Growing Too Fast? Here’s How to Avoid the Inevitable Startup Crash

Money

Growth is the whole point of building a startup. Every founder hopes their company will scale fast.  But take it from someone who has built six business and seen his current company jump from two people to 54 in just this past year—though it might sound like an oxymoron to some, there is such a thing as growing too fast. The wrong kind of growth can even kill your business.

I’m an engineer, so I tend to think of the phenomenon in physical terms. Imagine a company as a mechanical system, like a spring. New hiring is like a force being applied to that system. When you add new people quickly, you are essentially stretching and stressing your company.

Stretch it a little and it will bounce back with more or less disruptive bouncing around depending on the type of company you’ve built and how much force you’ve applied. Stretch it further than the system can handle and the spring never works again properly. That’s what growing too fast does to your company. Avoiding this fate comes down to building a business that’s strong enough to support fast hiring, but flexible enough to withstand its stresses.

The Goldilocks Principle of successful scaling

Creating this sort of structure is a balancing act. On the one hand, I advise a lot of first-time entrepreneurs who don’t have enough of a plan on how grow. Often they end up hiring a lot of people who start work not knowing what they need to accomplish and where they fit in. Veterans who have been with the company for awhile get frustrated when new people go off in different directions or spin their wheels not sure what to do. The result is wasted time and resentment. Different players end up pulling in different directions. Startups can collapse from the chaos.

On the other hand, there’s also the danger of going too far in the opposite direction and creating too much structure. When you’re growing super fast, the number of decisions the organization has to make increases dramatically. If you tell people exactly what to do and how to behave, and put people in permanent, fixed roles, they won’t take ownership of their work. They won’t be able to evolve with the fast-changing demands of the business. You end up with a lot of talent whose hands are tied from solving problems. There’s no chaos, but things are so rigid there’s also no ownership or agility. That can also mean death for startups.

The key is balancing the need for alignment with the need for fostering initiative and flexibility — not too little structure, not too much. Here are seven tips to strike that balance:

  1. Never just fill seats. In the course of growing my businesses I’ve learned the hard way that you can’t compromise on the people you bring on board, both in terms of ability and cultural fit. Hiring just to get headcount is disastrous. One wrong person who doesn’t fit your culture or have the ability to perform in the role you’ve hired them in, can damage the entire company at the early-stage size. No matter how pressing your need, be deliberate in your hiring, get lots of opinions on candidates, and never settle for a B-player just to fill an empty chair.
  2. The goal is productive from day one. Everything starts with hiring the right people, but once they’ve accepted an offer you also need to be thoughtful about how you onboard them. Whether you’re adding your second employee or you’re 22nd, make sure new hires clearly understand your overall mission and their role in achieving it. The most successful hyper-growth businesses ensure new hires understand their purpose, what role they play, and their importance to the team. And everybody else on the team understands the same about the person.
  3. Leadership is for everyone. I believe in self-organization. If you take a group of smart people and give them a challenge, they’ll figure out how to get things done. And through this process, if you observe carefully, leaders in the traditional sense of making decisions and setting goals emerge. I encourage them to step up, but I also make it clear that everybody, no matter their role in the organization, leads. Maybe you produce really high quality work in a timely fashion, setting the bar for the team. Maybe you just look out for ways to do things more effectively. That’s leadership, too.
  4. It’s not too early to write down your values. Communicating your mission requires you to be clear on what it is. The best way to do this is to have employees collaborate on writing it down early in the life of the company. Just recently at Vertex I asked all the employees to nominate six people to develop our mission, vision, values. They went through a process with an outside facilitator to get everyone involved. The result is not only that everyone knows our mission, vision, and values, but that everyone feels a sense of ownership of them.
  5. Make every employee a bullhorn for your mission. As the CEO, I spent 40-50 percent of my time making sure everyone understands our mission and is aligned around it. But that doesn’t mean spreading the word is my job alone. Everyone should participate in developing your values but they should also help explain and enact them. New hires should hear the same vision from their interviewer, their CEO, and their colleagues. The mission must be echoed in everybody’s voice for it to truly matter.
  6. Don’t mistake culture for game night. Culture isn’t about Nerf Gun battles or free food. It goes much deeper than that. Culture is about shared vision, values, work ethic, and the way people work together. Unless you are very deliberate about thinking through what your culture is and how to sustain it, you’re going to lose it.
  7. Healthy growth requires some pruning. Scaling isn’t just about adding people. It’s also about saying goodbye to some. The first 50 people in a company are often 100mph-with-my-hair-on-fire types who like to make a huge impact and can tackle many different roles. Later, when there are operational processes for everything, it’s harder to make as much of an impact. Then, you need people who can perform their role precisely and swim in their lane. That means you have to make hard choices and have some difficult but respectful conversations, because what you need today is very different from what you needed just a few months ago and what you’ll need in the future.

The bottom line is that to avoid crashing from out-of-control growth, leaders need to provide structure—but not in the sense of day-by-day hand-holding. If you make your overall mission and values clear and then hire great people who understand their role in achieving that mission, you create an environment that brings out everybody’s individual genius. That’s the best recipe for success in the early-stages of growing a business.



Add Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

WB
The History and Story Behind the Warner Animation Group Logo
NASCAR
The History of and Story Behind the NASCAR Logo
Pascal Soriot
10 Things You Didn’t Know About Pascal Soriot
Chipotle
The History and Story of the Chipotle Logo
Five Healthcare REITs You Might Consider Adding to Your Portfolio
REIT
Does a Renewable Energy REIT Exist?
REIT
Five REIT Trends to Pay Attention to in 2020
REIT
What Does “Adjusted Funds From Operations” Mean?
Holiday Inn Princeton
The 10 Best Places to Stay in Princeton, NJ
Princeton’s Farmers Market
The 20 Best Things to Do in Princeton, NJ for the First Timers
Newport Beach
A Traveler’s Guide to Hiking in Newport Beach, CA
Balboa Bay Resort
The 10 Best Places to Stay in Newport Beach
Ferrari 2
How to Get the Best Lease on a Ferrari

Ferrari Mondia


The History and Evolution of the Ferrari Mondial
Ferrari Convertibles
The 20 Best Ferrari Convertibles Ever Made

Ferrari 360 Moderna
What to Look for in a Used Ferrari 360 Moderna
Breitling
A Buyer’s Guide For Getting the Breitling Colt Skyracer
Breitling
Does Breitling Make a Smartwatch?
Breitling Navitimer
A Buyer’s Guide To Getting a Used Breitling Navitimer
The Five Best Breitling Crosswind Watches Money Can Buy
Vince Neil
How Vince Neil Achieved a Net Worth of $50 Million
Seth Meyers
How Seth Meyers Achieved a Net Worth of $12 Million
Lil TJay
How Lil TJay Achieved a Net Worth of $600,000
Michael Blakey
How Michael Blakey Achieved a Net Worth of $60 Million