5 roadblocks on the Scaling-Up journey (and how to smash through them)
5 roadblocks on the Scaling-Up journey (and how to smash through them)
Want to Scale-Up your business? Feeling fired up and ready to take on the world? Make no mistake. Scaling-Up is hard work. You’re going to need energy, drive and fanatical attention to detail. Not forgetting a perpetually inquisitive brain that thrives on learning new things and absorbing the latest thinking.
So often, I meet people who want to expand their business but don’t have this growth mindset. They’re not reading 12 or more books a year. Or going to conferences. Or prioritising training and development in their businesses. If this is you, there’s no point wasting your time reading this blog. You need to lower your bar and accept things aren’t going to change. It’s like buying a gym membership and then never going. You won’t ever reach your fitness goals.
But if there’s a fire in your belly and a real desire to put a dent in the universe, keep reading. I’ve been there and know what it takes. Let’s make sure we’re clear on the prize. You’re aiming to: a) reduce the time it takes for your senior team to manage the operational activities of your business by 80% b) allow them to focus outward on market-facing activities and c) realign everyone else on the same page to drive execution and results.
Firms who succeed have double the rate of cash flow, triple the industry average for profitability and increased valuation relative to competitors. And, best of all, the stakeholders (owners, shareholders, employees and customers) enjoy the journey.
From my own experience Scaling-Up two UK technology service firms and coaching clients over the past five years, I’ve identified the main roadblocks that you’ll need to smash through to achieve the growth you crave. So what are they? And how do you overcome them?
1. Loss of momentum
It’s really common for start-ups to plateau at a certain size. The business seems to have lost its soul. The culture has fallen away and the thing that originally drove the company forward has stalled. When an organisation is small, the founders live and breathe the culture and staff will follow their lead. By the time it reaches 100 staff, the influence of the founders starts to wane. They are less involved in recruitment so may not have hired all the new staff. And there’s more distance between the founders’ view of where the company is heading and the organisation’s view. What shows up is things take longer, decision making becomes painful and employees start second-guessing each other.
This is why you need to nail down your purpose, values and BHAG (Big Hairy Audacious Goal) from the very beginning and then introduce a process where they’re reviewed regularly. My advice is to check in on this every quarter and check for fit annually. This will bring clarity and consistency to your business, making it possible to take fast decisions again. As you grow, customers will ask for things that don’t fit with the purpose of your company and it’s easy to fall into a cash/execution revenue trap. Use your BHAG as a north star, guiding you forwards in the right decisions. Say ‘no’ more than you say ‘yes’.
2. Recruiting the wrong people
As CEO of a business that’s Scaling-Up, you need to get hands-on with the first 50 people that you hire. It’s vitally important that you get this right. These people are your white cells in the business – its immune system – and form the basis of your tribe. My advice is to hire slow and fire fast. Make sure your first 50 staff are rock solid on your core behaviours and values because this will give you the foundation you need for sustainable, consistent growth.
Achieving true clarity over your BHAG and purpose should automatically boost your employer brand. What journey are you on? Is it an interesting enough mission to attract the ‘A Players’ you need to succeed? People tend to think in linear terms when it comes to talent. They expect their best people to be twice as good as average. But in fact, the difference is often exponential. So, for the same job in the same location, you can actually get 10x or 100x better people than average.
These ‘A Players’ don’t necessarily need more money. They’re looking for a workplace that gives them autonomy, mastery and purpose (to use Daniel Pink’s words). If you can create an environment that fosters these things, you’ll attract great people and they will be far more productive and profitable.
Once you’ve got this solid base, you need to create a hiring system that ensures A Players continue to be recruited. Apply a sales mentality to this process. Ensure every aspect of the candidate experience is managed. Be obsessive. When I was MD of Peer 1 in Southampton, I laid down that hiring decisions should be made by someone who hadn’t met the candidate. The hiring manager would take the Gallup Strengths Assessment, the CV, interview notes and a picture the candidate had drawn, off the cuff, to represent what motivated and inspired them. The decision was made based on whether this person would fit with our purpose, core values and make a cultural contribution. Don’t hire people who aren’t going to make a difference and raise the averages in the firm.
Try not to make the mistake of going cheap on salary. It’s fine to recruit less experienced people and grow them because they have the potential to be amazing. But hiring people who should already be amazing because of their age or experience – but aren’t – is a death knell. You may perceive them to be cheap, but it will cost you far more in the long run. It’s guaranteed to p*ss off your existing A Players – I’ve seen this costly mistake happening all the time in businesses I meet.
As part of your regular talent review, it’s vital to identify the rock stars who live and breathe your organisation, embodying the values you want to encourage in others. Make sure you call them out for this, setting them up as role models and giving them recognition and praise. This will give other staff something to aspire to and is a great way to embed the culture you need to grow.
If people aren’t the right fit, be ruthless. I suggest asking your managers to review their staff monthly. Would they enthusiastically rehire all of them tomorrow? If not, they need to go. Put a mechanism in place so that employees feel it’s not management’s job to spot poor performance. Wherever I’ve been MD, I’ve made it a priority to take old hands out for lunch. I knew they had a really useful ‘spider-sense’. They could tell instinctively whether a new member of staff was genuinely a ‘Racker’ or ‘Peer’ or ‘Labber’ ie. a member of our tribe.
Finally, make sure there’s no place in your organisation for brilliant jerks. If the behaviours don’t fit, even if the performance does, they need to take their toxic ways somewhere else.
3. Poor decisions on structure
The human mind is only capable of handling around 150 relationships simultaneously.Prof Robin Dunbar, Oxford University
I’m intrigued by this. As companies get bigger than 150, it’s impossible for one person to know everyone individually and understand where they sit in relationship with each other. To my mind, this is when passengers appear – no-one knows what these people do or can hold them to account.
As companies grow, there comes a point when staff stop putting their cups in the dishwasher and there’s less shared ownership for general issues like fixing broken equipment and keeping the office tidy. This often coincides with the introduction of new, hierarchical structures which create silos and more opportunities for a ‘them and us’ attitude to creep in. You’ve gone from a smaller number of generalist staff where everyone wears multiple hats and knows what’s going on, to a functional, departmental structure. And this starts to impact on customer satisfaction.
Sometimes, new staff bring bureaucracy with them. It’s often the result of hiring senior people from large corporates who have big company habits. Presented with a challenge, they’ll try to introduce a whole new set of rules and structure. Beware! This can kill productivity in A Players. All they need to do well at their jobs is freedom and a framework of organisational expectations. They most certainly do not need bureaucracy around expenses, holidays, salaries or, horror of horrors, annual appraisals!
Try to avoid the trap of thinking that a functional, departmental structure is necessary. I’m a big fan of small, multi-functional teams and this is the structure I have always implemented. It’s a methodology borrowed from agile software development and works so well. It’s why I refer to the method I coach as scale-up agile. You take a multifunctional team and map it to a specific cohort of customers. The Scaling-Up tool FACE can be really helpful here. Also, the 3HAG process flow map which I wrote about in last week’s blog. These tools give a good overview of how you generate money, mapping out quote to cash and identifying who’s responsible at each point of the customer’s journey.
It’s fine to have some shared support services but try and put as much as possible in the team. By focusing teams on a small number of customers, you’ll have much higher levels of engagement. Their work will feel more purposeful and fulfilling. There’s way more chance of that team delivering great service than if they were split into functions.
A final word on structure – working hard is not the same as getting good outcomes. As you get bigger, you need to get less worried about hours and more about objectives and key results (OKRs). Someone may appear to be working hard but they’re actually delivering nothing. You need to put in a structure that ensures expectations are understood. Staff need to know what a good day looks like. As we scaled, we introduced strong indicators – the number of tickets dealt with, NPS by an engineer, hours on the phone, MRR achieved per month etc. This made it much easier to have meaningful conversations with the staff.
4. Failure of communication
As your company grows, the rapid intensity of change can cause resistance and, before you know it, negativity can creep in like a disease at the heart of your business. The solution is always communication. But, as life gets busier, no-one seems to have the time for it. So, when it’s needed most, it’s neglected.
In the beginning, it’s not a big deal. When you’re part of a small team on a mission to change the world, communication comes easily. The bigger you get, the more important it becomes, particularly if you have multiple sites. My advice is to introduce a communication rhythm as early as you can. Daily, weekly, monthly, quarterly, annually – you need regular opportunities for bottom-up and top-down comms.
This will maintain momentum like nothing else, ensuring objectives and key results are always fully understood. Progress on your various themes can be discussed as well as customer success stories. You’ll also have the opportunity to dish out social currency, reinforcing the right behaviours by telling good news stories about people who’ve done well. Praise and celebration are so important to employee engagement.
Another simple way to break down silos is the behaviour of leaders. Make it a rule for all members of the senior leadership team (SLT) to speak with an employee not in their team every week.
5. Loss of customer focus
When I see companies that are stalling, unable to articulate their strategy and unsure of where to go next, it’s often because they don’t spend enough time talking to their customers. Executive teams get busy in their individual silos and leave customer relationships to Sales or Customer Service.
Why is this bad? Well, it comes back to your purpose. Why is your company here? It’s because you spotted that a group of customers have a problem that you’re trying to fix. Proximity to this is vital. Otherwise, you might end up spending time and effort fixing a problem you think they have, only to find out later that this is wrong. You need your company to be customer-centric.
If you’re looking to scale up, every member of your leadership team should be committed to speaking with a customer every week. Attribution mapping using the 3HAG tool can be really useful here because it forces your team to step back and look at your market in relation to your competitors. By truly understanding the competitive attributes of your product or service, you’ll be able to develop a unique strategy that will give you forward momentum for growth.
Scaling-up is a tough road – there’s no getting away from it. It’s easy to lose your sense of direction, hitting one roadblock after another. But with conviction, drive and determination, it’s possible to smash through to the other side. When you do, the rewards will be worth it. And it will be fun.
Written by business growth coach Dom Monkhouse. Find out more about his work here.