Later Stage AdviceOct 4, 2016 Blog Advice , Start-up; Founder
There are many things to focus on as you become a founder, but there are also a few things which you don’t need to focus on until you reach months 12-24 as your start up scales.
In the beginning there is no management in a start-up and this works really well. Before 20-25 employees, most people report to the founder which is the ultimate structure for productivity. When lack of structure fails, it all fails. Although, what works for a start-up with 0-25 employees will not necessarily work for 30 or more employees as your start-up scales.
Reporting structure is not to be complicated. All employees should know who their direct manager is – the most important thing is to have a clear and simple reporting structure. As your employees grow to over 25, you should begin to shift your attention from building a great product to building a great company and you will spend the rest of your time focusing on this.
This is a very important shift for your start up and when this shift happens, there are four main failures that occur. The first failure is being afraid to hire senior people. As the company starts to scale it is valuable to have seniors on the team. Hire executives who have helped scale a successful company before. Don’t be afraid.
The second failure is going into hero mode. This happens when the manager wants to lead by example so they work long hours to show employees what it means to work hard, but as the company starts growing, your 12 hour work day becomes a 16 hour work day as the work load starts increasing. The correct thing to do in this case is to stop working and to concentrate on hiring more people. The work load will fall behind, but this will bring to light that it’s important to hire more people before it gets to this stage. When you find your business in this position, you need to make a conscious decision to fall behind with work in order to hire more people. It is wrong to stay in hero mode.
Bad delegation is the third failure. Most founders haven’t ever managed people or managers before. When asking your manager to do something, instead of telling them to go off and complete a task, consider telling them that you trust their judgement and their decisions. That’s why you hired them.
The final failure is human resources. It is correct to ignore this in the beginning stages of your start-up, however it is a huge mistake to continue to ignore it as your business grows. In fact, it will actually help your business. This becomes a great path for your employees to receive performance feedback. As the business grows, this tends to get lost. Compensation bands are necessary to keep things fair and it saves you from negotiation down the line.
Be mindful of these changes which must occur after the first 12-24 months as this is what is going to assist you in moving your start-up forward.
This article was created on the podcast “Closing thoughts and later stage advice” by Sam Altman. You can read the full transcript here.