Ch.11 Leadership for a Growing Business

Ch.11 Summary

- Growth challenges the founding management team, whose members may lack the skills, experience, or temperament for leading a larger, more complex organization. - The work of Michael Roberts describes four modes of management: real-time management of content, management of behavior, management of results, and management of context. The founder and management team must recognize which mode is appropriate under which circumstances and must know when to change from one approach to another. - A few entrepreneurs have successfully adapted with the growth of their companies. Others must either change themselves (often a difficult prospect), change their roles by bringing in professional management, or cash in their equity and move on to new challenges.

Developing certain systems and processes (Stepping Aside)

Are essential if a firm is to continue to grow successfully and profitably during its life cycle. Professional managers know how to develop those systems and processes, and your company will need them at some point if it continues to grow.

Advisory Board - (Getting help)

As your business scales, this can not only act as a sounding board for new ideas, but also provide skills, mentorship, and a broader network. But it can be hard to determine whom to invite onto your board if you don't know yet what kind of expertise you are missing. See the image How to build a board for more info on how to overcome these challenges and get your board up and running The rest is on desktop or in book

To remain relevant and effective (The right leadership approach)

You and the rest of the leadership team must find new ways to operate. HBS professor has described four possible approaches to leading a startup faced with rapid growth: *Managing content *Managing behaviors *Managing results *Managing context These are describes more throughly here

Founder ent. (Stepping Aside)

often find it very difficult to let go. Some try to change their behavior as a way of avoiding this step back, but they often fail. Others merely give the illusion of turning the org. over to professional managers. But, will continue to control everything.

Stepping Aside

If you cannot or will not adapt to the changing requirements of your company, it may be time to change your role or step aside. eBay example. Some people are simply not suited to be leaders of large organizations. Either they lack managerial and interpersonal skills, or the job of business leadership is incompatible with their temperaments or deep-seated life goals. If someone who came up with a company, like Esther, and they did it out of passion first. They may enjoy their role as CEO in the early-development stage of business, but as it enters the later phases id testing and all that, it may feel boring, mundane and anti-climatic for them because business is not what they're passionate in. The best solution to this is to bring in professional management, with the founder staying on as chair of the board. Do you need professional management image will help you decide whether doing this is right for the company. This solution ALSO works when the founders are simply incapable of handling the kind of work entailed in business building. Many businesses don't recognize the need for professional management soon enough to avoid a crisis.

Your funders - (Getting help)

If you want advice for your startup ask for money. If you want money ask for advice. To succeed you will need both. Many of the sources of funding that were discussed in previous chapter, come with experienced ent. professionals who can give you guidance. For example, serial entrepreneur-turned-venture-capitalist Marc Andreessen believes that the skills that make a good CEO can be taught (whereas those that make a good innovator are more innate), so he sees part of his VC firm's role as specializing in that training. But the author of The Gig Economy, Diane Mulcahy, warns that VCs differ widely on how much they actually coach their CEOs. As you're looking into funding, get the names of the CEOs of other companies that the VC is funding. Ask these executives how effective the VC firm's mentoring is. Talk with the CEO of the VC firm's other portfolio companies. Ask if the VC partner is accessible, how much they add to boardroom discussion, and whether the CEO has received constructive help in dealing with company problems

Managing Behavior - To remain relevant and effective (The right leadership approach)

In this approach, according to Roberts, you specify how people should behave; you identify the behaviors that lead to success and codify them through policies, rules, and procedures that employees are told to follow. Unlike the content-oriented manager, the behavior-mode founder of, say, a medical diagnostic laboratory doesn't supervise the day-to-day work of test-lab workers. Instead, the founder trains them to run specific tests and then audits their compliance with that training. This approach makes better use of your time and effort, enabling you to maintain control over a growing enterprise. Instead of trying to manage everything, you rely on policies, rules, procedures, job design, and behavior-auditing systems to do the heavy lifting. This approach is most useful when employees are inexperienced or need clear direction. For example, the manager of a newly trained group of salespeople might tell them, "I want each of you to talk with twenty prospective clients every day. Do that, and you should get one new account per day, or five every week. After six months, you'll have a solid base of commission business." If employees agree to this work strategy, the manager can then use his or her time to monitor compliance with the twenty-contact rule, helping where needed.

Managing Context - To remain relevant and effective (The right leadership approach)

Leaders who take a more context-based approach also focus on results, but they seek it more broadly by shaping the culture, values, and structure of the organization. Generally speaking, they aim to create an environment that will naturally attract and retain highly competent employees and allow them to do their best work. According to Roberts, these managers select employees, develop them, and rely on general communication to shape the context of the work. Upper management spends little or no time telling people what to do or how to do it. In our sales-person example, a leader might give the sales team freedom not only to determine the best way to win new accounts but also to set their own goals. The salespeople might consequently create goals like winning back lapsed accounts or measuring the profitability of certain kinds of accounts to make better decisions about which to pursue in the long term

Is there a best way to manage a startup? - To remain relevant and effective (The right leadership approach)

No. But there may be a best mode for a particular company at a particular point in its development. Be alert of your current needs, and understand how they are changing. The transitions between these approaches (as a warning) need extra attention; as the volume and scope of work grows, the manager has less time for hands-on involvement. While young, small, simple enterprises tend to depend on a content management style, with leadership closer to the front lines, larger and larger organizations call for the other leadership styles in turn. Image displays when the different approaches are most appropriate, along with assumptions, behaviors, and tools associated with each

Getting help

Reflect on your own management capabilities and your ability and willingness to change as your business expands. Is your business at a transition point, where your style of leading and management must change? Can you adapt? Are you will- ing to adapt? If you are willing to adapt but have difficulty in doing so, find people who can and will give you objective criticism on your leadership style. You'll want people who are not afraid to tell you if your grip on the business is too tight (or too loose) and where you need help. They can also tell you when it's time for you to go--that is, when it's time to bring in professional management. Feedback of this type will help you adjust to the demands of the business and will support the collaboration that every enterprise needs to succeed. Those whom you ask for this kind of feedback could include other members of the management team and members of your board. Other practical possibilities include the following parties: Your funders An advisory board An executive coach ^^These will be discussed further^^

Managing Content - To remain relevant and effective (The right leadership approach)

The most direct approach to getting things done is to do them yourself or to directly supervise those who do. Whether it's hiring a new employee, working out the design of a new product, or moving goods through production and into the stockroom, the content manager is intimately involved. In a startup organization, the CEO and leadership team often follow this approach. And why not? The scope of activity is small, and employees are few. Managing content gives you substantial control. And control appeals to many entrepreneurs, who are often motivated to start their own companies out of an innate need or desire to control their own work and future. But as operations expand, the entrepreneur's time and energy cannot keep pace. Also, his or her ability to make good decisions may falter with the arrival of new challenges that require special skills or experience. Failing to recognize when managing content is no longer appropriate can cause the business to fail.

Managing Results - To remain relevant and effective (The right leadership approach)

Unfortunately, the manage-behavior approach assumes that you'll get the results you want if people behave in the manner you've prescribed. This doesn't always happen. In the salesperson example just given, maybe talking to the required number of prospects doesn't actually yield a new account every day. Worse, the approach assumes that your prescription is the only way to reach that goal of five accounts per week. But that's not always the case. In many scientific and engineering endeavors, for example, employees must solve complex problems for which there are no clear guidelines. In these cases, leaders must look to their talented and creative employees to find optimal solutions. A leader using a results approach says, for example, "We need to design a military vehicle that is fuel-efficient (twenty-five miles per gallon on paved roads), that is capable of driving over rough terrain, and that can protect the driver and five passengers from small-arms fire." The leader tells the employees what the result should look like and gives them the responsibility for producing it. Returning to our salesperson example, you might simply tell each employee that the annual goal is to produce a minimum of 1 50,000 euros in commission revenue. Results-focused management saves time for time-strapped entrepreneurs. Instead of specifying what people in different jobs should do and how to do it, they can concentrate on providing the resources, the training, and the motivation that people need to produce results.

Many entrepreneurs have demonstrated (Is it time to change the guard?)

a capacity not only to launch a successful venture but also to actively guide it successfully through years of growth. Ex- amples include Larry Page and Sergey Brin at Google, Bill Gates at Microsoft, Herb Kelleher at Southwest Airlines, Scott Cook at Intuit, and Richard Branson at Virgin Group. Each leader successfully adapted his management mode to the needs of the business as it grew and changed. Not all entrepreneurs have this adaptive capacity; they either cannot change the behaviors that served them well in a small, entrepreneurial setting-_and habits of behavior are very difficult to change-or they actively resist changes that would dilute their control. In either case, the inability of the founder-leader to adapt as the enterprise becomes larger and more complex can have these damaging consequences: *Employee initiative is smothered by the founder's insistence on controlling all activities and making all important decisions. The best employees eventually leave in frustration. *The org. misses opportunities because it can operate only at the pace of the overworked founder *The scope of the enterprise is limited to the knowledge and vision of the founder

Although sales may seem to be the greatest growth challenge for a growing venture

organizational issues eclipse it You and your startup team must periodically reinvent your org. to cope with changing circumstances. To attain sustainability, the capabilities of the firm (as opposed to those of the ent.) have to be somehow broadened and deepened. More qualifies personnel have to be added, the specialization of functions increased, decision making decentralized, systems to cope with a larger and more complex org. instituted, and the employees oriented towards a common long-term purpose. To accomplish all these worthy goals, you and the other founders must usually reinvent yourselves; that is, you must change your mode of working from doing things yourselves to doing things through other people. Many funds this reinvention difficult. They fail to change, becoming liabilities to the very companies that they founded You and your core team contribute important assets to the company: a common vision, technical skills, management skills, and personal energy and time. Growth puts a strain on each of these contributions * Your vision must be instilled in newly hired employees * The technical skills that made your startup successful become relatively less important as the need for operational and management skills increases. * Your founding team's management skills may not be up to the challenge of a larger org. * Your personal energy and time are finite, but the end for energy and time to direct and control the expanding enterprise keeps growing.

An Executive Coach - (Getting help)

provide a one-on-one, customized approach to altering behavior, with the goal of improving on-the-job performance. In general, these professionals follow one of two approaches. The traditional approach, which we will call diagnosis and development, has strong roots in psychology and is deeper in its method, but it takes longer to deliver. The other, called the prescriptive approach, has more in common with the everyday coaching that managers give to their subordinates. It is faster and more direct. Each approach has its advantages. Executive coaching is expensive, but it may be worth it to you and your company.

Although the 4 leadership approaches may help you - To remain relevant and effective (The right leadership approach)

with thinking about how best to manage in different circumstances, no law of nature dictates to use more than one mode, depending on the circumstances. Perhaps a hands-on approach to helping a newly appointed manager succeed is compatible with a results-oriented mode of dealing with the overall operation.