March 2, 2017
A couple years ago I had breakfast with Nick Mehta, my friend who runs the incredibly exciting Gainsight. I think at the time I had been running Return Path for 15 years, and he was probably 5 years into his journey. He said he wanted to run his company forever, and he asked me how I had developed the stamina to keep running Return Path as long as I had. My off the cuff answer had three points, although writing them down afterwards yielded a couple more. For entrepreneurs who love what they do, love running and building companies for the long haul, this is an important topic. CEOs have to change their thinking as their businesses scale, or they will self implode! What are five things you need to get comfortable with as your business scales in order to be in it for the long haul?
Get more comfortable with not every employee being a rock star. When you have 5, 10, or even 100 employees, you need everyone to be firing on all cylinders at all times. More than that, you want to hire “rock stars,” people you can see growing rapidly with their jobs. As organizations get larger, though, not only is it impossible to staff them that way, it’s not desirable either. One of the most influential books I’ve read on hiring over the years, Topgrading (review, buy), talks about only hiring A players, but hiring three kinds of A players: people who are excellent at the job you’re hiring them for and may never grow into a new role; people who are excellent at the job you’re hiring them for and who are likely promotable over time; and people who are excellent at the job you’re hiring them for and are executive material. Startup CEOs tend to focus on the third kind of hire for everyone. Scaling CEOs recognize that you need a balance of all three once you stop growing 100% year over year, or even 50%.
Get more comfortable with people quitting. This has been a tough one for me over the years, although I developed it out of necessity first (there’s only so much you can take personally!), with a philosophy to follow. I used to take every single employee departure personally. You are leaving MY company? What’s wrong with you? What’s wrong with me or the company? Can I make a diving catch to save you from leaving? The reality here about why people leave companies may be 10% about how competitive the war for talent has gotten in technology. But it’s also 40% from each of two other factors. First, it’s 40% that, as your organization grows and scales, it may not be the right environment for any given employee any more. Our first employee resigned because we had “gotten too big” when we had about 25 employees. That happens a bit more these days! But different people find a sweet spot in different sizes of company. Second, it’s 40% that sometimes the right next step for someone to take in their career isn’t on offer at your company. You may not have the right job for the person’s career trajectory if it’s already filled, with the incumbent unlikely to leave. You may not have the right job for the person’s career trajectory at all if it’s highly specialized. Or for employees earlier in their careers, it may just be valuable for them to work at another company so they can see the differences between two different types of workplace.
Get more comfortable with a whole bunch of entry level, younger employees who may be great people but won’t necessarily be your friends. I started Return Path in my late 20s, and I was right at our average age. It felt like everyone in the company was a peer in that sense, and that I could be friends with all of them. Now I’m in my (still) mid-40s and am well beyond our average age, despite my high level of energy and of course my youthful appearance. There was a time several years ago where I’d say things to myself or to someone on my team like “how come no one wants to hang out with me after work any more,” or “wow do I feel out of place at this happy hour – it’s really loud here.” That’s all ok and normal. Participate in office social events whenever you want to and as much as you can, but don’t expect to be the last man or woman standing at the end of the evening, and don’t expect that everyone in the room will want to have a drink with you. No matter how approachable and informal you are, you’re still the CEO, and that office and title are bound to intimidate some people.
Get more comfortable with shifts in culture and differentiate them in your mind from shifts in values. I wrote a lot about this a couple years ago in The Difference Between Culture and Values . To paraphrase from that post, an organization’s values shouldn’t change over time, but its culture – the expression of those values – necessarily changes with the passage of time and the growth of the company. The most clear example I can come up with is about the value of transparency and the use case of firing someone. When you have 10 employees, you can probably just explain to everyone why you fired Joe. When you have 100 employees, it’s not a great idea to tell everyone why you fired Joe, although you might be ok if everyone finds out. When you have 1,000 employees, telling everyone why you fired Joe invites a lawsuit from Joe and an expensive settlement on your part, although it’s probably ok and important if Joe’s team or key stakeholders comes to understand what happened. Does that evolution mean you aren’t being true to your value of transparency? No. It just means that WHERE and HOW you are transparent needs to evolve as the company evolves.
- Get more comfortable with process. This doesn’t mean you have to turn your nimble startup into a bureaucracy. But a certain amount of process (more over time as the company scales) is a critical enabler of larger groups of people not only getting things done but getting the right things done, and it’s a critical enabler of the company’s financial health. At some point, you and your CFO can’t go into a room for a day and do the annual budget by yourselves any more. But you also can’t let each executive set a budget and just add them together. At some point, you can’t approve every hire yourself. But you also can’t let people hire whoever they want, and you can’t let some other single person approve all new hires either, since no one really has the cross-company view that you and maybe a couple of other senior executives has. At some point, the expense policy of “use your best judgment and spend the company’s money as if it was your own” has to fit inside department T&E budgets, or it’s possible that everyone’s individual best judgments won’t be globally optimal and will cause you to miss your numbers. Allow process to develop organically. Be appropriately skeptical of things that smell like bureaucracy and challenge them, but don’t disallow them categorically. Hire people who understand more sophisticated business process, but don’t let them run amok and make sure they are thoughtful about how and where they introduce process to the organization.
I bet there are 50 things that should be on this list, not 5. Any others out there to share?