Being deeply interested in the management practice of startups, I’m always thinking of analyzing which traditional management techniques apply or don’t apply to startups.
Startups are different creatures and they require a different way to being managed, but to what extent, and until when?
What troubles me sometimes is seeing startups that re-invent tried and true management principles, or misinterpret them, or even ignore them, for a lack of interest in researching or learning the prior knowledge that already would have served to solve the issues they face.
People, Products and Markets
Fundamentally, small companies differentiate themselves by managing 3 big variables: People, Products and Markets. In a startup, what is primarily special is that the “Time” factor lives on a different scale than in larger companies. Startups have a greater sense of urgency to grow fast, scale fast, and adapt fast.
With People, you’ll start with a small group of highly self-motivated individuals as your founding group until you realize that you need to start managing these people more methodically, probably around the 15-20 people mark.
With Products, you’ll start with a Lean Startup methodology, but as soon as you hit product/market fit, you’ll need to orient your product management to fit the intent of your business model and revenue growth objectives.
With Markets, you’ll start by adopting growth hacking as your main growth trick, but then you need to evolve towards more sophisticated marketing, branding and outreach activities, whether you are reaching consumers, developers, business partners or enterprise users.
One of the determining factors related to whether a startup should be managed like a startup or not depends on whether the processes and rituals are well formed, or whether they are still being defined and refined. The breaking point for “managing” depends on whether you have stabilized your compass and you know where you’re going. Otherwise, you are probably still trying to take off, or on your initial market attacks. During those initial stages, management skills and techniques may not be as critical yet, but if you have reached product/market fit, and are on a growth trajectory that is scaling nicely, then management matters more than anything. And the cracks will show if you are growing, but not managing your company well.
I have recently taken issue with a couple of management principles that have been wrongfully bashed or dismissed, due to either a partial understanding of their intent, or to a sloppy implementation: Management by Objectives, and the Feedback Sandwich. I’ve explained MBO’s in Don’t Abolish MBOs, noting that linkage to programmatic bonus formulas was one of the reasons for its criticism. And I’ve defended the Feedback Sandwich in a comment on AVC’s post Taking To Dos and Moving Up The Y Axis, after reading that it has demonized by Ben Horowitz in Making Yourself a CEO, a post that contained some good advice, all of which being actually congruent with the proper way to provide feedback, sandwich style.
Unless you’re planning to try a Holacracy type of organizational structure, here are 3 tried and true management related practices that apply to a company that is growing beyond the 50-people mark. I’ve chosen to focus on these ones, but that doesn’t mean there aren’t others.
> Alignment System.
Creating alignment between and across the various departments becomes increasingly difficult as the company grows. What you need to keep alignment in check is a planning method where each objective is tied to a strategy and metric that cascades down or across. A very simple nugget to remember is: where does my objective link into the organization? Who else holds a piece to help me achieve my objectives? One person’s objective is another’s strategy with its tactical implementation and metrics. Alignment is not just about communicating goals. It is about enforcing their realization in a tightly knit way. I’ve written about this, in Don’t Abolish MBOs, using a simple football team analogy example. A tight alignment can make a huge difference in ensuring the entire company is working together towards achieving common goals. To stay agile, implement short weekly review cycles so you can quickly adjust what is necessary.
> Being People Managers.
People are a company’s most valuable asset, and so are managers. Employees will quit if they have a bad boss. Invest in training or teaching managers how to manage people. It’s a myth that people will manage themselves, or that you can focus on objectives only while ignoring the human side. When all is going well, it’s easy to manage people, but when there are issues, challenges, changes required, that’s when people management skills can make difference. In reality, every manager and leader will have six types of conversations with their employees, and they need to be well versed at it. The six types of conversations are about: 1) Alignment, 2) Directive, 3) Coaching, 4) Supportive, 5) Delegating, 6) 1:1 Catch-ups. You’ll need to train your managers how to properly give feedback, conduct performance evaluations, employee development plans, coaching sessions, change management, etc.
> Sales training.
Many startups exit before selling much of anything. On the high-end, Instagram and Tumblr were in that league, with a billion dollar valuation because they have managed well a viral product. Of course, some companies have great products that sell themselves online with no direct sales requirements, (e.g. Basecamp, Evernote, Dropbox, Eventbrite), but most other companies have to sell something at some point in time, in order to grow. So, sales training is really important: strategic selling, account-based selling, profit oriented selling, power base selling, etc. Even if all you have is inside sales, train your sales people formally and methodically. Leads and demand generation have changed with digital marketing, but you still need to sell to another person or group of people. Companies that don’t end-up with a strong sales culture are rarely able to grow to their full potential.
Manage Your Startup
Each startup CEO who has scaled their company ends up developing their own style or management framework. Rand Fishkin, CEO of Moz (~120 employees) developed his Vision-Based Framework. Matt Blumberg, CEO of Return Path (~400 employees) refers to his business operating system in his book, Startup CEO. Watch Dick Costolo in the PandoMonthly interview (around 20:00) go to great lengths explaining how he fixed the internal alignment issue that Twitter had before he joined them. The symptoms were a passive-aggressive culture where employees would leave a meeting with a smile on their face, instead of a conviction and understanding about doing what was required. That was in part alignment related (understanding), and in part culture (accepting the process). Watch Mark Pincus talk about the importance of “process” at Zynga from the early days, “everything is a process”, even ordering company food.
There are lots of traditional management principles embedded in these examples. Here’s the issue I see sometimes. Startups come out of a lean development, product iterations, pivot mentality that engenders a lot of trial and errors to reach product/market fit. So, they think that management and managing scale are also trial and error tasks, but it doesn’t have to be. You’d be wasting a lot of time doing that. Of course, the luckiest CEOs will learn from their Board members, advisors, peers, coaches, and VCs. My suggestion is to know what you need to learn before you need it, not after.
The bigger the company, the more orchestration, co-ordination becomes important. What often goes astray is Alignment. Work on it, precisely.
Don’t let lean startup become a crutch to your growth or business model realization. I re-played and analyzed the theme that Marc Andreessen echoed a few months ago, and recently again at the Lean Startup conference, Not every startup should be Lean Startup or embrace the pivot.
If you want to innovate with management, don’t be “cute” with ideas, but rather do something really significant, and explain its impact and benefit. Joel Gascoigne, CEO of Buffer has sparked a storm of commentaries and positive reactions when he disclosed openly all salaries and compensation formulas at Buffer, via a significant post, Introducing Open Salaries at Buffer: Our Transparent Formula and All Individual Salaries. I’m sure that post is causing other startups and VCs to analyze the implications of what Buffer has done, and perhaps thinking about applying the same, if not even more openness.
The secret to managing growth is to keep breaking-up the organization into nimble, fast, startup-like sections. There is nothing wrong in having frequent re-organizations. It re-invigorates and re-energizes people, because it is typically accompanied by freeing them up from certain tasks, and allowing the double their focus on fewer areas, with greater depth.
So, when it comes to management practices, start by applying what already works, and adapt it or modify it to make it fit what you need, instead of re-inventing everything from scratch, just because you can.