Your Start-up Needs Some Structure

As your company grows you need to think less like an entrepreneur and more like a CEO.

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As entrepreneurs, we inherently resist structure and conventionality. Entrepreneurs succeed in many cases because they break the mold and think about things differently. They build a team that can move in many directions at once and can turn on a dime. This typically means that they lack a formal organization structure and almost always implies that they reinvent their model regularly to suit the needs of the customer.

In a recent article, Growing Like Gangbusters, we outlined three changes that growing companies need to make as they transition from an entrepreneurial start-up to a growth-minded company. First, growth companies need to focus their customer targets, as we outlined in Why Fewer Customers Will Help You Grow Faster. Second, they need to change their leadership style, as we outlined in Difference Between Brute Force & Strategic Growth.

The third key element growing companies will need to transform is a structure and supporting processes. For a small entrepreneurial company, the lack of a formal organizational structure actually helps the team break down barriers and move quickly to capture the highest-value activities. But once a company reaches a certain threshold, a lack of structure becomes a hindrance to further growth.

We've seen this in our own business, and we see it time and again in similar growth businesses. An unstructured approach creates the nimbleness that a small growth company needs to gain new customers and maintain a flexible business model. The larger growth company needs structure to define roles, create clear accountability for results, and ensure that it can scale the business beyond a few customers, locations, or products.

What's the threshold that drives this transition? The answer varies from company to company, but from what we've seen the best opportunity to establish a structure and process is when a company has proven its model and is ready to scale. Structured organizations are inherently bad at reinvention but can excel at growth. You don't want to create an overly structured organization, with lots of processes, until you've determined that your business model is right and can withstand the trials of growth.

True sustainable growth is created by an organization with clear accountability and process. The CEO needs to be able to delegate specific elements of growth and monitor progress. Managing growth through the P&L is like driving while looking in the rear view mirror. The growth process must measure activities that lead to growth and enable frequent course corrections to redirect the business toward sustainable growth.

The structure and process required of a growing company is in some ways the opposite of the entrepreneurial organization. But it's essential in creating a sustainable, growing enterprise.

Send us your learnings and challenges on growing your company. We can be reached at karlandbill@avondalestrategicpartners.com.

Karl Stark and Bill Stewart are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree. @karlstark