5 Steps for Managing Your Start-up's Hypergrowth
Last week, I was talking with the CEO of a start-up that was so successful that in the past year it had increased its revenue and employee count by more than 50%. And at the same time, it had just raised tens of millions in venture capital.
Did this start-up have the bull by the horns? Not exactly.
That’s because the CEO was concerned about whether his start-up could do a better job of managing its growth. In particular, he thought the start-up could improve its structure, systems, and shared values.
Let me tell you what I mean by each of these terms. Systems detail the processes that a company performs and the specific measures that the company uses to evaluate how well the organization is doing.
While systems in many organizations typically focus on boosting and measuring financial performance, as an organization grows, it is often important to build systems that measure qualitative factors such as employee and customer satisfaction, learning, innovation, and growth.
Structure is how people are organized and their reporting relationships. Traditionally, start-ups begin life with a functional organization--with executives in charge of, say, product development, manufacturing, marketing, sales, and finance. As an organization grows, it may create divisions with general managers who run different product lines as businesses within the business.
And shared values represent the kinds of conduct a company seeks to encourage. Start-ups with clearly articulated shared values do a better job of hiring people who fit with their culture, and use those values to decide whom to promote and whom to manage out of the company.
If your start-up is struggling to manage rapid growth, here are five steps you could follow to improve your structure, systems, and shared values.
1. Build a project team.
If you want to change these three S's, you can’t do it alone. You should assemble a team of your key direct reports, and you might want to include representatives of your leading customers and key suppliers as well.
And once you form that team, you ought to develop an approach to managing your growth, possibly with the aid of an outside consultant. The project team should develop a method for going forward, including a process for communicating progress and getting feedback to keep the project on track.
2. Interview start-up CEOs and experts.
The next step your project team should pursue is to pick the most burning issues your start-up faces when it comes to managing growth.
For example: Do you have the right organizational structure, or is it slowing down decision making? Are you measuring and rewarding people on the right variables? Are you hiring people who fit well, or are you suffering from high turnover?
By identifying this list of burning issues, you can develop an interview guide. You should use this guide to structure your conversation with 15 to 20 CEOs of fast-growing start-ups and experts in managing change.
3. Analyze research findings and develop a diagnostic tool.
One you’ve conducted the interviews, you should analyze the results and use the insights to generate ideas for how you can improve your start-up’s structure, systems, and shared values.
But before you move forward with these ideas, you should develop a diagnostic tool. This tool will be a set of questions that you can ask your start-up’s stakeholders--its employees, customers, suppliers, and investors.
4. Compare diagnostic results to best practices and identify improvement opportunities.
Once you’ve completed those interviews, you can assess where your start-up’s structure, systems, and shared values are strong and where there are opportunities to improve them. You should benchmark your start-up against the best practices that you identified through the interviews with other start-up CEOs and experts.
This will help you narrow the scope of where you need to change how your company works.
5. Develop and implement improvements.
Finally, you should work with your project team to develop ideas for how to improve your start-up’s structure, systems, and shared values. Here, you should use the ideas from best practices to brainstorm many new ways to make your start-up’s structure, systems, and shared values more effective.
For instance, you might decide that you need to get customers involved earlier in your product-development process; measure your people not just on how much they boost sales but also on how well they work with those in other departments; and add giving back to the local community as a core value.
Fast growth in a start-up is a sign that customers like what you’re doing. But if your organization can’t keep up, your growth could quickly reverse. Follow these five steps, and you’ll lower that risk.
Strategy consultant, startup investor, teacher, corporate speaker, pundit, and author of 11 books, Peter Cohan has invested in six startups, three of which were sold for a total of $2 billion. Before founding Peter S. Cohan & Associates in 1994, he worked with HBS strategy guru Michael E. Porter.