Why Growing Past 20 Employees is so Damn Hard (and what you can do about it)

Startups are hard.

And often hard in sneaky, unexpected ways. One particularly nasty stage is the transition from a small team (~10) to a slightly-larger-but-still-small team (20+).

There are common events that are understandable if you look at the big picture (something very hard to do in the chaos of the moment.) This post is to help any employee or leader trying to make their way through.

Note: Every single thing may not apply, but don’t be too quick to dismiss something “that isn’t happening at our company.” This is a situation where the penalty for missing a problem is much worse than the cost of investing in a cure for a problem you don’t have.

Ideal Startup Life: A Team of 10

When a team is somewhere around 10 people, things feel pretty perfect. It’s the ideal of startup culture.

Everyone knows everything, everyone is contributing ideas, everyone is friendly. The whole team is close to the founders and everyone has clear(ish) roles that are crucial to success. Each role is unique and everyone has an obvious purpose. Everyone on the team is living and breathing the mission of the company and invested in its success. The organization is ‘flat’.

Great.

Now, you’re growing and happy then suddenly…

Shitshow Startup Life: A Team of 20+

At some point over 20 employees, everything changes. Even though the company’s future may seem more certain, the future for each employee becomes increasingly uncertain. And inevitably this creates problems.

The First Hierarchy

First, let’s just see how much more complicated the social network is. A 10-person company can have 45 different 1:1 relationships. A 20-person company can have 190. (This is Metcalfe’s Law, foundation of network effects.) This makes a decent illustration of the quickly-growing complexity of the company.

When you get over 20 people in a company, it is much harder to maintain a ‘flat’ organization.

Some hierarchy starts to take shape. There is a new layer of management. People have managers who aren’t founders. Some of those managers were hired in above early team members, some were not. The founders/leadership spend more time removed from non-management employees. The company starts to feel ‘less flat’ — which means employees don’t feel like their voices are heard or valued like they used to be.

Unique Jobs are lost, Conformity is pushed

Early employees are now working next to new hires, who are earning the same salary and being treated the same. Roles for early employees that used to be unique, challenging, and exciting are now being “streamlined” for simplicity. They’re now part of a team of people doing the same job with more standard rules, feeling more like a cog than a unique and valuable part of the team.

Early employees were there first, working 16-hour days and putting everything into the company to make it successful. Now they are treated the same as some “9–5er” for whom this is just a job — not a mission. Employees who felt like they had “earned their stripes” now perceive themselves as moving backward in their careers.

A New Social Structure

New cliques form at the company. Roles start to become teams, which often turn inward and create their own identity. There start to be “product team” events or “sales team parties.” This often divides people unintentionally into camps within the company (we are tribal animals, after all.)

With more senior team members, an age rift is also created. The young people hang out together and senior employees come together. A mentorship relationship that sprouted when there was a 1:1 manager to employee ratio now withers when the ratio is 1:4. Managers don’t spend as much time directly with individual team members, which to the employee feels like a lost bond and “being pushed away.”

One “social group” becomes a handful of “social groups” in the same office that happen to work on the same company.

New Team Members

New hires come in that feel like strangers. Resumes come in from people without personal connections to the company. 3 new hires at a time join and are assimilated like employees, rather than like new family members.

The “bar” feels as though it is being lowered, creating resentment from early employees who are protective over the quality of the team. OR, new hires are smarter, faster, more senior, and more qualified — which threatens existing employees who… feel resentment. (It’s a trap! Isn’t that fun?)

The company is now too big for everyone to know each other well (And therefore trust each other.) There are 15 different conversations at lunch instead of 1 or two.

Not everyone knows everything anymore. Things that employees used to be consulted about now happen without them even knowing about the discussion. This feeling of losing access to decision-making can be incredibly discouraging and demoralizing for employees.

More Divided

Every time a new team member is added, the petty battle to establish “pecking order” is re-started. If you think humans don’t do the equivalent of what chickens do when the social hierarchy is in question… you’re not paying attention. Watch “Mean Girls” or “Oz” and you’ll get the gist.

On top of all of this, more people means more opinions. Different perspectives can be healthy, but in the massive uncertainty of a startup they can also be divisive. Groups form around opposing strategies or philosophies. If they are stubborn personalities and become entrenched, things can come to a grinding halt.

More Uncertain

When there’s little information about the right decision, but strongly-held opinions, gridlock sets in. Leadership is stuck between alienating one group to choose the path advocated by another. Each decision they make creates a dissenting group that feels frustrated (and possibly now pessimistic about the direction of the company.)

Branch after branch of this happens until everyone has something to grumble about. Without a strong culture of what Bezos calls “Disagree and Commit,” this can cause some real morale problems.

The Impact of These Compounding Effects

All of this piles up to create a feeling of an eroding culture. That this place “isn’t what I came here for.” Employees are lamenting that “the culture isn’t what it used to be.”

If I had a dollar for every time I heard these quotes from a friend at a startup, I could actually help them purchase their options (and pay the capital gains taxes on their completely illiquid, hypothetical future stock.)

And they’re RIGHT. These things ARE happening. Employees might mistake the intentions behind them, but what they see happening and how they feel about the changes are completely legitimate.

Moving Backwards

Humans hate to have things taken away. We over-react to having something removed that we used to possess. During this growth, a transition happens where employees lose some autonomy, some status within the company, some input into important decisions… it’s hard. It’s incredibly hard. And usually inevitable.

Echo Chamber of Discontent

Those employees, without the perspective and experience that tells them this transition is normal and necessary, feel disrespected. They feel ‘the culture is changing’ — and they start to complain about it. They need to vent. They talk about how things used to be and how they are now. How things could be better and why it’s so obvious what needs to be done. Why leadership is getting it all wrong and ruining the company.

This attitude is quickly adopted by the new hires who are imprinted with this perspective of the company from their peers. They adopt this attitude even though they never actually experienced the original conditions!

Before you know it, the leadership is mired in uncertainty, unsure of which direction to lead. Over time, they’re losing their credibility to lead in any direction effectively. And employees are rapidly losing loyalty to the leaders and the mission, feeling increasingly distant from the company. They become detached and either check out, quit, or start plotting revolution.

Every. Damn. Time.

The oddest thing about this is how common it is. It’s nearly universal. I’ve personally experienced it a few times and seen dozens of friends going through it. Yet everyone I know who has had this experience feels as though it is unique to their company, a completely new phenomenon that is only affecting them.

I actually can’t think of a high-growth company that hasn’t had some version of this challenging transition.

What Will Happen

Even with world-class leadership, this will happen to some degree. Those with foresight can prepare by over-communicating… telling employees to expect this. (Which doesn’t make for a good recruiting pitch.) But it’s honest. Communicate this over and over and over and over. With top 0.1% communication skills, leadership can navigate these dangerous waters. But you’re going to go through them, one way or another.

Most startup leadership won’t see this coming. They don’t understand how employees perceive this change — they’re just excited that the company is growing (And isn’t dead). And they’re eager to not screw it up.

Stabilizers & Destabilizers

Through this stage of emotionally and psychologically trying times, some employees are better at handling this than others. A team member who sees what is happening and why, and can react with equanimity is worth 10x another who is feeling disrespected and is complaining to others. These complaints, though they may be an honest perspective with good intentions, can derail others and snowball into chaos, destroying a culture and a company.

It can be an incredible asset to a company to have one or two employees that can provide perspective. People can calm others down — who stand up to those who are complaining and blaming, balancing the conversation.

To foster these employees, leadership has to earn them. It takes months and years of trust-building and expectation-setting. And all of this has to happen well before they are needed. To expect someone to stand up to their peers and separate themselves from the group is asking a huge amount — more than most will be able to appreciate. If you have one or two in your life you’re lucky. Protect them and reward them.

These employees are rare. Once begun, the snowball of discontent is so attractive that it takes a monumental effort to keep it from continuing to grow.

Complaining is Nature’s Way

Complaining and blaming are the paths of least resistance for our egos. Especially if our peers are already on that path. We tell ourselves that we have the answers, that others are getting it wrong, and that our new distance from decision-making is a central cause of any missteps.

This perspective frees us from accountability. If the company is fucked because of poor decisions by leadership (of course, because we were not consulted) then it doesn’t matter how well we do our jobs, and there’s no point in even trying. Better to sit here and talk about how we know best and how it *should* be done.

To be a better startup employee during this:

Anticipate this. Expect it.

Help co-workers understand what is happening and why.

Communicate openly with leaders about your feelings and what could be done to help. Expect them to only implement some portion (or none) of your suggestions (I might write about this later).

Empathize with leadership — this is an inherent, structural, inevitable part of growth. This situation does not indicate a failure of leadership. They can improve symptoms but not cure the root cause of most of these challenges.

Understand that earning the right to experience this challenge is a good thing. You’ve leveled up! It means that you are growing. Growth is MUCH better than no growth. The path gets harder, but at least you’re moving forward.

Confront these challenges with a smile. Be glad you are living to fight at the next level up. Choose a positive attitude.

Understand that this is a crucial stage of creating a culture. The employees brought on now will imprint their impression of culture on the next 200 employees. You control what they will believe — much more than leadership does. Be aware of your power. If you imprint negativity, that will spread.

Coming through this challenging time with a positive attitude, showing empathy for every parties’ situation, and helping to shepherd everyone through will show leadership, emotional intelligence, patience, and resilience. Leadership with any brains at all will (eventually) notice this and reward you.

Whether the company makes it or not, you will move on knowing that you did your best to make it a success, rather than turn and destroy your own work after a perceived slight.

Share this post with your managers and your team.

Ask (and answer honestly) hard questions.

To be a better startup leader during this:

Anticipate this. Accept some version of it.

Get ahead of it — communicate it to your team early and often. Lay a strong foundation.

Work hard to be empathetic. Don’t argue with their feelings, understand them. If you dismiss their perspective (even once), you’ll cut off the feedback loop and lose any insight into what is happening and why.

Make an effort to keep the company feeling like ONE team. Bonds as a company should be stronger than bonds of similar roles or levels.

Keep employees close to leadership, personally and professionally.

Notice, appreciate, and reward employees who are contributing to stability.

Quietly coach and work with those who are unhappy to find ways to create a smooth transition. Some employees don’t scale — don’t wait too long to remove someone who is unreasonably dedicated to being a destabilizer.

Share this post with your managers and employees.

Ask (and answer honestly) hard questions.

Closing

Startups are hard.

The most dangerous challenges are often the sneaky and unexpected. Use this post to drag some of these common problems into the light, and prepare yourself and your team to confront them successfully.

You may not regret following me on Twitter: @EricJorgenson
I also write other things like The Evergreen Library, for building a better business brain.
And I Am A Terrible Investor, a collection of people's investing mistakes and what we can learn from them.