Startups tend to stall once they hit 200 employees. 7 experts share their tips to avoid this fate.
- Scaling your startup is about adapting your team to the organization you’ve created, and getting it wrong can have serious consequences for your business.
- “Culture” might seem like a fuzzy concept, but experts say it’s one of the most important things startups need to watch out for when scaling up their teams.
- Asking the right questions to prospective hires and taking the time to prioritize your startup’s company culture are likely to help your team ride out the inevitable highs and lows of growing your business.
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Scaling your startup is about adapting your team to the organization you’ve created.
The early days of a company often involve each team member wearing multiple hats and jumping in to help wherever needed for the business to grow.
But at some point — about 200 employees — the company culture that worked at the beginning starts to falter under new demands.
Suddenly, the implicit systems and processes that got your startup to this point need to be made explicit, and getting it wrong can have serious implications for your future growth.
Formalizing those systems and processes is hard, but professor Deepak Hegde says getting your company’s culture right is one of the most important things startups need to watch out for when scaling up their teams.
Hegde researches management and organizations at New York University and directs Endless Frontier Labs, which helps technology and science startups scale.
“As a founder, you are so used to doing everything yourself,” Hegde told Business Insider. “Your startup becomes your baby.”
Here’s how to make sure your baby is in the right hands as it grows up.
To grow, sometimes you need to prune
One common mistake growing companies make is “not subtracting when you add,” Ethan Mollick, an associate professor of management at the Wharton School of the University of Pennsylvania, said.
“The things that made you successful early on aren’t always useful later,” he said. For example, all-hands meetings (aka all-staff meetings) might not be helpful or even feasible once the company reaches 500 employees.
Narie Foster, a startup adviser and founder of the work-clothing brand M.M. LaFleur, said her startup had to change meeting structures frequently, sometimes kicking people out of a meeting if it got too big.
That meant she had to set expectations for her team that things were going to get weird and awkward.
“If you want to be here, it’s because you want this kind of crazy adventure ride with us,” she said.
What to ask prospective hires to find the right fit
Growing your team is about much more than just finding people with the right skills. The pressure-cooker startup experience makes it especially important that you find candidates with the character and agility to ride out the inevitable highs and lows.
Foster says she asks candidates to explain how they would describe their previous bosses and what feedback they would give them.
“How you talk about work environments that you both loved and didn’t love — that really gets at what kind of cultures work well for you,” she said.
Foster is also interested in hearing someone describe the lowest point they’ve experienced.
“How you talk about hard times really shows both self-awareness and where you fall on the optimistic and positivity spectrum, which often is very important getting through these kinds of jobs,” Foster said.
Kimberley Ho, the CEO and cofounder of the skin-care startup Evereden, is also interested in how a candidate reflects on their past supervisors and asks interviewees to rate their past five managers on a scale of one to 10.
That approach helps Ho gauge a candidate’s honesty and receptivity to feedback — not all managers are deserving of perfect 10s, nor are they likely all zeros.
Other candidates need to be prompted to talk about themselves in a more approachable way, Marie Berry, the CEO and cofounder of the automated marketing platform Kara, said.
“The way they describe [themselves] gives me often a good insight into how the person ticks,” she said.
Finding qualified talent to join your team is a daunting challenge in and of itself, but taking the time to prioritize your startup’s company culture is likely to help your business in the long run.
And avoid ‘role confusion’ before it starts
Something strange happens to companies during the middle-size period of their growth, and it drives many employees to quit.
Lorna Hagen, the chief people officer at the human-resources-software company Namely, told Business Insider that role confusion might arise when startups begin to scale into midsize tech companies, or ones with between 200 and 500 employees.
Namely reported findings from 1,200 businesses on its platform that showed 46% of people who quit midsize companies said it was because of a misalignment between what the company said a job would be and how it turned out in reality. Those rates for smaller and larger companies with were 37 and 26%, respectively.
It’s not simply that jobs can be misrepresented during the interview process, but they can also change over time as the company grows.
In the early days of a company, Hagen said, “everybody has linked arms and is doing everything together, and they have absolute transparency into all the information.”
That transparency changes as companies become bigger, Hagen said, and it’s up to workers and managers alike to create greater role clarity during the scaling process.
“The onus is very much on the individual to be very, very intentional about what they’re looking for,” Hagen said.
Either way, making sure that those feedback channels are open and inviting is a worthwhile priority for the leadership team.