From Startup to Scale-up – How will you lead when you grow up?

Let's imagine a situation: you have raised thirty million dollars, and you are expected to double or triple your workforce within a short period of time, sometimes a few months. This is a situation that creates true organizational challenges. You were used to direct all key decisions yourself, and now probably can't be directly involved in everything that happens in the company. On the other hand, you founded the company and you are interested in preserving the principles and values on which you built the company. You are correct: continuity of identity and organizational culture is a key factor for success. In a previous article, I presented a model that integrates nine organizational keys for the rapid growth of startups across three dimensions: Leadership, Alignment, and People. Let's explore the necessary adjustments in the Leadership dimension.

(1) Appointment of executives who  "have done it", (2) Building a leadership team, (3) Personal development of the entrepreneur as a leader

One of the most famous "acquisitions" in the high-tech industry is that of Mark Zuckerberg, who recruited Sheryl Sandberg to Facebook. Zuckerberg recruited Sandberg, who is 15 years older than him, from Google, where she led the AdWords division and built a huge sales team of 4,000 employees worldwide. Zuckerberg, a man with sky-high self-confidence but also unusually bright, realized that he had to recruit great managers with a track record of scaling up. Sandberg became Zuckerberg's right-hand man. Up until her retirement from Facebook, they worked very closely—starting the week with a personal meeting on Monday morning and ending it together on Friday.

Zuckerberg's move is based on a common dilemma - should he trust the current Sales or Engineering manager, who is an excellent person, to take the team to the next level - from twenty people to fifty, or is it better to recruit someone who has already done it? One of the first employees took on the customer service area at an early stage and did an excellent job. Should he be allowed to continue developing the Product from Israel or should he recruit an American manager (assuming that is where most of the customers are) with proven scale-up experience?

What do we do with the Marine force when the Navy takes over the occupied territory?

In its early stages, the company relies on key employees who are "all-around players" and are capable of both development and QA with a bit of DevOps. This is exactly what the company needs throughout these stages - talented technologists, resourceful, daring, and a knack for improvisation. Over time, and to ensure scale, the company will recruit experts in their field.

And what about the all-around players? In some cases, they will choose a specific specialization. in other cases, the company will direct them to build a new product/capability. Reed Hoffman (one of the founders of LinkedIn, currently a partner at the Greylock) used the metaphor of the Marines conquering new islands versus the Navy basing itself in the occupied area. In order to get the most out of the Marines at this stage, they must be redirected to a new mission. In the transition from startup to scale up, some of those all-around players will eventually leave to their next startup. This is completely natural because those people are at their best in small companies.

Hire executives who have led significant scale-ups of companies. If that is not possible, recruit executives who were there in significant roles during the scale-up.

I previously worked with a startup whose development team was led by one of the company's first employees. He was a classic all-around player, super talented with tremendous technological capabilities. His people appreciated and loved him and he maintained a perfect "employee retention balance." However, at some point, the founders decided to hire a more experienced R&D manager who was part of a scale-up at another company. The founders noticed that manager's difficulty in building an organization through rapid recruitment of people and through the creation of methodologies that allow the development of several products simultaneously. This was a very difficult decision because that manager was very well-liked. Through a high level of trust and support, that employee remained in the company in a significant technological role.

Rapid growth also creates a need for strong middle managers, most of whom will be promoted from within, so learning and mentoring are needed at a relatively early stage. Rapid growth creates countless opportunities for managerial learning, but more structured learning (mainly through personal mentoring and peer groups) is extremely important.

"Founders' Kitchen" versus building a management group

Another key is building a leadership team. For founders, even after hiring several senior managers, it is very natural to maintain the "founders' kitchen" and make important decisions there. It is a safe place for them that allows them to make quick decisions. This path worked for them over time and brought them this far.

Last year, I worked with a very promising startup that went through such a process. I met them three years after the foundation, immediately after Round A. The two entrepreneurs added senior functions in the fields of marketing, sales, and finance, all three of them experienced and strong people. In preparation for a leadership development offsite, I met the three new recruits who were quite frustrated. They believed in the product, they believed in the CEO, but they felt like they were out of the loop when it came to key decisions. Through the team building two days offsite the founders better understood the price of "keeping the kitchen closed," while the new joiners understood why it was so important for the founders to maintain their special "pairing."

I don't think we should, and in general, we can give up the kitchenette, but we can certainly make adjustments in the routing of the topics discussed in both forums, and consciously make the work of "expanded leadership team" more meaningful. Of course, this is the only way to get the best out of senior managers and maintain their sense of significance and influence in the company.

Six to nine people in the management team

Avoid building a management team that is too broad. This is tempting because we don't want to leave out important people who have been with us since the company's early stages. But this also has a price. Patrick Lencioni, in his book "The Advantage" recommends a management team of 6-9 people. The reasoning is simple: in a group that is too large, there will be significantly less attentiveness between participants: When the window of opportunity to express your opinion is small, you'll be preoccupied with seizing that opportunity, with finding the chance to voice your thoughts, and as a result, you'll be less attentive.

The founder who achieved one of the most impressive exits in Israel in the past five years, told me that one of the three most important keys to scaling up his company was building a leadership team. Once a quarter, he convened the team face-to-face, so that they could maintain strong personal relationships, get to know each other's plans, and be optimally coordinated.

Another key is expanding the mindset from founder to leader.

The daily presence of founders in the hallway is powerful, useful and will continue to be so. At the same time, a company leader must find a way to avoid a situation where they spend most of their day solving tactical problems and putting out fires. This simply does not work in an organization of fifty people, where the leader must have an eye on the market and focus on building and strengthening the company. I would like to suggest three adjustments that the entrepreneur/CEO should make:

• The first is delegation of authority - you hired senior managers beyond the founders' circle, and spent several months making sure they had the right head and heart for you. Now let them work: build a strategy, build an organization. Lead.

• A second match is "to amplify". In the past, I opposed the appointment of a personal assistant or Chief of Staff. I thought it distanced the leader from his people. I see it differently today - the amount of organizational transactions is so great, the frequent transitions from tactics to strategy, to people development, to customers. When you have someone by your side who follows up on decisions, remembers, and sometimes creates an image - you are simply more powerful and effective.

Match number three - turn yourself into a learning machine

Drew Houston from Dropbox shares a practice that greatly helped him during his scale-up journey. He suggests meeting with other entrepreneurs—not just the famous ones, but also those who are one, two, or five years ahead of you in their journey. Since things evolves, sometimes quietly, from stage to stage, you can learn important insights by looking at what the future holds.

It’s very difficult to "lift your head" above the endless sea of challenges. In essence, you’re excellent problem-solvers, and that’s what has worked for you so far. However, the value of learning—through reading or listening to relevant materials, attending conferences, or meeting with other founders—is priceless.

We are afraid that if we are not constantly connected to the daily details, Execution will be compromised. A second concern is the changing face of the startup - how can I know that our special way is being preserved. These are indeed very significant questions. In two additional articles, I will try to demonstrate, through an examination of two additional dimensions - "Alignment" and "People" - how you can preserve the company's uniqueness while also improving its execution capabilities