My observations on the topics you should be careful with while your startup is growing.
by Peyman Pouryekta
Startups face many issues.
In the beginning, they must have a strong founding mission and prove that their business idea works. If they manage to demonstrate a proof of concept, the real fun starts – a growing company.
Investors start to trust you. New shareholders come on board, often with an opinion on how to do things. These different opinions can easily create conflicts, so it is a huge task for the management to lead the company in the right direction.
Let’s start with the hiring process.
It may sound obvious, but you need people with skills. On average, new joiners should have better expertise than the current employees do, otherwise you will not see improvement. An alternative would be to train and educate very good youngsters/students – in other words, to shape a young generation in a way that generates success for them and the company. However, this process takes time, and you may not be able to afford it at your current stage of development – but in the long run such an investment should be preferred. The people you train have a different, invaluable kind of trust in you, and they will identify strongly with the company.
Diversity is currently a big topic. It is also important to embrace diversity and bring people of different professional backgrounds, gender, cultures and ages together and create synergies. One way to make this possible is to create interdisciplinary teams. Bring people together and help them have the right environment to efficiently work together.
So, you’ve found rightly skilled people. Your work doesn’t stop here. Bringing skilled people on board does not mean they will work well together and produce the best outcome. Outline the company’s values and take care that decisions and new hires are in line with these values. What kind of vision does your company have? What are your values? What is your mission? All these topics have to fit with your employees to a certain or better extent. Essentially you should make sure that everyone is working and moving in the same direction. You need team players who believe that together they can achieve more than alone. There is less space for egoists in such an environment. It doesn’t take much to identify egoists and recognize their behavior. If you have people in your company that are only focused on making money and getting rich, better let them go sooner than later. They won’t be good for the company in the long run. You want team players in your startup, people who believe in the mission of the company.
So, be sure you have skilled people on board, but be even more sure that these people are a good fit, that they understand the vision, the mission and have similar values. If you as a leader want people to follow you, be sure that there’s mutual trust.
“Employees that want to follow a leader will always ask themselves these three questions:
- Is he/she credible?
- Is he/she talking about me? Am I engaged and valued as an employee?
- Is he/she planning a future for all of us, or is he/she talking about his/her own future?
If they answer “no” to at least one of these questions, be sure that you’ve lost this employee and they’re not following you. It’s better to have no strategy rather than having no trust of your employees. Make sure you have their genuine trust.”*
Which brings us to the next topic – Management.
You see the true face of people when things get difficult.
At the start of a startup’s lifecycle, the founders are usually also the management. More often than not, they have never learned to manage or lead a company. Therefore, these people have to grow with the company, and that’s normal: nobody is a born leader. Nobody becomes a leader overnight and everyone has to go through a learning curve. Sometimes it works, sometimes it does not. If it’s not working, you have to ensure two things:
1. Be sure that the environment you build is right and meaningful (if you’re imposing a lot of hierarchy, perhaps this will be an issue).
2. You have to provide everything people need to make the work happen. If you are sure you did, but things still aren’t working, look at the personal level. Maybe people are occupying wrong positions and you are facing the Peter principle:
If the business is not working, most of the time the management resorts to cost-cutting. Practically, this means firing people. If this works, management will keep their positions. If it doesn’t, shareholders and investors may decide to remove them from leading positions and replace them with someone from a big corporation. This is usually a mistake. Investors have money but don’t usually have a clue about the product or how to build the company. One thing investors often have besides money is this unshakable conviction that they know it all. This is something to watch out for and challenge when necessary.
What you should keep in mind is that putting an external person in a management position who starts telling everyone who the boss is now most likely won’t be accepted. An important question at this junction is if such a strategy is in line with company values. Most likely it isn’t. It creates a „take-it-all mentality“ in the company and only reveals egoistic behavior. People on all levels start to be cynical, they learn from management’s behavior and will act accordingly. At the end of the day employees will sense that egoistic behavior is beneficial for the company, for management, and for themselves.
People at the roots of a startup, the founders, come up with a creative idea and define the main drive of the company, normally the main drive has something to do with innovation in a particular field. Replacing the founders with corporate management will have a huge effect on the company and will probably change it beyond recognition. Worst case scenario: new management will have other values (i.e. profit driven), potentially not aligned with the companies defining values, shifting the foundation upon which the company was built. A change into this direction can work, but it will only work if you have the genuine trust of your employees, if the management can define and communicate the new vision, mission and values to the entire team.
Let’s face it: employees do not usually have trust in the new management – and why should they? Considering this statement, the new management have two ways of moving forward: remove all employees that do not want this change of values, or try to suit everybody. Suiting everybody is a form of manipulation. The employees will tolerate the new management only because of power and position. The new management will try to promise more money or a promotion just to have their formal acceptance and bring them to heel, hold them under control, hold them accountable.
The new corporate managers probably won’t be as creative as the founders and they probably won’t be all-rounders used to thinking outside the box. They most likely won’t be innovators in the field, but rather administrators. Unfortunately, an IT company without vision and innovation won’t keep good employees and won’t survive the future in a field where the environment changes constantly.
New corporate management face the additional problem of proving their existence in the company. After a year, they have to face the investors and show them they’ve reached goals successfully so that they can retain the right to occupy their position. This process is usually very money-oriented, representing the biggest break with original company values. Such a process creates unpleasant pressure for employees, and there is a risk of fostering egoistic behavior, a lack of integrity, and plain old slimy fake behavior from management (potentially infecting all levels of the company) in efforts to appease investors and employees. But let’s face it, startups usually employ some of the best people in the field, people who will see right through any kind of placating bullshit from the new management. This whole process will slowly but surely decrease morale and motivation.
Visionary management who has the trust of the employees and align with them on the vision, mission and values of the company is key to the continued growth of any company.
In a startup, you have Founders, Investors, Management, and Advisory Board, a.k.a. a lot of politics.
- Founders’ goals are usually (and should be) mission-driven. They build the company with passion and almost never because of money. That said, they are happy if they can sell their company one day and gain profit from the shares.
- Investors have money, but usually have no clue about the product or how to build the company. If they had, they would have used their money to build their own company. Investors are people who want to invest money to get even more money.
- Management must be mission-driven. They should be focused on leading the company and making it successful.
- Advisory Board are there to give advice if asked – not more. They are not there to take decisions but rather to give advice and get paid for it.
Potential problems of politics:
- Founders who focus only on money and not the mission of the company.
- Investors who manipulate and drive the company away from the founding mission.
- Management who focus only on money and not the original mission, or who do not understand and or align with original mission of the company.
- Advisory Board who manipulate and drive the company in a wrong direction.
A company normally falls prey to the above-mentioned problems because it lacks leadership. Having a leader means having a person (i.e. CEO) who leads the company in a charismatic and straightforward way. A leader is someone who is organized at the C-Level and someone who is very clear about the future of the company and what role Founders, Investors and Advisory Board play in it. It must be someone who can put these stakeholders in their place when they interfere on matters they have no clue about. A leader is someone who doesn’t have a problem with challenging the status quo. Finally, a good leader is someone who is ready to fight for the mission of the company.
No company with passion for its business / product is money-driven but rather mission-driven including the employees. Profitability is the basis of their existence, but not the purpose of their actions. A company should want to achieve something beyond lining investors pockets. It should want to change something for the better. And when an employee sees this happen step by step, one bit at a time, they are confident that coming to the office every day is truly worth it.
Author: Peyman Pouryekta
Reviewer: Olga Dmitrochenkova, Dani Brown
* Quote: Reinhard Sprenger