Sunday, August 17, 2008

Essence of Growing the Company

As company start to mature and grow in business or there is a sudden boom of business opportunity, they also start to hire aggressively. This is a natural progress. However, sometime this transition has a negative effect on the company and to the employees if the growth is not managed properly.

First, when the number of employees increases, the management and reporting structure also need to be changed. When the company has only 15 employees, everyone can easily get into each other and know what is going on in the company. The CEO can easily talk to any employees because they sit closer in the smaller office space and it is easy to address 10 to 15 peoples. The CEO can almost oversee everything in the company. However, when the company grow to 30 or 40 peoples, the situation start to change. The CEO and senior management will spend more time on business matters and less time in internal company affairs. The office space will also expand and possibly has remote office. This means that management has less time to understand employees’ affairs and improve the company for their employees. At this stage, HR play an important role to serve as the voice between the employees and the management. An important part of the HR job is to ensure the employees satisfaction is always remain high and play an proactive role in driving the company and employees improvement.

Second, one of the tough changes when a small company transition into a more mature middle size company is the reluctance of the CEO or founder of the company to relinquish management control to the rest of the management team. This is a difficult change for a lot founders as they still see the company as "their own company" rather than develop an objective and separate view between their ownership of the company and what is good for the long term future of the company.

Third, job function still start to specialized and new reporting hierarchy is introduced. This means employees will become more distanced from each other. Managers play a vital role in understanding the company direction and hold the team tight by delivering the message to their subordinate and drive everyone towards the same direction.

Forth, the culture and style of working will also undergo changes. As the business and employee size has grown, company might start to put in new company governance policy because management need a more structured way to operate the team in a more self-sustained way. The company may also need a new set of core values in order for them to succeed in the next stage.

It is unavoidable that in this stage, the company and the employees will go through the growing pain. Some employees will feel resistant to the change, some employees will feel that company is now trying to restrict their freedom, some employees just have no clue why the company is doing this and that. Just like a kid who transition into a teenager or a teenager who transition in an adult. During this transition, some people who had not done well in their earlier life will find their direction and excel in it. Some will lost their direction or get influenced by some bad friends and goes bad. The growing pain need to be managed well so that it doesn’t goes out of control.

First of all, the founders need to maintain an objective view of what is good and needed for the company to succeed in their new stage. This includes stepping aside and promoting someone or even hiring someone from outside the company who are more capable to take on their responsibility. By releasing some of their day to day responsibilities, the founders can have more time to look at the company and business in a broader view, set new direction and prepare the company for their next life. This is same as if you are already holding a handful of things in your hand, you cannot grab new things unless you release what you are currently holding.

Second, employees need to be addressed so that they understand what is happening within the company, the rationale behind the series of changes that is taking place in the company, what is expected from them and how they can contribute to the continuous success of the company. It is important for all employees to understand the business landscape so that they appreciate their role better not just in term of the niche view of the organization chart, but also from the perspective of the business and how they can make a difference and impact. It also help employee to understand what they need and develop new mindset in order to do better and adapt to the new changes and culture in the company.

Third, employees need to be prepared for the change. This include develop new and nurture leadership within the company long before changes start to take place. Employees need to be trained, guided and empowered to make decision and take on additional responsibility beyond what is expected from them. Founders and managers need to understand that in order for them to do something bigger, they need someone who can replace them and do their job so that they can move up higher. Leadership is about replicating more leaders, not just how to do a new job. This include training the new born leaders to understand business landscape, how to make tradeoff and decision, how to lead people, how to develop new leadership, how to be caring (if you don’t care enough, how can you make change), develop new skill sets and so on. The skill sets and mentality needed to be a manager and leader is different from those of regular team player. Leadership takes time to nurture. It is not something that can happen overnight.

Forth, don’t hire too aggressively. Whether you are hiring people who are experience or inexperience, these new employees will go through a learning curve and adapt to a new working culture. You need to have enough leadership within the company to guide them to a productive stage. Of course you should only hire people who can swim on their own, but it doesn’t mean you can neglect them in a corner just busy with their own work. Leadership and guidance is still needed to align them to the company’s culture and core values and their progress need to be monitored until they are truly productive in the company. Make sure your existing employees are prepared to guide new peoples before you start to employ in big ways.

Fifth, before you even start expanding the number of employees in the company, make sure the existing employees are happy. There is no point if on one hand the company is hiring new employees, but on the other hand is losing good employees. There are usually three reasons why an employee leaves the company:

  • First, their remuneration is not up to the market standard. In simple words, they are under paid. If this is the case, it is a simple fix.
  • Second, bad manager. Employees leave the company because they cannot get along with their manager or the manager is simply not capable. This is a much harder problem to identify and fix. One way to spot this is to allow employees to appraise their manager during the appraisal and review period.
  • Third, employees feel that they are stagnant in the company. This usually happen in company where no new business is developed, the employee is put in the same position doing the same old thing for a long time or the company has not prepare these people to move up in their careers.

I believe leadership and core values are more important for the long term success of the company than the employees’ past experience and skill sets. Experience and skill sets can be rendered useless when business nature and job role are changed. Leadership and core values are what keep people moving in the same direction.

I have seen some companies which have been staying in the same size for a long period of time due to lacks of leadership within the company. The company is mainly drive by the same person over many years and how much one or two person can accomplish?

I have also seen companies that outgrowth themselves. They hire so fast and so aggressively that they have no way to manage the situation and things simply goes out of control. This phenomenon is especially obvious during the dot com boom days. It also happen in companies that get external funding. When some companies got funded, they just simply hire new employees just for the sake of expansion.

I believe that the essence of growing a company is that management needs to instill leadership from day one of the company life and prepare their employees to growth with the company and take on new role when the company expands. This has to happen before the company actually grow.



At 7:48 PM, Anonymous Anonymous said...


You have explained quite well the problem growth presents to every management team. And you have identified some specific remedies including at the end of your article that of "instilling leadership".

Based on my 30+ years of managing people (as few as 22 and as many as 1300), including eventually transitioning away from the wrong model of doing so to its opposite, I agree that "instilling leadership" is the fix to the entire problem. But then what does that mean?

I was unable to understand leadership until I began truly listening to followers and by so doing gained enough of their trust that they would tell me what they were following. When they opened up to me I learned for the first time the great damage which the traditional top-down command and control approach to managing people does to them and their performance. By its goals, targets, visions, orders and other directives, top-down "leads" them to treat their work, their customers, each other and their bosses with disrespect.

After I changed to the other extreme from top-down, I was easily able to "lead" my people to unleash their full potential of creativity, innovation, productivity, motivation and commitment thus resulting in a huge rise in performance, productivity, morale, retention and quality of life.

To better understand this issue of "instilling leadership", please read the article "Leadership, Good or Bad"

Best regards, Ben
Author "Leading People to be Highly Motivated and Committed"


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