While there are few hard and fast rules, there is a pattern of shared key moments most businesses go through. One of these is the point at which a business transitions from being a one-horse show to employing other people. But later there is also a further stage, when the founder recognises the need to bring in senior management support to help shape the future of the business.
It’s an exciting moment, signalling that this is a business expected to go places and scale. But it can also be fraught with complications and difficulties.
One great advantage of that initial, founder-led phase of growth, is speed of thought and action. The owner calls the shots and makes quick decisions, without the need for consultation. This brings agility and quick reaction times to market events. Bringing on board a senior team brings with it the danger of slowing down, of decisions requiring more discussion among the team.
But a slightly slower approach is a price worth paying compared to one that isn’t fit for the purposes or complexity of the business as it grows. Founders who cling to too much power risk becoming a drag on growth, as too much comes through their desk. As the business grows so the decisions required get more complex. Expertise is needed in areas beyond the founder’s experience, whether that’s HR, finance, marketing or operations. This means taking the leap and bringing in senior people who can bring in that expertise.
The need for suitable structures and systems
But as this new team forms around the founder, it can initially lead to even more chaos. The trick is recognising the company is changing as it grows and that it requires a conscious shift away from what management guru Charles Handy described as “the power culture” to something more structured.
Chris Morling, founder of Money.co.uk - the pioneering price comparison website, which he built, grew and eventually sold - warns here against just copying the structures used in large corporations. He says what matters is finding the right structure and supporting systems for your business.
Morling, for example, grew and sold his business without having a conventional board in place. Instead, he says he had clear, robust systems and a strong team of senior people around him, empowered to make the decisions they needed to. Morling says what matters is getting the right people at the right level making the right decisions at the right time. “There is no need for the formal structures of a board. If you get a small team of senior leaders from within the business to help steer performance and growth, that’s enough.”
When to make the move and who to bring in?
There is a degree of the catch-22 in knowing when to bring in this new senior team to help run the business. A lack of finance means startups often can’t afford such senior people until the business grows, and yet business growth depends on those people being in place.
For Diane Young, co-founder at the Drum, it was a key moment and a revelation in her business growth story when they appointed a chief of staff. Such a role – or sometimes a chief operating officer – is someone able to take the load off the founder or founders. If they are handed the operational reins and responsibility for the day-to-day running of the business, it can allow the founder to think and act strategically. In a phrase coined by Verne Hanish, it’s about giving yourself the space to “work on and not in the business”.
A good finance director (FD) is another option for such an early second-in-command. Ben Mekie, founder of Acuity Associates, himself a chartered accountant and FD, who now places FDs into growing businesses, says there is no bad time to bring in a CFO. But there is a time when not doing will cause harm. He says clear sight of vital numbers, such as having a detailed cash flow forecast, can make or break a growing firm.
“What kills businesses is a lack of cash. Get a strong FD and they will produce the reports you need. You need to know how cash moves through the business, what is happening to things like debtor days and which services or products are generating profit.”
Focus on structure
When you do bring in new people, it is important to fit them into a sensible, well ordered structure. Putting order to the chaos of a structure that has often “just happened” is essential to getting the most out of new hires. Early bursts of growth often lead to people joining and all reporting to the founder. Getting the right people doing the right roles and reporting to one another in the right way is key.
Founders have to be brave and recognise the moment to put in place a clear senior team. The ideal is that no one (especially not the founder) should have more than three direct reports. This is rarely a comfortable or easy process. Restructuring can be awkward and requires hard conversations. Adding hierarchy may mean early hires, used to being on the same level, find themselves reporting into one another. The best approach is to be open, honest and frank in discussions and explain why this new structure is needed for the future and success of the business.
Have you got the resources you need?
It sounds obvious, but having got a senior team on board, you still need to know you are properly placed to grow. You need faith that the new team can scale and grow the business. Nick Towers, co-founder of digital marketing agency The Remarkable Group, says this should be a conscious effort to make scalability a lens for operational decisions.
The Remarkable Group has experienced tremendous growth over the last decade, and Towers says his leadership team are always asking a simple question: “We want to know how things would look next year if this was twice as big. Can we maintain the current level of staffing and continue to grow?”
The ideal, he says, is to automate as much as possible, so that there is no longer a linear relationship between revenue and people costs. It’s obvious, but the more you can automate and the fewer people you need as you grow, the easier and more profitable growth becomes. As Towers says “Always ask ‘what happens when this doubles?’. Is it still feasible for it to be delivered at that scale? How will you grow if you can’t scale all aspects of your organisation?”
Data and analytics
The best performing high-growth businesses focus lots of effort on getting the right systems and processes in place, but also take time to monitor and measure performance. In the data-rich digital era, lots of businesses have lots of data available, but not enough to turn it into meaningful information and use it to drive the business.
Critical to Morling’s approach at money.co.uk was having excellent processes so everyone had sight of relevant data and information to make decisions. Getting systems and processes right, he says, allows you to keep structures lean and to devolve decisions to the lowest practical level.
Morling suggests the ideal is what he refers to as “the two-minute rule”. Having put in place a strong senior team, he suggests leaders and this senior team should be able to find the answers to the most important questions about their business within two minutes.
Being less founder-centric, having in place clear structures and systems, and having information available in an instant are all good for business growth. They can also help as you get closer to seeking external investment or if you want to sell the business.
Having information available quickly impresses potential investors and shows them the business is run in an efficient and orderly manner. It also helps to show that the business is structured in such a way that its future growth is not tied to any one individual.
It can be lonely at the top, but it doesn’t have to be. Recognise your strengths and weaknesses, and then find the best senior people you can afford who can complement your own expertise. Get them on board, and put in place structures and systems that will help both you and your business realise their full potential. You’ll never look back.
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