From Start-Up to Grown-Up (and Back Again)
I am not a product of my circumstances. I am a product of my decisions.
—Stephen Covey
The traditional model for business growth is linear. You may think of a few friends who have joined forces to found a start-up. They gain traction in the marketplace, begin growing in size, and eventually transition to a large-scale corporation. We’ve seen this happen countless times. It’s the typical success story of many of today’s top organizations—Microsoft, Apple, Facebook, Hewlett–Packard, even Disney.
That large-scale corporation becomes our goal, a measurement of success. The tight-knit group of visionaries has taken their brainchild and expanded it to national or international stature. Their products or services are being adopted on a mass scale; their sales force has ballooned, they may even be gaining influence within an industry. Who doesn’t want to realize that kind of outcome?
As you might guess, the reality is never as clear-cut as we like to assume. There’s a downside to this kind of growth.
Obstacles of all kinds can emerge in unforeseen ways. The culture evolves, procedures change, and departments expand. The strategies you used to build a business out of your garage don’t serve you when you’re trying to reach the next stage. As you grow, your organization will require new and improved tactics to continue thriving.
But the growth comes at what cost?
It’s common to watch start-ups make it big, only to have the founder step down from his or her post. These leaders have often become disappointed or frustrated with their company’s new direction. They remember the early days—days of just getting stuff done, of not taking “no” for an answer, of working overtime to pull off incredible feats. The scrappy, independent environment and culture they once knew have since transformed into a slow-moving administrative hell (Figure 4.1).
The model for success for evolving from a start-up to a mature company is necessary, but not sufficient. So what is the problem?
Just like people, businesses cycle through different stages of development. They begin as youthful, rambunctious ventures before they eventually transition into more mature organizations. The difference between you and your organization, though, is that you only grow in one direction.
We don’t think this way about companies. We apply the same logic to our organizations that we do to ourselves. Our model for success assumes a linear and unidirectional trajectory—and is flat-out wrong.
We need a new model. We need one where an organization can accelerate its growth by shifting its developmental stage forward and backward.
An organization may not derive long-term, or even short-term, success by continuing to move toward what I like to call grown-up mode. This manner of operations is typically thought of as forward-leaning growth, most commonly seen in the later developmental stages of an organization.
Grown-up behavior in companies typically manifests itself as the standardization of processes, tools, and methods. In other words, your attitude as a business epitomizes standard operating procedure. Everything is by the book—for better or worse.
On the other side of the spectrum, we find the start-up mode. Here, you’re operating by the seat of your pants. In exchange for little to no standardization, you have the space to be expedient and to innovate (Figure 4.2).
Each side of the continuum has its strengths. Start-up behavior requires highly responsive and collaborative teamwork. Once you’re on the team, it’s “welcome aboard” and “all hands on deck.” Start-up ambitions are undefined and boundless. Compensation often includes rewards in the form of stock options. Getting results is a matter of survival, so start-up founders will fight tooth and nail to do whatever it takes to succeed.
Figure 4.1 Growth and time
Figure 4.2 SOP continuum
The SOP Continuum can and should be applied to every function of an organization. However, because ventures like Compaq and IBM had such dramatically divergent methods of operation, it’s easy to separate them as polar opposites. I entered Compaq when our staff numbered at only 104—every position was collaborative, fast paced, and hands-on. By contrast, IBM was grossing around $50 billion with almost half a million employees. They were highly bureaucratic with lagging processes. Our approaches to business were fundamentally different.
Compaq was envisioned as a big company in the formative stages. But alongside that, we wanted to be a good place to work—where our actions were aligned and understood by all. No more telling vendors you’d pay in net 30, only to have them begging for payment in 120 days. We knew which processes helped us grow, and which got in our own way.
On the contrary, grown-up behavior prizes regulation and careful planning. In exchange for a slower pace, managers have all their bases covered. If you work for an organization predominately functioning as a grown-up, chances are you applied in a large applicant pool, went through a lengthy interview process, and read through 50 pages of paperwork before any work could begin. Your organization has locations all over the country and occasionally risks minor litigation, so the paperwork was necessary. Thankfully, you and the rest of your team are legally protected. Not only that, but you know exactly when to expect your paycheck, and your health insurance is one of your benefits.
Similarly, start-up and grown-up operations each have downsides. If everyone you hire is a friend or neighbor, not only do you chance discrimination, but you can end up insulating your team from workers of diverse thought, background, and experience. The risks are also inherently higher in start-up mode. When you are doing something new, or in a new way, you have no precedent to follow.
A business operating in grown-up mode may find itself steeped in red tape. Red tape is always a way to stifle creativity, a quality that otherwise keeps any business afloat and relevant. In the grown-up mode, the risks are lower. This is great when you have slow, standardized processes for functions like ethical precautions or following regulations. But issues arise when you find yourself lacking expediency in a high-impact situation. In essence, grown-up organizations tend to work efficiently, but not necessarily successfully.
If you’re wondering whether your organization or a division of your organization is functioning in grown-up mode, there’s a great rule of thumb I like to use. Say your CEO’s name is Jeff. If workers don’t know why they’re doing what they’re doing because of a tangled mess of standardized processes, you’ll hear the phrase “Jeff said,” or “because Jeff told us too.” Rather than grasping the rationale behind their contributions, workers will operate blindly in an organization with extreme grown-up behavior.
Notice, though, that there is zero correlation between these two types of behavior and the size of your organization, or its chronological age.
The difference between an organization in start-up or grown-up mode speaks entirely to the culture of your business and the mentality by which you operate. It’s true that smaller operations can foster more seat-of-the-pants behavior, but that is not an exclusive privilege. Large-scale corporations can and do practice start-up behavior while maintaining their perspective.
Remember, because it’s a continuum, that means this model is not a binary to toggle between, but a barometer to be adjusted. The processes, tools, and behaviors of every organization each fall in a different place on the continuum. Some are closer to start-up behavior; others are more grown-up oriented.
Consider these case studies.
A few dozen colleagues are just months into the formation of their new insurance company. They’ve found some clients and are beginning to turn a profit. Up until now, workers have been informally compensated. One staff member has been writing individual checks as a way of distributing the business’ income. This method, which embodies start-up culture, has been fast, easy, and inexpensive. But with a growing customer base, the company is looking to expand its workforce, a move that will further complicate this particular staff member’s job. The company faces two options:
Option 1: They can continue the start-up behavior of writing and distributing checks manually. In the past, this tactic has been an easy and inexpensive incentive for employees to work hard and fast. But now, it may stifle efficiency to have one worker in charge of paycheck distribution for such a large group of employees—especially considering any necessary tax withholdings or deductions he or she will have to manage. In expanding their sales force, all manner of compensation and incentive structures must be considered.
OR
Option 2: They could shift to a centralized payroll system, which would mean hiring additional employees—or outsourcing—to form a payroll department. While this may be a costly move in the short term, it will allow the business to continue growing its workforce and long-term profits.
The company chooses option 2. It shifts its payroll processes from start-up to grown-up, capitalizing on the advantages of standardization. But notice that payroll is the only aspect of the company that makes this shift. In many cases, it’s beneficial that the majority of a company’s departments remain in start-up mode long after their internal operations become grown-up. A high-energy environment that encourages innovation was the primary catalyst to begin with—losing this kind of culture could jeopardize the growth in sales and your ability to fulfill those sales promises.
COMPANY B
An international tech organization is well established in its industry, but its sales have plateaued, and analysts predict the company will begin to decline if it does not make changes. Its board of directors has suggested that the firm scout for new business ventures to acquire, with the hope of feeding a start-up environment with enough resources to do extraordinary things. The senior leaders lock onto to a team of coders looking to launch a smartphone app that will reinvent personal finance. The coders meet with the management team and sign a contract.
Within a month, the organization has connected the coders with their firm’s marketing department to design a social media campaign for the launch of their app. Initially, everything goes well—the coders seem wide-eyed and giddy after several brainstorming sessions. A week later, they all decide on a game plan, but the Director of Marketing explains that it’s going to take 9 to12 months for the organization to begin implementing the campaign. The coders will have to wait for the tech organization’s bureaucracy to do its job. With this news, the coders lose all excitement, and within a month, the coders walk out the door, and the venture collapses. Even those with work-out contract clauses are less than enthusiastic and not performing. They’ve dumbed down—just like we discussed in Chapter 3.
What began as an M&A turned into what I like to call an M&D, or “Merge and Destroy.” What happened? A company still in the start-up stage was suffocated by an organization functioning predominately in grown-up mode. The team of coders was bogged down by the larger organization’s lack of speed. Whatever free-spirited and innovative environment the senior leaders had previously created was now gone.
I’ll often see an organization segregate their acquisitions, walling them off from the grown-up part of the organization. There is some value in this, but the synergies between teams and the infusion of new energy are lost. While it may be counterintuitive, the solution here would have been for the multinational tech organization to adopt a start-up approach in interacting with the team of coders. They could learn how to foster the team’s enthusiasm by embodying this energy themselves. Maybe, they could have formed a group within their chain of command that specialized in pushing lengthy processes through faster.
COMPANY C
With some small investor funding, several graduate students decide to launch a new kind of sportswear that keeps you warm in winter. Right now, only a group of a few people runs sales, marketing, manufacturing, and customer relations. Their clientele ranges from local vendors to online shoppers.
The business has been using SurveyMonkey and Microsoft Excel to track the customer feedback. The information is entered manually by several different employees, who all help to analyze the data for trends and determine how to meet their customers’ needs. The same team deals with customer support, answering the phones, and replying to emails. Given the firm’s current size, this “seat-of-the-pants” approach is both feasible and cost effective.
At what point should their customer relations transform from start-up to a grown-up? When will their staff be spread too thin to manage all these responsibilities? When will they accumulate too much customer data to analyze? These are all signals that the team needs to reevaluate their approach and consider a more grown-up strategy.
As you might imagine, an organization that spends too much of its time and resources at any one point on the spectrum will begin to get stuck. It can manifest cross-organizationally or within just one department. Many of the businesses I work with find themselves in these circumstances.
For example, it’s critical that COMPANY A keep an eye on the impacts its centralized payroll system will have on the size of its workforce. The measures the firm has taken at this juncture may foster the right environment to grow the organization from a few dozens to a few thousand. But what happens when it reaches 3,000 employees? The tactics that moved the business out of its first stage of development might impede growth at the next level.
It’s important for you to not only evaluate your business’ processes, tools, and behaviors to see if they’re getting in your way, but also to continue to reevaluate them at different stages of growth.
As we’ve seen, there are times in an organization’s development where it makes the most sense for a firm to go backward, to shift procedure from grown-up to start-up. I call this strategy doubling back.
UPS embodied this perfectly during one of its busy holiday seasons. The team responsible for sorting, loading, and delivering packages was understaffed, leading to a last-minute scramble. Under a tight deadline to deliver packages in time for Christmas, the company pooled together workers from accounting, marketing, and other desk jobs to hit the streets. “Some [were] delivering packages using their personal vehicles,” the Wall Street Journal reporter Paul Ziobro wrote.1
Who could imagine a $60 billion company pulling off this kind of team effort? It was a tremendous—albeit momentary—shift from grown-up to start-up. For about a week, the company collaborated with the same seat-of-the-pants drive I regularly observed at Compaq.
I remember when Compaq exceeded the $1 billion mark—our growing workforce was outpacing our office space and we had no intention of slowing down. Our solution was a great example of flexibility (a quintessential start-up competency). Without the time to wait for construction to finish on new buildings, we set up shop in one of our parking garages. We built a landing to level the angled flooring, set up walls, and assembled a walkway connected to the main building. Our goal was to continue expanding while not interrupting workflow. It worked.
These types of strategies emerge all the time in the heat of the moment. But more likely than not, when they do, we’re not aware of what’s happening. It should come as no surprise that identifying these qualities of your organization is a great way to align internal and external strategies, and by so doing, to support your organization’s growth.
How do you shift your organization from behaving unconsciously to consciously within this framework?
1. Identify your coordinates.
Ask yourself, “Where are we?” Pinpoint all the functions of your business and examine from where on the SOP continuum they’re operating. Now is a great time to sit down with the rest of the leadership team and practice clear communication to ensure everyone is on the same page (and avoid dumbed-down teamwork). You may be somewhere completely different from the other senior leaders, or you may all be operating with the same approach. Being explicit about these differences and similarities is a critical step to ensuring success. It will help you chart where you want to go and how to get there.
2. Decide on a set of goals.
“Where do we want to be in 18 months? 2 years? 5 years?” If your aim is to double your organization’s profits, figure out what processes will help you get there. Where might doubling back help your company? In what changes will you have the time, energy, and resources to invest? What changes may be too disruptive to your organization?
Differentiating which start-up and grown-up functions need changing and which should remain as they are will depend on the kind of results you’re seeking. If your goal is creativity and innovation, consider doubling back on your functions around product development and design. If you see your staff despondent and uninvested, consider taking another look at your workplace processes so your staff feels more influential and interconnected.
Major shifts in your industry should also trigger the need for doubling back. In other words, use start-up behavior to capitalize on new opportunities in the market. Maybe your customers are asking for products or services you not only don’t have, but don’t know how to provide. Perhaps it’s taking too long to deliver on some plans, either to appease customers or avoid rising competition. These are all situations where doubling back on aspects of your business may open up a treasure trove of new directions forward.
3. Examine doubling back functionally and cross-functionally.
“What will be the ramification of these changes? Where are our resources being relocated, and what effects will that have on each department and the organization as a whole?” Consider how your team will prioritize doubling back strategies over others. Where would you like to create synergy? What’s that going to take? Who needs to be involved, who needs to be informed? Who will this impact?
4. Make a game plan.
Each senior leader will need different things from the rest of the team to ensure his or her success. For instance, the processes, tools, and behaviors of accounting will need to function differently than that of sales. It will be critical that each senior leader understands where on the SOP continuum his division will need to be, or what kind of processes, tools, and behaviors he will need to adopt. One division may be operating primarily as a start-up, while another may be in grown-up mode. Communication here will be critical.
5. Execute the plan and track your progress.
As I mentioned earlier, it’s critical that you continually measure your success. Many of the businesses I work with begin executing these internal strategies, but either something gets poorly implemented or there’s an external shift, which makes for some unexpected outcomes. While your aim should be to avoid these situations, you need to be prepared. Nothing ever goes exactly according to plan. Tracking your organization’s success will allow you to respond to unforeseen circumstances with greater ease and learn from your mistakes. You should always try to understand what got you where you are. Your team will need to track your organization in real time.
Decide what metrics you should be reviewing: what data are most important to your success and the success of your team? What kind of short-term and long-term success are you seeking and how is measuring each different? Use your organization’s dashboard to automate as much of this as you can. It’s a great idea to convene a quarterly retreat for senior leaders to examine and reevaluate intentions and outcomes.
This kind of strategy is a grown-up behavior in itself—it requires patience, care, and lots of coordination. But if your organization can begin operating with this deeper awareness, accelerated growth will not only become possible, but probable, too. You’ll be able to define your goals, minimize your weaknesses, and have a clearer view of your trajectory.
Add to this the ability to be agile and suddenly your organization is a force with which to be reckoned.
But wait—that’s just one word. What does it mean to be agile?
The story began in 2001 when a group of software development experts gathered at a ski resort in Utah to discuss innovative business practices. They left with a manifesto—the Agile Manifesto (Figure 4.3). It was a structure of values that would go on to redefine the priorities of many tech companies, as well as many other growing industries. Here it is.
It’s a simple document, but one with radical implications. Even if you aren’t a software developer, there’s value to be mined. I’d like to highlight the last point: responding to change over following a plan is how I define agility. Expect the unexpected. Adapt.
This kind of agility is critical for doubling back. I guarantee your plans won’t always work out as expected, especially when you’re growing or shifting the culture of your organization. Dealing with unanticipated consequences is an invaluable skill set. But what’s required?
Figure 4.3 The agile manifesto
Source: Kent Beck, Mike Beedle, Arie van Bennekum, Alistair Cockburn, Ward Cunningham, Martin Fowler, James Grenning, Jim Highsmith, Andrew Hunt, Ron Jeffries, Jon Kern, Brian Marick, Robert C. Martin, Steve Mellor, Ken Schwaber, Jeff Sutherland, and Dave Thomas, “Manifesto for Agile Software Development,” 2001.
The answer isn’t simple. Staying agile is a methodology in its own category. It demands its unique framework, internal processes, and measurements for success. And yet it is a core element of any thriving organization, as well as one of my five internal strategies.
Keep reading to learn how and why an agile organization is a healthy organization.
Time for more notes! Consider the operations that you oversee. Where on the SOP continuum would you place your staff’s behavior? How are you optimizing or weighing down the organization by your processes? Is there any helpful information you could get from the other senior leaders? What kind of communication is necessary between you, your peers, and the staff you manage?
1P. Ziobro. December 26, 2017. “At UPS, It’s All Hands On Deck,” The Wall Street Journal, U.S. ed., Business section.