So, you've made it past the initial chaos of the seed stage, you’ve high-fived some milestones, and secured some sweet funding. You’ve built a tight-knit team and it’s all hands on deck getting after your dream. But, hold up, there's a sneaky little hurdle awaiting you just around the corner - breaking through that 20-employee mark. Yep, you heard it right, the magic number where things start getting real - you might fluctuate between motivation and exhaustion, see duplication of effort, feel like misunderstandings are all too common and things are breaking.
This is what we mean by the hidden hurdle. Through our work with over 100 startups we’ve tracked a common pattern - things starting to unravel when the company reaches around 20 employees. For some, this is earlier, for others, it hits around 40-50 employees, but to make things simple we’ll stick with 20. Here’s what we’ve learnt from those that managed to jump the hurdle.
But first, why do things start to fall apart as you reach 20 employees?
Culture is harming not helping
Culture happens whether you plan it or not and if your culture doesn't match where you’re headed you are going to attract the wrong people, have people pulling in different directions and potentially being rewarded for culturally harmful behaviours. As your numbers increase, you are reliant on your culture to set the stage for your team, outlining the behaviours you value.
Communication isn’t so easy
Everyone used to know what was going on at all times, and now it’s not so simple. When you had 5 people there were 10 lines of communication, mind bogglingly at 14 people, this skyrockets to 91 lines of communication! No-one can keep that straight without some planning (and the support of technology, let’s be real we’re in startup land). To succeed at scale requires an adjustment in communication methods.
You can’t do it all. At around 20 employees you can no longer manage everyone yourself. As a leader, you’re time poor, stressed about the next capital raise, achieving product market fit, or hitting your milestones and forced to delegate. For some, this is a blessing, for others it can be hard to let go. In any case, some of your earliest employees may no longer report to you and may find this transition difficult. You also are one step further removed from the day to day customer service and delivery.
Shift in business focus
The focus of the business shifts towards building operational capability over continuous innovation. This can be tough for those who have been with you from day one.
People want to grow
People start to care about their careers. They want to see growth and development and may have experienced what feels like a demotion by no longer reporting to the founder. They may be looking for growth opportunities that you can’t guarantee at this stage.
The answer: deliberate organisational design
Our experience and working with 100+ startups has taught us some lessons about how to push through the 20+ barrier. Across industries, markets, and businesses of all shapes and sizes, it all comes back to deliberate organisational design. Simple answer, complex execution.
What is deliberate organisational design?
Organisational design is the analysis of the gap between your current and desired state and the design of practices that will bridge the gap. Put simply, it’s designing solutions to get you where you want to go.
Here’s a high level roadmap:
Start with leadership The most important question to ask yourself is do I want to lead this company through the next stage of growth? And, am I the right person to lead this company through the next stage of growth? If you are, then it’s your job as a leader to see people through this change. The single most impactful thing you can do in times of change is to create clarity through clear communication.
Make communication a given with operating rhythms An operating rhythm is the process of communication between departments to ensure that operations are not interrupted. Operating rhythms impact the flow of communication and have a direct influence on your culture. Without operating rhythms any changes can be hard to make stick. Get your team together and design the operating rhythm for one particular part of the business e.g., design the operating rhythm for product meetings including the purpose, the agenda of who attends, setting pre-work (eg gathering customer feedback), timing etc.
Mind your hiring Hiring the wrong person in the wrong role is messy and the clean up is long and arduous. Take the time to build out your future structure in line with the business ambition and hire the right people for your stage of growth. How do you define the ‘right people’? Map out the mindsets you require from your team eg at this stage you need people who are adaptable, will muck in to any task required and are problem solvers. Down the line you may bring in people with a more structured mindset.
Cultivate your culture Define your culture, align everything to it, and throw a celebration when you hit those milestones. Cake optional, but highly recommended. The key is to design it, align it and bring it to life daily.
Reduce your mental load by using technology With more people comes more responsibility (similar to having great power). Technology is your friend for keeping on top of all of your responsibilities and keeping in touch with your team as it grows. We’ve seen founders; do weekly livestream company updates, use slack to build a birthday-bot or bot to celebrate a work anniversary, hold virtual AMAs and more.
As you kick into 2024, take some time to consider your org design, and then get back to high fiving milestones. Your org design is not just a plan it’s a blueprint for your future success (and hopefully a few less grey hairs). If you’re heading towards 20 and want to get prepared or want to learn more about org design get in touch with Pip@sproutpeople.co.