Dear Founder #5: Managing growth pains – 8 alignment tools to manage complexity

• By ssyc1
• February 24, 2020
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Anyone who has worked at large organisations will know what organizational inertia feels like.  There was once this much-read corporate tome titled “Can elephants dance?” (written by the then CEO of IBM) for this reason.

Some of us who have inhabited the corporate world as well as the world of hyper-growth or “blitz-scaling” start-ups pay attention to ensuring and enabling the founder-CEOs of young companies engineer and build some “institutions” or “glue” as they scale (and grow in size) to avoid creating too much of those dysfunctions.  I often find myself talking about building teams where 1+1 equals 4 or more and have also had the occasion of being engaged in a conversation in recent weeks about “alignment” with a founder-CEO who is managing a growing team that is increasingly dispersed across geographies.

When thinking about growth pains, alignment and complexity, there are perhaps 4 broad concepts we need to start with.

First, growth naturally creates complexity which can be considered a major source of “growth pain”, i.e. growth creates growth pains.  If you are scaling and growing, you have to expect complexity: the bigger and the more complex team the greater the need to deal with growth pains (and to devote time and resources to managing these).  It is a good problem to have!  (We also recommend a 2013 post penned by Salesforce’s Marc Benioff about what he’s done to “maintain alignment while growing quickly” which he sees as “our biggest strength”).  

Second, as the CEO, you have to accept that time will be required.  It is a choice between spending time to develop, adopt and implement smart tools to align, or not doing so and spending even more time dealing with the consequences of misalignment.  It has to be stressed that the time and resources spent on managing growth pains will ensure the pains don’t become crippling and slows down growth itself.

Third, managing “growth pains” can involve both “adding institutions” and taking out the ones that are not working, and skillful and judicious adding of the right institutions are required too.  Some understanding of where the mis-alignments are or likely to emerge is needed to find the right solution.

Fourth, it is useful to distinguish between necessary complexity and unnecessary complexity.  There is some parallel with essential complexity vs accidental complexity (I am borrowing from a widely discussed software engineering paper here that was quoted recently by the CTO of one of Asia’s largest on-demand multi-service platforms who also shared that “most companies fail due to self-inflicted accidental complexity … most scaling problems are accidental” and advised teams to “focus on the essential and minimise the accidental“).  While one has to live with some complexities that can’t be “taken out”, it is so important to find ways to measure and minimise the “accidental” (unintended, unnecessary, dysfunctional, etc.).

And here are 8 tools we’ve found useful and you may like to consider:

First, deliberate efforts to align – e.g. developing “shared values”, e.g. introducing some management information system (e.g. metrics).  These should come fairly readily to those who have done some managing before and there are well-known tools: there is of course John Doerr’s OKRs (“measure what matters”) and we always recommend the Netflix culture doc too.  The one suggestion we always make: keep metrics to 3 to 5 at most.

Second, deliberate efforts to clear or fix mis-alignment – e.g. moving people to the best places within the organization, letting go of wrong hires, etc.  A helpful practice that Netflix famously highlighted (in the above-mentioned “culture” doc) is what they have called the “keepers’ test”: “Which of my people, if they told me they were leaving in two months for a similar job at a peer company, would I fight hard to keep at Netflix?”.  The rest should “get a severance package”.

On the other hand, having “10x performers” creates a culture where others are also thinking how they can be “multipliers”.  This is probably a version of “A players hire A players, and B players hire C players”.  In our team, one of our values is “personal leadership” and we have a saying that “Leaders = taking ownership and making it your responsibility”.

Third, while the need to do this is so obvious to those many of us who have had more management experience that we forget its purpose, and while its value is not restricted to a high-growth company, a business plan and a process of regular discussion and planning around it is the first and foremost the most fundamental alignment tool within a company.  We want to assess where we are today, where we want to get to, and how; especially important for “teamwork at the top”, because if there’s no teamwork at the top, the rest of the organisation will be going and pulling in different directions too.

Fourth, we’ve found that a useful word is “fit-for-purpose”.  The amount of processes required to manage complexity and deal with alignment when a company is 50 people strong is different from that 500-strong.  So think about the situation before thinking about the solution.

Fifth, there are good vs bad processes: to quote from the “Netflix culture doc” again, “good” processes “help talented people get more done” (e.g. website push every 2 weeks rather than random), while examples of “bad” processes” include “permission needed to hang a poster on a wall”.

Sixth, the founder-CEO himself or herself will have to keep aligning what he or she does with the needs of the business!  For a hyper-growth company, he or she may have to rewrite his or her job description once every 18 months or so; because of this, the final tool mentioned in this post is especially helpful too.

Seventh, we have found that a good way for the VC to help the founder-CEO is to have a process of matter-of-factly assessing what went well and what went wrong.  We wrote a little about this and the importance of being brutally honest in an earlier post.

Finally, and relatedly, it really helps when the founder-CEO himself or herself proactively take steps to ensure he or she is increasingly equipped to deal with bigger problems, i.e. to keep growing himself or herself and be a “learning machine”.  He or she will be solving bigger and more complex problems as the company grows, and will often find himself or herself in novel situations or “deeper waters”, so to speak.  He or she can benefit a lot from having built a “sounding board” or “brains trust” around him or her of people who’ve done blitz-scaling before, often VC-backed too (we discuss this in points 1 and 2 of this earlier blog).  These indispensable “sounding board” or “brains trust” people not only (a) offer advice and share experience which allows the founder-CEO to learn from the mistakes of others and hopefully make fewer mistakes than the average; (b) offer some solutions or perspectives or practical support when the inevitable problems and mistakes arise; and (c) offer a/an (emotional) support system in those crisis situations.  In other words, another level of alignment that is required involves proactively “in-sourcing” (part-time, high value) resources and capabilities to prepare and provide a buffer for the business challenges that are expected to arise.

To sum up, dear founder, congratulations on having growth pains and complexity and alignment problems  as they are the result of growth.  Smartly dealing with these issues requires embracing that complexity is (i) a natural and inevitable consequence of rapid growth, (ii) can be managed with deliberate efforts to create alignment (e.g. development of core values, metrics) and diagnose mis-alignment (reporting relationships that do not create accountability), and (iii) when designing processes and “institutionalizing” things, the test is to favour ones that makes life simpler for everyone (i.e. “good”) and (iv) are fit-for-purpose.  Finally, be very clear that (v) your own personal-professional growth is going to have to keep up with the growth of the company and the growth in size of the challenges you will face, and (vi) make it a priority that you have a “sounding board” of people with lots of scale-up experiences of dealing with larger challenges (with successes and failures to draw from) to prepare and equip yourself as the complexity and scale of the business challenge increases as you grow.