An Open Letter to Promoters of mid-size companies

Dear Promoter of growth stage company

You’ve pulled it off. Despite the many obstacles in your way, you have succeeded in taking your venture from a fledgling start up to a growth stage company.  You identified a market need, developed a prototype, refined it into a product / service, created the distribution networks and secured the approval and loyalty of the end consumer.  You and your small team have worked tirelessly over the last several years juggling multiple roles.  And now, the business is rapidly scaling up with new customers and revenues.

Congratulations.  Well done.

Now what?

A startup that has thrived in an unstructured dynamic and nimbly developed into a Rs. 100 crores plus company has a new challenge in front of it.  You have the tailwinds behind you.  But, how do you make sure you leverage them and take the company into the next league ?

By continuing to push on the accelerator, you say.  Yes, that’s true, but if you don’t take the time to invest in upgrading your engines (i.e., talent) and oiling the parts (i.e., putting in the right structures and processes), you could be careening off the highway instead of staying on it.

Recognize that scaling up will require specialization

It’s quite likely that your senior team has known each other for several years and there is a high degree of comfort and familiarity.  You have all shared a vision, and in order to achieve it, have worn several different hats over the last few years and performed a variety of roles.  Team members have probably been involved in facets ranging from product design, marketing, distribution, customer support, and human resources.  You had limited resources and did what you needed to do to execute and be successful as a start-up.

But what got you here may not get you to the next stage.  To get from Rs. 100 crores in sales to Rs. 1,000 crores will require new capabilities and specialization across functions.  All functions.  You wouldn’t ask your head of finance to write the code for the next version of your product.  You wouldn’t ask your marketing head to negotiate the terms of your funding requirement.  So why are your human capital needs such as hiring and development being handled on an ad hoc basis, without a dedicated functional head and with limited or no structure?  We hear a lot of small companies say that their people are their biggest asset but their investments (both in structure and bandwidth) don’t reflect that view.  It’s time to ensure that you’re developing that asset as best as you can.

I often hear promoters say that they have many things to focus on to keep the engines of the business running and hence they chose to delegate their hiring and people management to others.  That’s fine, provided you are delegating to the right, qualified people who are devoting their time and effort into this crucial business imperative.  Ignoring your hiring and talent needs to focus on the immediate priorities will ensure many issues in the long term.

Take stock of your existing leadership talent

Identify the key priorities that you have as part of your business vision over the next 2-3 years.  Then identify the capabilities and skill sets that will be required by the leadership team to achieve them.

Does the team have them ? For instance, if your long-term goal is to become a supplier of choice in international markets, does your sales head have the networks, experience, and established credibility in those markets?  If you are in a market that requires constant product innovation, does your chief marketing officer have her ear to the ground to identify the trends and take advantage of them ?

If your aim is to continue growing, this is the time to be ruthlessly honest.  Hold up the mirror and ask if your current team has what it takes to get to the next level.  If it doesn’t, can they develop the skills that are needed?  If the answer is still no, you need to find the right person(s) who has those skills.

Over invest in the right talent

Steve Jobs famously said that if the top 50 people are right, it cascades down throughout the organization.  While he was talking about companies that employed thousands of people, the same principle hold for companies that only have 50 people.  If your top 5 people are the right ones, with the credibility, expertise, integrity, work ethic, and commitment to the organizations goals, the same culture will cascade throughout the company.

The right people will not be cheap, but they are often the ones that will open up new markets, bring new customers and innovate new products and processes within the organization, and generate enormous value while paying for themselves over and over again.

You may not need a sales head with international experience for the next six months.  But at that level, the right person isn’t always available exactly when you need them.  So identify the attributes that you need in your sales head and start the discussions sooner rather then later.  Those conversations will give you additional clarity on the skill base and experience that is available and help you to make the best hiring decision.

And once you hire them, set them up for success.  Ensure they understand the company culture, establish clear goals and give them the resources that they need for meeting them.

Create the right processes

The term “structure” is often anathema to startup organizations.  Many of them attribute their very success to the lack of structure and process. But that again, is short-sighted.

To bring the best out of your team, you need to bring in the right talent management and development processes while keeping out the layers of bureaucracy.  In fact, there are many processes that encourage the removal of these layers such as 360-degree feedback surveys whereby a junior level employee in an organization can provide anonymous feedback on the leadership in the company.  Many other effective tools are available.  As an example, SeaLink Capital Partners has developed an Organization Performance survey.  A short multiple-choice anonymous survey can provide a quick dipstick on a company’s strengths and development opportunities.  The results of that survey can help promoters and senior management have a constructive and objective discussion on areas of short and medium term focus.

Creating the right processes, which encourage the feedback mechanisms and support resulting action plans can be very powerful for any organization.

Focus on development

Few areas are more neglected in growing companies than talent development.  Everyone is so busy firing on all cylinders and focusing on the immediate needs of the business that this crucial organization need is ignored.  And it is not noticed until good talent, tired of remaining stagnant in their growth, starts exiting for other opportunities.

Formal development, which includes skills training, mentoring and coaching is useful not just for the employees but also for the organization.  It doesn’t always have to be complex or costly, but it has to be genuine. Demonstrating that the leadership of the company cares, listens and takes an active interest in the professional growth of their employees can foster long-term loyalty.  Ignoring it will create substantial costs in terms of retaining talent.

Don’t linger over tough decisions

There will be people who were absolute stars when the company was in start-up mode.  They were resourceful and able to execute on the needs of the company.  But, they are not the right talent for a growth organization.  Perhaps it is people skills or even their ability to develop with the growing needs of the company.  It is important to be honest with them, give them the resources and tools to develop the skills and if that is not successful, to let them leave.  Too many companies have lingered too long on these painful choices.  It doesn’t help anyone.

Promote the company culture

But, what about the company’s entrepreneurial culture, you ask.  That’s what enabled us to grow fast and succeed where so many others did not.  Surely I can’t lose that amidst all these structures and processes.

No, you can’t lose that culture.  But having the right systems in place does not have to mean that you need to slow down.  On the contrary, if done well, they can help identify your strengths as well as the areas that need further development and help you focus accordingly.

You want to ensure that you retain the entrepreneurial spirit, zest that got you success in the first place.  If you can combine that with capable leadership and strong development processes, you’ve got a killer combination.

Good Luck!