A little known fact about growing your business: Somewhere around 40 to 50 employees, things fall apart.
Yet, when CEOs present their five year plans, a strategy to properly grow a team — and all that that entails — is often the most overlooked component on the path to whatever success they might envision. Ignoring the challenges inherent in operational strategy will always sabotage a company on a high growth trajectory.
A particularly skilled founder or CEO can navigate these challenges on their own longer than most, perhaps, but eventually it is a problem that all startups must face. And with first-time CEOs these challenges can overwhelm a company right out of the gate.
Half, and half again
Over half the number of failed startups are directly the result of poor market fit or funding shortfalls. By some measures, though, a quarter of all startups fail because they simply have the wrong people on board at the wrong time. Most early stage founders are almost always hyper-focused on capital, product and happy (repeat) customers. Yet, ignoring operational imperatives — like recruitment, organizational responsibilities and communication architecture — is the reason why so many good companies with good ideas go off the rails before they can really get going.
Moving from a founder skill set- or 10 person company — to a 50-500 person company is hard to accomplish and requires a good deal of intentionality and foresight not usually found in a business plan, which is why the strategic organizational element within most business plans can often mean the difference between success and failure.
There are many challenges with talent acquisition and management for high-growth startups. As a company expands, team dynamics shift and, with growth, skill sets invariably change. With any kind of early success there’s also a correlating need to build up the team (and product) quickly to meet that growth. But rapid expansion, team dynamics and changing workforce needs all can lead to errors of judgement and the cost for those errors is significant — sometimes repressuring twice the cost or more of an annual salary per hire.
Bad decisions mean burning through precious funding and most CEOs don’t account for bad decisions in their planning. Turnover, productivity and growth are all directly impacted by a CEO’s hiring decisions. CEOs need to create strategic staffing plans against key positions from the get go and have a sound strategy for attracting the very best, as well.
CEOs also have the problem of exponential management. In a large organization, even a single person managing dozens of people can be too much. When you throw in balancing those needs against a founder’s normal responsibilities it becomes untenable. This “people problem” generally becomes truly problematic as a startup moves beyond 15 employees.
Prior to that a “do it all” mentality among employees and executives — usually the hallmark of most startup’s organizational strategies – can suffice but that attitude has a shelf life and can lead to crippling inefficiencies. The fact is, a totally flat organization is over as soon early stage growth kicks in and if you don’t have a good plan to deal with it you’re in trouble.
Obviously, having an HR team in place to help manage these various challenges is ideal but often this is not an option for startups as they attempt to gain a foothold in a given market and have precious little resources to allocate.
There are services and platforms, though, that are cost efficient and can help effectively manage this growth. AI platforms that significantly cut traditional recruitment costs while being exponentially more effective help address the issue of attracting top talent. And, with HR undergoing its own digital transformation, the abundance of cloud-based platforms that help startups through traditional HR pain points — like, internal communication and employee management – has never been greater.
While having product/market fit is obviously paramount for growth, having a well considered operational strategy at an early stage is just as vital for a company if it’s going to ultimately thrive. Even as revenue ticks up, market share expands and industry theses hold up under real world scrutiny, people problems will represent the single largest, day-to-day issue a CEO will have to face. Having a plan and best practices in place is as important to the growth (and funding) of a company as the product. Smart CEOs must always have both in focus.
And it’s also why repeat founders get funded more often. They recognize this challenge from the onset and start from the very beginning with an operational strategy that makes sense for the timing of the company and its ultimate path forward to success.