Eight common mistakes when scaling a company

A few days ago, Impact Arena hosted an event during Gothenburg Tech Week, together with Minna Technologies and Hedylity Technology. The topic for the evening was “How to build a great company” and we shared learnings, tips and tricks how to scale a company both fast and sustainable. In my presentation I shared eight mistakes that we have seen in fast-growing companies and have learned from discussions with many founders.

The eight most common mistakes we have encountered are:

1. Founder(s) is/are sitting on too many chairs

In the beginning the founder sit on many different chairs, constantly balancing sales, tech, marketing, strategy, culture, finance, customer support and all the other stuff that needs attention when building a company. Some of the roles comes naturally and some of the roles is because there’s no one else to do it. When scaling the company, it’s crucial that the founder continuously reflect on his/her role and let go of control and “chairs” as the company grows. In many small companies the founder is the information node that everything needs to pass through and that creates a bottleneck for growth. To be able to scale fast you need to hire great people, unite them under your vision and then trust them to do the job.

2. Heavy focus on bringing people in and less focus on how to make people perform and stay

When all focus is on “scaling”, it’s easy to put heavy resources on recruiting and less focus on how to create a culture/organization where people thrive and want to stay. Great recruits who leave after six months or frustrated talents who’s not feeling valued or feel they can make an impact, won’t help you scale in the longer perspective. Not to mention the negative effect this has on your employer brand (which will affect your future recruiting chances).

It’s also important to keep in mind that a great deal of your employees’ performance depends on the environment in which they operate – don’t recruit your competitors’ top performers, create your own!

3. Too little structure in areas like internal communication, personal/professional development, organizational learning, recruiting and onboarding

When scaling fast, everything in your company is in constant movement and employees face new exciting challenges every day. To maximise their (and your) chances of succeeding you need to make very conscious decisions on where to create structure and stability. In these areas you would typically gain a lot if having a strategic/structured approach:

–       Internal communication is one of your golden keys to create alignment and give employees the possibility to take wise decisions. When you’re growing fast you shouldn’t solely rely on informal information channels, you need to have a structured and transparent approach to make sure everyone has the best possible chances to contribute to the overall company goals.

–       When the ground is shaking and you’re travelling at the speed of light, it’s crucial to leave the operational heat from time to time and discuss important questions connected to personal and professional development. If you don’t have a structure for these kinds of conversations, they probably won’t happen, or at least not be as qualitative as they need to be – which will result in external headhunters hearing the stories instead of you.

–       You also want to have a structured approach to organizational learning – how you reflect on and learn from mistakes and how you experiment in ways that maximizes learning. Your organizations’ ability to renew itself is crucial to succeed in a constantly changing world.

–       And finally, if you are growing fast, make sure to have good structures and tools for recruiting and onboarding (research show a clear connection between the quality of the onboarding and how long people stay with the company).

4. Unnecessary policies, procedures, rules etc. are being implemented to solve short-term problems

As you grow you will encounter times that are more chaotic than other. Typically, the first chaos-part enters around 12-15 employees and the first sign is often questions like “I don’t get the information I need”, “I want a detailed job description”, “what’s our working hours?”, “why don’t we have benefits like xxx?”, “how do I know if I do a good job?” and “who’s my manager?”. Now (if not before) is the time to really think through what kind of company you want to build. It’s temping to start solving all these questions one by one as they appear – you create that detailed job description, you write a working-hour policy, you implement the benefits that people ask for and you introduce that performance management model you’ve heard of. Don’t do it – it’s a trap! Instead – take a step back and assess the situation with other glasses. Reflect on/discuss why the questions are raised and explore the underlying needs behind the questions. Think long-term – what kind of company do you want to have when you’re 50 or 100 people? Do you want to build a fast-moving, adaptable, creative and collaborative culture/organization? Then you must lay the foundation when you’re 15 people and everything you do going forward should be connected to this.

5. Organizational structures are being based on functions/professions without considering alternatives

It doesn’t have to be wrong to organize function wise (to have a sales team, a development team, a customer support team, an admin team etc.), but if you do – make sure to find natural ways to work cross-functionally to solve customer problems (like OKR’s etc.). Silos are very easily created which leads to teams with slightly different goals and where people don’t see a clear line from what they do to the customer value. This is what all larger companies struggle with and you don’t want to end up there! An alternative to function organization is to organize in small cross-functional teams based on for example products or a set of persistent business problems.

6. Management positions are added to the organization without being considered if really needed (and often with lack of common view on leadership)

Why do you need managers? During shaky times it’s very easy to think that one of the solutions is to add more managers. Sometimes that’s part of the cure, but more often something else is needed. Instead, focus on building strong autonomous teams with clear goals and mandates, and then add leadership in order to support these teams. You don’t want or need the old management roles who work with coordination of information flow, delegating tasks and controlling that people are doing their jobs. That will slow you down and make people less engaged and less productive.

Also make sure the leaders you hire share the same values and view on leadership and that they want to be leaders for the right reasons (for your organization). Talk about leadership on a regular basis with all employees – what it means to you (as a company) and how good leadership is expressed in your organization. All employees practice self-leadership daily, and they lead others in different situation even if they’re not formal managers.

7. Founder(s) is/are not prepared for the employees’ different expectations depending on when they join the company

If you grow fast there’s not much time between employee number 15, 35, 55 etc. These employees will have totally different expectations on you as an employer. They will ask for different things and they will expect different things. If you are not prepared for this, you will probably be both annoyed by the “silly” questions you get from employee number 55 and also risk having a too reactive approach when answering (as discussed above).

To prevent this, sit down from time to time and think big – “now we are 15 people, what do we want/need to have in place when we are 60 people?”. Involve your employees in these discussions to use your collective intelligence. When you know what to strive for it’s much easier to make it happen and you can have a proactive approach to the expectations and questions you will get from future employees.

8. Founder(s) is/are looking too much on how others build their companies rather than look/build from within

It’s great to be inspired by how others build their companies by talking to other founders, reading articles and books, watching YouTube-clips and attend meetups etc. But in the end, you and your people have to decide what kind of company you want to build. To build a great company you must be authentic and you have to build from within. Start with why you exist, what kind of impact you want to make in the world and go from there.

The great part is – you are (or should be) not alone in this. The more you involve your people in building your company, the more engaged people you will get and the stronger culture you will have!