The majority of all startup firms fail for one very specific reason – and it’s NOT why you think.
It’s not their product. It’s not the service or technology. It’s not even marketplace developments. It’s because of people.
A well-known statistic states that nearly 70% of all startups fail within their first 10 years.
Most of those failures can be traced back to people issues.
If you think that surviving the startup phase reduces these challenges, you’d be wrong. Managing the demands of a growing workforce is the single biggest challenge for any growth business at any stage of maturity.
The hard reality is most businesses find it hard, if not impossible, to scale because they can't manage the human element. They fail at a critical inflection point in their trajectory because they lack the EQ perspective in their IQ approach.
People, not product
The biggest obstacle constraining growth businesses is people, not product.
Many acclaimed authors such as Noam Wasserman (The Founder’s Dilemmas), Peter Drucker (The Effective Executive) and Jim Collins (Good To Great) have all discussed the importance of this 'people dynamic'. Because how a company’s various teams are deployed, led and supported ultimately becomes the handicap to revenue expansion for many growing firms.
Younger companies are most susceptible to this danger because these organizations are usually built on the 'hustle' of youth and contribution of individuals. But as these companies become more established, they often cannot scale to the next level because their people in leadership roles are not necessarily people' people.
Of course, business divisions must be built on functional specificity. Yet building the culture and ethos is paramount, especially in the growth stage. Making matters worse is the current focus on metrics, measurement and this religion of data that leads many companies to focus on the quantitative at the expense of all else. While data can certainly drive efficiency, the real magic of growth stems from the people element. So ultimately, scaling starts with dynamic leadership and vision not bean-counting.
Leveling Up Requires People' People
It doesn’t matter whether yours is a founder-led startup, a public company or anything in-between. Your challenge remains the same: to scale the business. Perhaps the clearest illustration of this dilemma comes from fast-growth, technology firms that are rapidly forced to transition from 'Go-to-Market' to 'Go-to-Scale'. Initially, a founding team of strong individual contributors wearing many different hats may well establish a strong product-market fit. But taking a business to scale requires further specialization, not to mention a certain level of experienced supervision. This is the crucial point - because it’s this 'leveling up' phase that can either unlock or inhibit a company’s trajectory.
Alignment
Scaling anything requires the proper strategy. But this really means operational depth more than operational efficiency. The people inside your organization must be aligned with the mission. Jeff Bezos, Steve Jobs and Richard Branson are fine examples of CEO’s who succeeded in pulling this rabbit out of the hat.
But what if you’re not Jeff, Steve or Richard? What should you do? How do you take your company from $10 million to $100 million in revenue, or from $100 million to $1 billion, in this current environment?
Growth Concepts
Below are three simple concepts to help your business become one of the small minority of companies who are able to leapfrog the daunting 'level up' stall-out points that inhibit so many growth businesses.
1) Re-imagine the CEO role
Your CEO’s job is no longer chief cook and bottle-washer. Rather, the Chief Executive’s SOLE responsibility is to align your company’s people around the long-term vision. During your 'go-to-scale' phase, the single most important activity of the CEO is selling vision. Everyone needs to be clear on precisely where the business is going. The CEO must always, always be hammering on their vision of WHERE the ship and its crew are headed.
2) Change your criteria for hiring
If you are to make the swing to greatness, you must minimize the common practice of simply hiring trusted friends or close second degree connections. But neither can you simply choose folks for their experience, intellect or college transcripts. Instead, your acquisition of talent must now become rooted in the concept of: “Ask something great/Offer something great.” With all your hires, you must now ask for greatness up front. But in return for their commitment, you must deliver on four promises of your own:
- You will reward hard work with opportunity
- You will take an interest in the employees as individuals
- You will make all employees feel like 'a member of the family'
- You’ll call on each employee to be part of the mission
If you are authentic in these areas, your employees will run through brick walls for you.
3) Make the hard decisions.
'Making the hard decisions' doesn’t mean cutting heads or shutting down divisions. It means honestly assessing where your firm excels and more importantly, where it doesn’t. It means those morning sales meetings where the team shares their weekly wins have to stop. Instead, pivot these into 'tough love' sessions where your client’s negative feedback takes the center stage. Improvement requires honest appraisal and a sharp eye to call out the naked truth. If your culture doesn’t demand it, you will fail.
Look past the trees to see the forest
Often, the leaders of organizations may not have the critical eye or the backbone to handle the raw demands of this responsibility. Sometimes they do. Or sometimes they bring in outside help to assist them in this. But if you bring in outside assistance, you must guard against the single most common pitfall in this approach: saddling your 'external eye' with triviality.
The reality is the CEO or management team that is hyper-focused on specific, micro-issues often loses sight of the big picture. Worse, they can hamstring the very people who are able to help them with the needed perspective. As a leader, you stand a much better chance in navigating the ship through the rocks, when you have access to a person or a group of people who’ve traveled the passage numerous times before.
Table stakes
Winning as a team isn’t some philosophical goal on a mission statement. It truly is the only route to your firm’s success. Ironically, competency and performance are not your end goal. Those are merely table stakes in today’s environment. What really ensures your outcome is the perspective of EQ, people-orientation and firm alignment overlaid onto the operational efficiency your business requires. This must be done under your leadership and carried out by your management team. This is no easy task because there is always an art to successful execution. You cannot outsource the leadership of this and your management team must be unified in the strategic approach. Of course, your employees must also be fully aligned.