Growing Pains for Startups

by Guy Ralfe on February 24, 2010

Lately I have been noticing the interactions and communications in an organization a lot. It reminded me of when I studied for my Project Management Professional (PMP) certification, where the concept of communication paths, for which there is the following specific formula (N * (N-1))/2 where N is the number of people in the group, was introduced to me. Back then I recall wondering how this formula could be so important in the whole project management realm.

Business is basically built around network interactions; each person in your network is then a potential communication channel that you have to keep alive. As a business grows the number of channels increases both internally and externally. Let’s just take a look at internally, for example when an organization moves from a 10 to 20 person organization. Using the formula logic we go from having 45 to 190 communication channels. This increase will place a lot of stress on a management by committee organization, which is the structure found at many startups. This stress ultimately impacts the performance of the organization and no longer does the organization have the image of a ‘Can Do’ but quickly becomes a hobbled ‘bureaucratic’. The main cause of this is the number of interactions, in the now larger organization, needed to make decisions. Continually going back to the group for a consensus just becomes costly and inefficient. These are classic characteristics of government departments where there are exceptionally high numbers of communication channels and requests have to be continually passed up and down the corporate tree to get any decisions.

To help companies get through growth phases here are two things that should be considered to capitalize on the growth and not stymie it:

  • Educate – Get employees to understand that this communication channel complexity exists as you grow. Stress that these communication channels are also the foundation of the success today so prioritize and focus on the critical communication channels and close the costly ones down.
  • Guidance – Provide a vision/code of conduct that is tangible for all employees to understand and embody as a guiding principle for doing business. Having this will allow employees to operate at a higher degree of autonomy, and revive the ‘can do’ mentality synonymous with successful startups.
  • Repeat – Repeat again as you grow as you will have to continually quit more and more channels to remain nimble

The difficult part is not identifying what to do and what to give up on; it is giving up an already existing habit. While I have not experienced this on my projects because the number of members has generally been small and fairly constant, in the growth of our organization it has become very prevalent at how much time is suddenly consumed going from one meeting to another to operate the same business just on a larger scale.

When you have clearly defined operating philosophies employees tend to act with more confidence yet still with the best interests they always had for the company, they feel more confident in their ability to take the decision having some point of reference outside of a committee/hierarchical structure. This does not mean the organization will operate without error, on the contrary, it allows employees to make decisions in the best interests of the company to seize opportunity, where previously they wouldn’t have. When issues materialize they will be quick to address and resolve as opposed to trying to hide them in a chain of command structure where there is dissolved ownership.

Stop herding the cats, give them a bowl of food and watch them congregate where you want them to.

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