Failing to Scale: The Crisis among Start-ups

There has been much press declaring the fall of American entrepreneurism.  Cited in a 2015 Wall Street Journal story, the Kauffman Foundation analysis of US Census data determined that start-up momentum in the US had stalled. (WSJ Article)  Additional publicity has blamed sputtering entrepreneurship for our country’s slow economic recovery.  Gallup CEO Jim Clifton stated, “We are behind in starting new firms per capita, and this is our single most serious economic problem.”

Venture capitalist Marc Andreessen tweeted his provocative take on the relationship of entrepreneurship and the economy.

A 2016 study by MIT researchers tells a different story.  Using more granular measures of entrepreneurial quality, the research team concluded, “Starting in 2010, there is a sharp, upward swing in the expected number of successful startups formed and the accumulation of entrepreneurial potential for growth.”

           

While the MIT research showed entrepreneurship on the rise, they highlighted a more vexing issue.  “To the extent that the current state of American entrepreneurship is facing a crisis, it is not the rate of creation of high-growth start-ups or in the initial funding of those firms but instead in the potential of those firms to scale.”   

            The conclusions of this groundbreaking investigation square with my own experience.  In a blog posted last October, I outlined how Founders struggle to pilot their businesses through the turbulent Transition Stage between Start-up and profitable Going Concern.  The MIT research team added, “Even as the number of new ideas and potential for innovation is increasing, there seems to be a reduction in the ability of start-ups to scale in a meaningful and systematic way.” 

            The MIT report does not provide recommendations for how to address the problem.  I see this gap as well in my work with start-up leaders.  There is no consensus or common approach to deal with this perplexing phase of a company’s life cycle.  

While well suited for launching a start-up, Founders are less experienced in the organizational and cultural nuances needed to scale their business.  Collapse during the Transition Stage can be driven as often by internal meltdowns as missteps in strategy or product design.  

Why is this?  In my view, C-level leaders are focused so heavily on “What we Do”, they neglect the appropriate balance of “How we Operate.” 

Young firms tend to rely on a few brilliant minds at the top to outsmart the market.  Today’s complex and competitive business arena requires a broad array of perspectives.  Adopting the axiom ‘Nobody is smarter than Everybody’, companies tapping the collective wisdom of the entire team are best positioned to seize market opportunities.

Unfortunately, organizational friction can stymie team member input.  As headcount soars so do functional structures, hierarchies and other vestiges of bureaucracy.  Turf battles, silos, political maneuvering, and lack of authenticity inhibit collaboration.  Trust breaks down.  Staff engagement drops and innovation stagnates.

            So how do Founders/CEOs minimize organizational friction while keeping their firms nimble and quick?  What aspects of “How we Operate” enable start-ups to scale?

Two key areas to consider: Core Values and Collaborative dynamics. 

Clearly articulated Core Values and explicit cultural norms are an excellent first step to sustain growth.  Most young firms have defined their Mission, Vision and Values.  Some design snazzy posters to plaster around the office.  Noticing a set of eloquent Core Values artistically rendered on the conference room wall, I asked a CEO how well his team was living out these standards.  He looked at me quizzically.  Shaking his head, he realized his team had not considered how to measure this basic of company progress.

In one start-up where I served, employees could name the company values but were confused over what they meant or how to apply them.  Our Values were vague words to them, too open to individual interpretation.  To rectify the situation, we identified a series of attributes to define each Core Value.  Adding explanatory prose helps.  

We augmented a section of our annual reviews to rate how well employees exemplify these virtues.  This evaluation reinforced the meaning of our Core Values while assessing if our organization was operating accordingly.

Culture is another nebulous concept.  While all firms champion a company culture, their personnel may struggle to pinpoint the specifics.  Culture is regularly expressed in terms of dress code, vacation policy, office décor or team building exercises.  This cursory view misses the critical inner workings defining "How we Operate."  Too often, the firms's implicit cultural norms are left unspoken, creating ambiguity and confusion, particularly among new employees.

Rules and handbooks do not define company culture.  Passions and purpose do.  Culture is the expectations between us as well as interactions among us.  Our approach to prioritization, decision-making, conflict management, meeting protocol and the role of leadership are the life-blood of the organization.  Communicating openly about our cultural underpinnings connects team members more deeply with one another while enabling the company to thrive.

A second key aspect of “How we Operate” is Collaborative dynamics.  In a number of posts, I have dug into the foundations of Autonomous Cross-functional teams, Distributed Authority, Transparency, Peer Accountability and an emphasis on leaders as Catalysts and Coaches rather than commanders.  None of these collaborative cornerstones are revolutionary.  In fact, many firms have tested these concepts on special project teams or key initiatives.  The intentional integration of these five dynamics enables organizations to operate more fluidly.  Staff members have a stronger sense of ownership.  Teamwork flourishes.  The steady flow of creativity inspires the innovation driving further growth.

With ample capital flowing into the venture space, start-ups will continue to sprout.  To meet the return expectations of investors, the most progressive leaders are experimenting with fresh organizational paradigms to scale their start-up and create a profitable business.

Next Generation Organizations: Peer Accountability - Part Deux

           

High growth leaders are always seeking ways to spark innovation from their staff.  Experimenting with progressive organizational paradigms is an emerging strategy. 

Thriving collaboration and employee engagement result from well-conceived approaches to  “How we Operate”.   Core Values are clearly defined and measured.  Explicitly communicated cultural norms and expectations enable teams to work together more fluidly and generate the market breakthroughs needed to sustain growth. 

Autonomous, Cross-functional Teams, Distributed Authority, Transparency and Peer Accountability are part of the next generation of organizational design.  

In the last post, we explored the power of Peer Accountability to create ownership within the ranks.  Relationships with colleagues are important in today’s workplace.  Tapping these bonds can create greater accountability than traditional superior/subordinate systems.  Peers hold one another responsible for deadlines and deliverables as well as inspire teammates to perform at their best and break new ground.  Side by side every day, co-workers have the richest insight on how teams are operating and steps to improve.

While a powerful source of productivity, Peer Accountability is not without downsides.  There have been several well-publicized accounts of this new approach gone wrong.  So how do we create the ideal situation for success?

Peer Accountability is most effective when companies promote organizational trustworthiness, authenticity and healthy conflict.

           

Trust is fundamental to collaboration.  Young firms understand this dynamic and many operate more like a family than an institution.  In a trustworthy environment, employees see the best in each other rather than the worst.  They celebrate one another’s strengths instead of carping on their flaws.  They grant the benefit of the doubt, an aura of grace and mercy where forgiveness reigns over bitterness and resentment.  When individuals look to help their team members grow, serving each other is as important as serving the customer.

Strong connections among colleagues as well as management engender a setting for effective Peer Accountability.  Authenticity and candor are cornerstones.  People are real with one another; open, direct and honest.  There are no masks or curated reputations.  They respect each other enough to speak the truth.  And they are unafraid of being transparent about who they are and what they stand for.  Staffers feel safe enough to be vulnerable, admitting fears or concerns, disclosing mistakes or willingly facing the inevitable failures that come with innovation.

Peer Accountability is natural when trust and authenticity are norms.  Individuals are open to input, valuing the constructive feedback of their co-workers to further their professional development and improve team dynamics.   
For many, Peer Accountability seems like a formula for conflict.  Truth is, conflict is unavoidable in a robust, growing organization.  Bright, passionate people will have differing opinions.  Sadly, too many companies wrestle with unruly, rancorous conflict or worse, conflict avoidance.

We have all experienced interactions on the conflict continuum, some constructive and others damaging.  Neither extreme is ideal, either.  Healthy conflict is a balance point where parties share relevant information, feel heard and respected while having optimism in each other.  Debate is open and unfiltered.  There is a willingness to disagree yet a commitment to support the resolution regardless of the outcome.  

With healthy conflict, teammates are not worried about questioning the ideas of others regardless of where they sit on the Org chart.  The best idea does not have to be one’s own and deliberations among one another are simply part of reaching the optimal solution.

With a foundation of trustworthiness, authenticity and healthy conflict, the power of Peer Accountability can be fully leveraged to help businesses thrive and scale.

In our next post, we will more examine how Transparency augments Autonomous Teams, Distributed Authority and Peer Accountability as well as laying the groundwork for leaders to serve as Catalysts and Coaches. 

A Leaders Path to Self-Discovery

An executive contemplates whether to continue his entrepreneurial pursuits or go back to a successful Wall Street career.  A founding CEO realizes she must rely on untested relational skills to scale her growing technology firm.  An accomplished leader finds his chosen profession less and less engaging.

“Now What?!”

This question comes at us from many different angles.  The timing is never good.  And the question refuses to go away unanswered.

Solving for “Now What?!?” requires Self-Discovery.  We must be willing to dig into the depths of who we are and where we stand.  Introspection is scary stuff.  Examining the truth about our nature and character is risky.  We may not like what we see.  We may have to open old wounds.  The prospect of exposing our vulnerabilities or uncovering the roots of fears and insecurities can be daunting.

So why bother?

As our leadership challenges intensify, we have to summon more from within.  Additionally, market demands are changing.  The best young talent expects a deeper connection with their leaders. Authenticity and true transparency are necessary to head today’s more collaborative workplaces.  Before opening to others, we need to know our self.   

There are many means of self-examination.  An approach I recommend touches four key areas; your Inspiration, your Perspiration, Peace and Pursuit. From there, you can hone in on the big question: Who am I? 

Here are a series of questions in each segment to help you in the introspection process.

What inspires you? What ignites your passion most?  What are your primary drivers? If everything in life went according to your plan, where would you be in 10 years?  What would your life look like?

What are your biggest fears in life? What’s the root of those fears? What are your greatest insecurities? Uncertainties? Anxieties? What causes the most stress? Why? What vulnerability are you least comfortable exposing? To whom? Why?

What does ‘being at peace’ mean to you? How much do you want that? How does peace differ from happiness? What brings joy to you? What do you appreciate most in your life?  Which of your strengths or gifts are you most grateful?  What will make you truly content?

What are your greatest longings? Your highest ambitions? What achievements remain most alluring to you? Why? What will these deliver? What sacrifices must you make to get there? Why is that worth the pursuit?

We can examine "Who am I?" from multiple perspectives; Identification and Validation (see this blog).

For Identity - How do you define yourself? By career accomplishments? Professional expertise or title? Do you identify yourself as a Leader? Good spouse or parent? Community Activist? Is who you are today the legacy you aspire to? If not, who do you wish to become?

For Validation - Where do you stand? Have you made it? Do you count? Are you worthy? More importantly, who is measuring, what are the standards and how will you know when you've gotten there?

Self-Discovery requires rigorous thought.  These questions are not easy to answer. They need to be explored from multiple perspectives. The process can’t be rushed.

So what’s the best approach?  Block out some time alone.  Find a secluded place. Turn off your phone and emails.  Quiet all the voices in your head.  Let you mind be still.  Disengage. Then walk through the questions slowly and deliberately.  Write down your viewpoints no matter how outlandish or embarrassing.  The answers are for you.

When finished, a clearer picture emerges.  Our outlook will be refreshed.  A new sense of hope will arise.  With a broader perspective, some anxieties and fears will seem trivial.  Other dreams and desires will be vitally important.  We will chase fulfillment over achievement.  We will realize satisfaction is more rewarding than success.  We won’t settle for happiness when joy is possible.

With a deep understanding of who we are, we will lead with greater confidence and conviction.  We will see ourselves as catalysts not simply commanders.  We will inspire and enable.  We will appreciate the wisdom of investing in others rather than serving ourselves.

Most importantly, when we complete the journey of Self-Discovery, we will have clarity and focus on what matters most.

Have fun!!

How to Answer "Now What?!?"

So we have achieved success. 

Perhaps we climbed the ladder at our firm.  We launched a start-up or our own fund.  We attained some recognition in the market as an expert.  As a result of these accomplishments, we now have many of the personal accouterments we always desired; a beautiful family, nice home and a fat bank account enabling loads of leisure activities.

Its all good, right?

No exactly.  We still struggle with anxiety.  We remain restless.  We can’t shake the nagging sense of emptiness.

“Now What?!?”

The source of these emotions is a mystery.  We don’t know how to find the antidote.   We feel adrift, uncertain where to turn or who to speak with.  Are we the only ones feeling this way?

“Now What?!?”

Careers are a journey.  Along the way, we experience plenty of twists and turns, some planned and some not.  Occasionally, we need to stop and assess where we’ve been and where we stand. 

Taking the next step is hard if we don’t have our bearings on the Destination.  Without guide posts, navigating through lots of options can land us in a ditch.  And we want to be sure we have enough drive to reach the finish.

Having traveled the Self-Discovery path with many executives and leaders, I’ve found a few important steps:

•       Articulate the Purpose for your work. (the Destination)
•       Define your Core Values  (the Guidelines) 
•       Identify your Strengths and Engagement Drivers  (the Engine)
•       Determine your primary Motivators (the Fuel)

Purpose:

The Purpose for our work helps establish our Destination.  Purpose is the point of our career, the reason for our work and the impact to we wish to make.

To be as successful as we have become, we have been blessed with great skills and abilities. A Purpose defines how we will use these gifts to benefit something larger than ourselves. If you’re struggling with a lack of meaning, it’s likely your Purpose is either undefined or simply too small.

Here are some questions to help define the Purpose of your work:  Do you want to build something lasting? Do you want to disrupt the status quo? Do you want to initiate change? Do you want to solve important problems? Do you want to stand up against injustice? Do you want to make people’s lives better? Do you want to invest in others? Do you want to inspire the next generation?  Do you want to be a role model? Do you want to advance a struggling community?

Core Values

Core Values define what we stand for and what we are unwilling to compromise. They serve as guidelines keeping us on course to our destination.  We discussed Core Values in this blog post .

Strengths and Engagement Drivers:

We lead best when we operate out of our strengths.  Understanding how we are gifted will generate more confidence in our leadership approach.  Leadership 360 reviews are excellent sources of input.  StrengthFinders by Gallup is a quick and insightful tool I often use with clients. 

High Engagement is essential to strong leadership.   Yet many executives find their level of Engagement waning.  Their heart is not engrossed in their work as it once was.  So, what is the cause?  Extended success can generate routine at work. 

The frenetic nature of a C-level role may force us away from those aspects of our craft we love most.  Others find their days reduced to meeting after meeting, fire after fire. Without engagement, leaders are no longer thriving at work, merely surviving.

The drivers of Engagement are those aspects of work that energize us most. They are the areas we are most passion about, the activities we want to tackle head on.  Are you excited when creating a new vision or strategy? Implementing a new idea?  Filling a market need? Wrestling with an intellectual challenge?  Solving complex business puzzles? Initiating organizational change? Teaching others?  Nurturing talent? 

In contrast, the engagement detractors are the things that frustrate and drain us. The tasks we try most to avoid.

While we can’t spend all our time on engagement drivers nor completely eliminate detractors, we can determine how to spend more time on the parts of work that engage us most.  To do so, may require hiring or developing those around us and delegating certain tasks to them.

Motivators

As we reviewed in this blog post, our Motivators can be both externally driven (Extrinsic) or internally driven (Intrinsic).

Taking the time to carefully consider our Purpose, Core Values, Engagement Drivers and Motivators will help us to tackle the question of “Now What?!?”.  In the coming weeks, we will walk through the Self-Discovery process and the impact it can have on your professional and personal life.