How to manage your startup’s rapid growth
Building shared values, operational clarity and efficiency.
I’ve been lucky to work at companies during their explosive growth stage. The most famous one being probably Twitter from 2010 to 2014, a timeframe during which we grew the headcount from 100 to almost 4,000.
There’s a common saying that the bigger a company gets, the slower it tends to operate. Founders taking their company to similar trajectories often ask me how to best manage such rapid growth, while increasing efficiency.
With more and more people added to the team, how do you measure operational efficiency across the board? What’s the right organizational structure? The right team size? And how do you manage social, product or engineering culture while you keep scaling?
This post is an attempt to answer these questions, sharing best practices that I could observe or help put in place in such companies.
What are your company core values?
I recently wrote about what being “mission-driven” means, and why it increases so much your odds to be successful, giving you execution focus. Building coherence between vision and execution not only helps you describe the purpose of your organisation, but also answers to what it does, who it does it for, and how it does it.
Why I love mission-driven entrepreneurs
How mission-driven companies build coherence between vision and execution.
A big piece of the “how” resides in building shared values within your company. That means developing and maintaining a concrete set of core values. Values that are shared and put in action in your company.
Develop a shared and common understanding of how you want to work and build the company.
Remember how in the movie “office space”, employees feel the company is the enemy? A big reason for that is in the company’s core values.
Involve your people as you go through this process. Get key people’s values, combine them, send them to the entire company and ask for feedback.
Then test your commitment to them. Rinse and repeat if needed. It might be long, but believe me, it worth it.
These values will complement your mission. They will unite your company’s way of thinking about problems. They will give you a strong base that will guide your actions and decisions as you grow.
This is an effort dick costolo led incredibly well during his time as the CEO of Twitter. We invested significantly in developing core values, using them in our interview process, our performance reviews, at all-hands meetings and everywhere else we could. We developed a shared and common understanding of how we wanted to work and build the company.
Get your employees to buy into your mindset.
Take a company like Facebook, whose famous mantra has long been “Move fast and Break Things”. The leadership team did a great job at scaling the belief that everyone should be working fast and making an impact. Creating speed was key, and it was encouraged from the moment you’d start as a new engineer. Something that directly translated to the consumer experience, with a product line that evolved incredibly quickly during that timeframe.
Common mindset, core values… It should be one of your top priorities to develop and put them in action in your company. Make them meaningful, make them count. A long list of banalities or baseline standards won’t get you anywhere.
How do you measure operational efficiency?
Building a strong company culture will be of great help as you scale your company. But as your headcount increases exponentially, you also need to pay close attention to operational efficiency.
Manage your burn rate. Model your growth against your revenue plan to stop worrying about the pace of hiring.
Interestingly enough, cash tends to burn pretty well. The very first thing you want to know is at which rate you can keep hire, in order to keep your burn rate under control. That means modeling your growth against your revenue plan, by building financial and operational forecasts. This will help you understand how you’re going to burn money.
SaaS businesses should watch their CAC and their CAC Payback Period (CPP), making sure to factor in churn. Consumer businesses should develop Dollar to Usage/Engagement metrics, to better understand what kind of revenue they need to make in order to be profitable as volume scales.
Develop metrics that will inform you on how well you leverage your people across the company.
Does it make sense to scale your sales team with tools and software, or should you keep adding more agents?
What about other functions in the company? What exactly drives revenue, customer acquisition, user growth? And where do you have the best leverage?
Think about metrics that will inform you on how well you leverage your people across the company. You want to be in a position where you have a detailed understanding of how efficiently you are running the business.
From there, it will be much easier to adapt the organizational structure, and it will help you do it with clarity, sharing with your people what you optimize for.
How does your organizational structure evolve?
As your startup grows and evolves, it tends to become increasingly difficult to keep clarity in its structure. Teams can easily start growing in a chaotic way, especially with a weak recruitment process. Starting with clear job descriptions that have well-defined meaning and responsibilities will help tremendously.
Optimize for organizational clarity. Remove redundancies.
As groups start to grow, strive to keep crystal clear who is responsible for what, and look for redundancies.
Are people working on too many teams at once, getting stretched too thin?
Or on the opposite, are redundancies created between teams, leading to blurry roles and miserable employees bouncing between functions?
Work closely with your exec team on how to continuously adapt your organizational structure, optimizing for clarity and operational efficiency. Once teams are tasked with precise objectives and responsibilities, the next step is to empower your managers on making them high-performing.
Keep teams small and together. Keep their mission crystal clear.
In engineering, it is a good practice to keep teams small and stable over time. The best performing engineering teams I managed were about 5 people, that worked together for a long period of time.
With a small and stable group, communication gets easier, agile methodologies like Scrum reveal their full potential, and people just know each other’s strengths and capabilities much better.
Applying such a team to problems, with clear objectives and responsibilities, is incredibly powerful. Especially when the rest of the organization knows what these objectives and responsibilities are! The best you can do then is to… Step out of the way, and give your managers what they need to clear roadblocks and simplify processes within their teams.
Get out of the way!
Literally. As the CEO of a growth stage company, getting involved in day-to-day operations as you used to will become unsustainable and potentially toxic for your company.
Spend time hiring a great leadership team, then get off the field to coach them. You can’t lead the ship from the engine room.
Growth stage is a time during which you should focus on creating purpose and alignment, constantly wondering what moves the needle, while nurturing your company culture. Ali Rowghani wrote a great blog post on Y Combinator blog about this transition from phase 1 CEO (the Doer-in-Chief) to phase 2 CEO (the Company-Builder-in-Chief). I highly recommend you to read it.
Thoughts? Questions? Other interesting pieces or stories on how to manage startup’s hyper-growth? Share in your comments!