happens as your company grows and there’s more complexity in the business or more structure? Will they resent the bureaucracy? Will they refuse to be managed or adopt the “special snowflake” attitude that they know better? Or will they rise to the challenges that come with growth, respect the structure, and become the guru of the team?
Please pay attention to your early hires as they and the company grow. If you see signs of trouble, consider whether an employee should remain and contribute another way or if it’s time to part ways–the company has outgrown them.
I once had a talented engineer on my team who was a great prototyper but not strong writing production-level code. Each time he tried to follow a project from the experimentation to production phases, he struggled miserably trying to follow a structured process. The product leads would constantly complain about his attitude and work quality. I carved out a prototyping role for him on the team so we could keep experimenting with new ideas and he could remain happy and productive. Sometimes you can make these things work, but when you can’t, consider how much time you may be wasting trying to force a situation that’s just not going to turn around.
To lead or not to lead. Pay attention to first-time managers who hate or are bad at managing. Some early hires become managers even if they are better suited to be individual contributors. Put a process in place at your company that allows upward mobility in both specialist and management tracks, and allow them to move between each. Make trying new things a positive experience versus an ego hit or failure when someone moves to another role.
Cross-team dynamics. As the company grows, not only do new teams form and new managers lead, but there can also be cross-team dynamics that create tension. Product and engineering teams often fail to align or face sales/marketing/support challenges. Pay attention to how these interdependent teams interact and make sure your team leaders are as passionate about how they partner and collaborate with their peers as they are about how their own teams perform. Resist fiefdoms and resolve rifts between teams as soon as you suspect there’s an issue. These issues can be toxic and destroy what may have been a humming organization when it was smaller.
Compensation and incentives. As the company grows, so must employees’ careers, compensation, and incentives. Be thoughtful about salary structures and be mindful that haphazardly compensating new hires early on or bumping people up to retain them will undoubtedly create a need to recalibrate everyone’s compensation down the road. The recalibration process is PAINFUL.
Employees are driven by three major motivators: The work they do, the people they do it with, and fair compensation for that work. Throwing money or an unearned fancy new title at an unhappy employee will not retain them if the work they do is uninspiring, if they don’t live up to the expectations of the unearned new role, or the people they work with are not enjoyable. These quick fixes are temporary. Similarly, beer on Fridays or a foosball table in the office is not as compelling an incentive as equity refreshes and opportunities to take part in new product work or the chance to work with an industry luminary.
Consider Maslow’s Hierarchy of Needs when it comes to your employees: They need the basics (a desk, computer, etc.), they need to feel safe (steady income, a health plan) and loved (great co-workers and managers), and they need to self-actualize (assigned interesting work, able to reach career goals, achieving wealth to reach personal goals or making a social impact).
The human impact of hypergrowth. Finally, people don’t always grow as fast as their companies and can easily burn out or perform poorly if you’re scaling at hypergrowth speed. The best write up about this particular topic is Khalid Halim’s post for First Round Review. I also wrote a brief piece about how hypergrowth of teams can slow down an organization.
Scaling a company can be both exciting and daunting. If you’ve never experienced this journey, it can also catch you by surprise when things start to go wrong. The best recipes feature managed growth with an experienced team, help from experts, and thoughtfulness while scaling.
About the Author
Julia B. Austin is a Senior Lecturer of Business Administration at Harvard Business School.
[This article was provided with permission from Harvard Business School Working Knowledge.]