Angel investors. Rounds of funding. Initial public offerings (IPOs). It’s what entrepreneur dreams are made of, but while rapid growth yields plenty of excitement, the growing process is not without its challenges. In fact, according to a study by the Kauffman Foundation and Inc., about two-thirds of the fastest-growing companies end up failing.
CEOs can’t get caught up in the exhilaration of growth or the piles of legal and financial legwork that need to be done and overlook what’s happening within their own four walls. These are common pitfalls executives should look out for when growing and expanding a company, along with ways to handle them.
Turn Back: Silos Unsafe to Enter
Pitfall: Organizations are typically broken down by departments and functionalities, a structure that lends itself to some natural segmentation. And many times, as companies continue to grow, the gaps between departments get wider and wider until organizational silos form. When employees operate in silos, they tend to be more loyal to their group than to the company or employer. They’re distrustful and resistant to change. They keep information held tight within their group and make decisions without considering other departments. If left unaddressed, silos are capable of completely destroying efficiency, collaboration, communication, and positive morale across an entire company.
Solution: So your company is growing, and you want to avoid the aforementioned problem. What can you do? First and foremost, make sure all employees are aware of leadership’s goals and vision as the company continues to scale. They shouldn’t just understand your objectives—they should buy in to your objectives. Hold regular all-hands meetings, and frequently discuss the status and future of the company. Make sure department managers thoroughly understand short-and long-term goals and key initiatives. Encourage cross-functional collaboration by pairing different managers together on certain projects.
Warning: “Chain of Command” May Break Under Pressure
Pitfall: Elon Musk recently revealed a list of productivity tips to his employees, one of which encouraged them to speak directly to the person in charge of a task or department. “If, in order to get something done between depts, an individual contributor has to talk to their manager, who talks to a director, who talks to a VP, who talks to another VP, who talks to a director, who talks to a manager, who talks to someone doing the actual work, then super dumb things will happen,” Musk wrote. As companies grow, this chain of command can easily develop. As more members of management and middle management get added to teams, employees become further separated from the person they perceive to be the “decision maker,” which requires them to jump through more hoops of approval in order to get things done.
“As more members of management and middle management get added to teams, employees become further separated from the person they perceive to be the ‘decision maker’.”
Solution: Not only is the process of running things “up the flagpole” extremely inefficient; it’s demoralizing to employees who no longer feel like they have any autonomy or decision-making power. If you suspect this is a problem in your growing organization, gather your managers together, and let them know that their priority should be developing talent rather than approving every decision that leaves their departments. In performance reviews, grade managers on how well they develop the careers of those who report to them. Make sure employees always have a clear view of who is responsible for what, using tools like a live org. chart, and encourage them to handle conversations directly, rather than going through a chain of command.
Caution: Approach Fresh Talent Carefully
Pitfall: Another problem that plagues rapidly growing organizations is creating an imbalance of people who are new to the company versus those who have historical knowledge and context about the company. As you continue to grow and scale, you’ll naturally add new employees to the ranks. However, if you’re not careful, you can accidentally end up with a pocket of the organization that is entirely staffed by new hires. Due to the lack of tribal knowledge in this fresh group, there is little to no understanding of where the company came from, how departments work together, undocumented intricacies of the company’s product and processes, and where the company is heading and why. Instead, this group starts to operate in its own way, which can often clash with the existing culture and mindset of the company.
Solution: The solution here is simple. When designing your hiring plans, pay attention to tenure on your org. chart. If you need to form a new team, it is often best to split an existing team and add a few new people to both, as opposed to adding a team entirely comprised of new hires. Reward the people who have been with you for a while and have historically performed well by promoting new managers from within. And since hiring new talent is inevitable as you grow, make sure HR arms new hires with the tools they need during the onboarding process. New hires should understand your culture, objectives, and organizational structure from day one.
As your company expands, growing pains are inevitable, but it’s important to recognize when you’re headed in the wrong direction and course-correct before you find yourself facing a pitfall that can severely impact employees and your company as a whole. All of the problems described above can be avoided with simple and constant communication, transparency, and employee engagement.
Read more: 4 Things to Get Right in Fast Growth Markets