Is your startup company experiencing rapid growth? If so, it’s essential to know how to maximize efficiency, while still expanding your services. According to a recent article from FastCompany, growing businesses are “bound to add cognitive load and gain complexity … you need more roles, more hierarchy, and more progress. It’s unavoidable.” Startup owners must know how to restructure their organizations properly in order to position them for success. We go over a few of the best ways to do this below.
To do this, startup owners must first recognize the benefits of a hierarchical structure. In recent years, many startups have switched to a flat structure—devoid of levels and managers—in order to breed personal responsibility and productivity among employees. However, this popular method has several drawbacks. The Small Business Chronicle highlighted some of the disadvantages of the structure: “Employees often lack a specific boss to report to, which creates confusion…flat organizations tend to produce a lot of generalists but no specialists…flat structure may limit long-term growth of an organization.”
Google learned this lesson the hard way when Larry Page got rid of his managers in attempt to create increased camaraderie. The results were less than positive, with far too many people bringing expense reports and personal conflict issues directly to Page. This not only created a bottleneck among employees, but distracted Page from his primary role. The hierarchical structure was reinstituted, along with clear-cut authority and well-defined job descriptions. Benefits of a hierarchical structure include: clear authority and leadership, managers who are skilled in a specific area, and a definite promotional strategy. Understanding the benefits of a hierarchical structure is an essential first step when managing a rapidly growing startup.
The second step is to implement this structure. In their book Scaling Up Excellence: Getting to More Without Settling for Less, Stanford Professors Robert I. Sutton and Huggy Rao detail important lessons from business leaders who successfully navigated quick growth. They highlight the importance of setting the right mindset for each phase of growth, removing the bad so the good can grow, and subtracting as you add (getting rid of ineffective practices, policies, or people as you continue to add new ones). They also admonish business owners to respect cognitive load. “There is a lot of evidence that as a team gets bigger than five, and the closer it gets to 10, things get bad–you end up spending more and more time on coordination chores and less and less time doing the actual work,” Sutton stated. “You also start having all these interpersonal problems because you’re trying to track the personalities and moods of 10 or 11 people. It’s like going to dinner and having a conversation with that many people all at the same time. Impossible.” Sutton recommends keeping teams small in order to counter this problem.
A third way to maximize efficiency at a rapidly growing startup is to utilize technology properly. Kit Hickey, co-founder of Ministry of Supply, a web-based clothing startup, highlights one of the crucial lessons he learned: “We truly believe technology can improve everyone’s lives. As such, we don’t stop at the use of technology in product development; we leverage technology in every touch point of our brand.” In a growing company, project management software can often provide immediate benefits. Solutions designed for growing companies, such as JIRA, a task assignment system that breaks large projects into manageable goals, or Basecamp, a popular and low-cost option, can help provide structure and accountability in a fast-paced environment. A collaborative management and tracking tool enables individuals to assign tasks to various employees in the company, give due dates, and track the completion of large projects. Such software will also provide a reference for project managers, or whole groups to identify where delays are occurring and which team members are overloaded. As your company scales, a well-designed project management tool will be essential in meeting deadlines and tracking your progress.
Navigating rapid growth can be tough, as evidenced by the many startups that fail to make it through this stage. However, with the right internal structure and technological support, you can stop focusing on trying to hold your team together, and get back to your mission.
Author: Cameron Graham is an editorial coordinator at TechnologyAdvice. He covers emerging tech trends and business software. Connect with him on Google+.
Published: June 10, 2014