Are you the one constraining your business?
Snakes shed their skins several times a year throughout their lives, and when they’re young, it can be as often as every few weeks. While they’re shedding, and immediately afterwards, they’re incredibly vulnerable, but it’s a transition they need to make because they’ve become trapped in a skin that worked well for them when they were smaller, but has started constraining their growth.
Leadership responsibility works in exactly the same way, especially for founders and CEOs of growing businesses. From their initial foundation, organisations need to pass through several transitions if they’re to continue to grow. The first two of these are by far the most critical, and for first-time founders, they’re often the most difficult, because they involve letting go of responsibilities.
For Microsoft, 1980 was the year of their first critical transition. That year they went from $2.5m to $7.5m sales, from 28 to 40 employees, and Bill Gates hired their first professional manager, Steve Ballmer. Ballmer remained Gates’s right hand for the next twenty years, “hiring lots of good people” according to Gates, and finally taking over as CEO in 2000. His appointment was pivotal in enabling Microsoft to pass through not just the first growth transition, but the second as well.
That first growth transition is about management. It usually becomes necessary somewhere between £3m and £6m turnover, or when staff numbers get to around 20 to 40 people; basically, when the boss can no longer be directly responsible for everyone and everything. Up until that point, the CEO is still the head of marketing, of sales, of manufacturing, of purchasing, of logistics – you name it, they’re in charge. Unless they start sharing responsibilities and delegating some of the decisions, at that point they become a bottleneck, and the main constraint on growth.
The problem I see most often in entrepreneurial businesses, is when founders think they’ve made this transition, but in reality, they haven’t. Rather than bringing in good managers from outside, the CEO promotes the longest-serving people to lead their growing teams. It can work, but it rarely does. There’s a huge leap required from being the best designer, to getting the best out of a team of designers. They may have the manager job-title, but more often than not, they’re still “doing stuff” rather than leading people and taking decisions. They may have been granted the captaincy on the field, but they’re not really the manager. And that catches up with organisations when they need to make the next transition: leadership.
The need for that leadership transition can come about for a couple of reasons. It’s often triggered when staff numbers approach the hundred mark, or when CEOs want, or need, to focus on other things, like mergers and acquisitions, new business ideas, or making a move towards retirement. By that time, the CEO needs a leadership team who can run, grow and ultimately evolve the business without their day-to-day involvement, and at least one deputy who can step in and lead when they’re not around.
The problem is, if the CEO didn’t start bringing good, professional managers in during that first transition, he or she now has a leadership team that’s not ready to lead. It’s probably made up of technical experts with scant experience of other organisations, a low focus on developing and leading people, no background in running a business of the size you’re aiming to become, and still looking to the CEO for decisions and direction.
Handing over the reins for decisions and departments can feel scary and vulnerable for a founder, but unless you start doing it early, your growth will hit a ceiling. Likewise, passing over your earliest employees for promotion, and bringing in an outsider instead, can feel painful, even disloyal for a founder; but replacing a leadership team made up of those same people, a few years down the line, is a far more painful prospect, trust me.
The longer you put off shedding your organisational skin, and bringing in really good people who can genuinely take over your responsibilities, and who can recruit and develop new management talent, the more likely your growth is to stall. Is it time you shed some skin?