Someone recently asked me what I thought were the greatest challenges that a fast-paced technology start-up faced when quickly growing in size. Having been closely involved with a few start-ups, some organizations which managed to successfully transition from being a start-up to a large enterprise, and, some which could not handle this so well, I found this a rather complex question to answer.
Tech Startups have a tendency to see explosive growth in their business which often results from early success and disruptive innovations, essentially indicated by the stages A and B the rough sketch below.
Among the various challenges that a fast-growing startup would face, a few big challenges would be:
Finding the right people
Finding the right people is one of the biggest challenges that any organization faces, and this challenge is even higher in a young startup where immediate business needs sometimes take precedence over long-term potential of an employee.
Fast growing organizations need a lot of very smart people in a very short span of time. This often leads to unclear recruitment strategies and less-detailed analysis of a candidate’s profile, often resulting in hiring candidates with cultural fitment issues, wrong motivations and unrealistic expectations from the employer- all of which can prove to be detrimental to a mutually beneficial, long-term association between the employer and the employee.
To avoid this, organizations should have a clear recruitment strategy where it is known why they’re hiring, who they would like to hire and how they will be hiring.
Defining and Protecting the Organizational Culture
Every company has certain set of values and ethos that tend to influence the way people interact with each other and the way communication flows. The culture, or an organization’s DNA, is sometimes a huge part of the way the company is perceived, both within and outside the organization. This perception goes a long way in attracting and retaining talent in the organization. For example, there are very clear differences in the organizational cultures of Google, Microsoft and Apple which are reflected in every aspect of the companies’ management styles, business visions and resource pools. Hence, it is a choice that needs to be made, and made early.
The fast growing start-up needs to decide what kind of company it wants to grow into, and make this consideration an integral part of their recruitment strategy. This is also important because the cost of retaining, and nurturing the talent within organizations is far lesser than that of acquiring talent. As start-ups in the fast-growth phase are likely to hire across various positions right from entry-level engineers to mid and senior-level executives, each of these hires will have their own personality traits, leadership and management styles. If cultural fit is not taken early into account, there will be ego clashes, communications gaps, favoritism and a lot of management problems.
If start-ups make sure that they hire candidates who are not just having great skills, but also a good fit in the organizational culture, it will save them a lot of trouble in the longer run as they will be more likely to have a lower attrition rate, higher employee satisfaction, better productivity and will enjoy long-term sustainable growth fueled by leaders nurtured in-house.
Creating an efficient, sustainable and scalable organizational structure
As start-ups enter the fast-growth phase, one of the most difficult choices they have to make is between people and processes. In the very early phases, start-ups typically are people-driven with not much importance given to following processes or communication protocols. Decision making is faster because of a flat structure making it easy for engineers to access the senior management.
However, as they start growing, it becomes apparent that this model has severe scalability constraints. Sometimes the organizations have to even forgo growth plans because their organizational structure is not scalable and they are not prepared to embrace a new structure.
Hence, in order to grow holistically, the founders are forced to find ways to maintain the innovative spirit where ideas are encouraged and risks are celebrated, while making sure that the organization maintains a structure where roles are defined and accountability is clear.
Because of the larger numbers involved, both in terms of dollars at stake and efforts involved, it is important to make sure there is a reliable structure driving the organization that is scalable, manageable and accountable without stifling innovation or becoming top-heavy to ensure long-term success and profitability.
Managing the sudden rise in operational expenses
Growth is expensive. The sudden influx of employees tends to create a huge dent in the operating expenses of the company. While this is a necessary expense, companies need to make sure they do not overshoot their budgets or misuse the money.
While this is by no means an exhaustive list, it is an attempt to crystallize a few key areas of concerns that start-ups need to be aware of as they enter this extremely critical and sensitive phase of their lifecycle. As no two endeavors are alike, I am sure there will be a lot of challenges that different readers would have faced or would have seen others face. This blog post is merely an attempt to get the conversation flowing in this direction.