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Scaled to a halt? When fast growth slows productivity

Founder: We'd just closed Series A funding. Now, we need to triple our growth in the next 12 months so that we can go for Series B to expand to 10 more countries next year! 🚀


Me: (listening intently for…)


Founder: We need to hire more people! 💪


Me: (there it is!)


 

If I had a penny for every time I heard Founders say that: I am 100% confident I would have been able to outbid Elon Musk on Twitter!


When start-ups are scaling, one of the main areas of growth is the number of employees. As start-ups expand, there are more products to build, more features to ship, more customers to serve, and more things to be done! 🤯 It’s not surprising that the thinking quickly turns to: “We need more employees to accelerate our growth! Pronto!”



Fast headcount growth can be a major trap. Prepare to evolve, or risk falling behind!


When hiring more employees, it’s important to be aware that it can trigger inflection points in the organisation. Inflection points (also known as crisis points in Greiner’s Curve: 5 crisis points that all start-ups should know), occur when businesses need to make a significant step-change to transition to the next stage of growth, see themselves failing to keep up with competitors or, in the worst scenario, ceasing operations entirely.



What if you could predict these points before they become a crisis?


Mark Logan (former COO of Skyscanner) proposed a simple formula (using the Catastrophe Theory) to predict when inflection points occur:

N = is the set of numbers of employees at which the inflection points will occur

i = 1, 2, 3... is the sequence of inflection points



According to Mark, the first inflection point typically occurs when a start-up reaches 50 employees. As the start-up continues to grow, his model predicts that subsequent inflection points occur at approximately 100, 200, 400, and so on.


Typical inflection points: 50, 100, 200, 400….employees


It's important to note that these inflection points are approximate and may not happen exactly at the numbers mentioned, and may vary based on the specific industry or company.



Shouldn’t growing our employee numbers also help us grow quicker?


When a start-up hits an inflection point, what used to work very well, is all of a sudden working against you! You may find features are slower to ship, user growth stagnating, fixing bugs takes longer, collaboration is suffering, misunderstanding increases, employees are leaving, and the list goes on… In other words, progress starts to slow down and we do not see the increase in outcomes that we hoped to see with the increase in the number of employees hired. Why? Because the increase in the number of people increases the complexity of an organisation.


Increasing the number of people increases COMPLEXITY in an organisation


The more complex an organisation, the more you need to enable alignment and coordination towards a shared common goal or pay the price of confusion:


Confusion across the organisation😱

One way to manage complexity is to group individuals in teams to improve collaboration, decision-making and communication. An effective team normally consists of around 5 people (also known as the "2 pizza team size" according to Jeff Bezos.)


The increase in the number of employees and teams triggers the need for effective managers and, depending on the number of teams, different management roles need to be unlocked. The manager role plays a critical part in nurturing and connecting multiple groups of people, bringing alignment towards a shared common goal.


Founder: Great! I will promote my best performers to managers and hire more managers 👍

Me: Not so fasttttt…



Predict inflection points and match the right management role to your organisational complexity


Layering Mark’s framework for predicting inflection points on top of the 6 phases of organisational life-cycle growth depicted in Greiner’s Curve gives us a better picture of when and what management roles may need to be unlocked.


Let’s illustrate this.

Predicting WHEN the 5 inflection points occur and WHAT different manager roles need to be unlocked to manage the increase in complexity as a result of headcount growth

At each inflection point, a new management role is unlocked. Each with new scope of accountabilities and area of impact that correlates to the increasing complexity that comes with business and headcount growth. Being aware of this gives start-ups the foresight to prepare for these changes and ensure that the right manager capabilities are in place before they are needed. This helps avoid disruption to productivity, culture and morale.


Now that you know the increase in the number of employees increases the complexity of an organisation and triggers the need for different management roles at different phases of growth, what are the different types of management roles?



 

JooBee’s note:

I am consciously using the word 'manager' instead of 'leader' in my blogs. A manager is a formalised job with clear people accountabilities and responsibilities to make people decisions (e.g. hiring, performance management, compensation and rewards, promotion, exits, etc.).


A leader is not a formalised job, but anyone who can effectively influence a group of people to achieve a common goal. This could be a Software Engineer, a Head of Product, a People Coordinator, a VP of Sales or a manager.


A little something to ponder 😉

A good manager might not be a good leader. A good leader might not be a good manager. A good leader might not be a manager.

 

In the next episode...


Founder: My VP of Sales is not working out 😖


Me: Why is that?


Founder: I don’t know. He was the VP of Sales in a big-name start-up 🤔


Me: What did he do there?


Founder: He was the VP of Sales and they loved him. The references we received were glowing! 🤷‍♀️


Me: What is the structure of the team he is leading today?


Founder: It started around 12 and grew into 25 people now, 2 Heads of Sales and 2 Sales Managers 🚀


Me: What is the size of the team he managed previously?


Founder: I think…around 10 salespeople? It’s the same - isn’t it? 🤨


Click next to find out.








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