There comes a time in a company’s lifecycle when it starts to witness rapid growth. That inflection point happens post Product Market Fit and is typically represented by the popular hockey stick of growth
Chart using https://excalidraw.com/
That period can be exhilarating. The company’s sales are rapidly accelerating, so is its headcount and its composition is also changing. As a company grows, new departments that didn’t previously exist will be created. Some departments that were historically small like sales and marketing will very quickly comprise the majority of the company. The table below shows this change spanning various stages of ARR
Source: Redpoint Ventures
There’s one particular point at about the growth curve that can also be particularly unsettling — the inflection point between tepid and accelerated growth. That’s the elbow stage highlighted in the hockey-stick chart above.
This stage is also synonymous with a change in culture. Specifically, you tend to hear things like “our culture is changing” and “we need to preserve our culture” especially from the earliest employees. I don’t think a change in a company’s culture is necessarily a bad outcome. In fact I’d argue that it is inevitable.
I would posit that when you think about culture, things like art, music, literature, values and beliefs come to mind. That’s the thing about culture, it really is an umbrella term for lots of things. Here’s how Wikipedia defines it:
Culture is an umbrella term which encompasses the social behavior and norms found in human societies, as well as the knowledge, beliefs, arts, laws, customs, capabilities, and habits of the individuals in these groups. Source: Wikipedia
It goes without saying that as a company grows in headcount, its culture will change. Every additional individual added to the company brings her own perspective and idiosyncrasies, which changes the culture. Cultures are based on social behaviors. It is therefore my belief that a change of culture is inevitable and not necessarily bad.
Having said that, there are a few pitfalls that have to be avoided as a company starts to witness that rapid acceleration, especially with headcount. The most important to me is the ability to remain nimble and agile whilst rapidly growing. The litmus test of this is to be able to keep on making high impact decisions without slowing down, even as the company grows. There are some tools that I believe can help with maintaining this balance.
Cultures will evolve, values should not. Or if they do, they should do so for the betterment of the company and its stakeholders: employees, customers and investors.
Core values are broad statements that guide your employees, identifying right and wrong, good and bad, and how to interact with each other and with customers. They can be instrumental in both alignment and decision making. They act as the first principles of an organization.
“ … core values are essential for enduring greatness, but it doesn’t seem to matter what those core values are . The point is not what core values you have, but that you have core values at all, that you know what they are, that you build them explicitly into the organization, and that you preserve them over time” Source: Collins, Jim. Good to Great (p. 195).
Source: Good to Great
When I was at Qumulo, Peter Godman (Co-founder and CEO) would give a quarterly talk to all new hires. Peter’s talk would cover the history of Qumulo, the storage market and the company’s core values and how those should be reflected in all our every-day actions. This was a 2 hour commitment from the CEO, but it was critical to ensure that new hires understand what these core values are. More importantly, having the CEO give that talk reinforces the importance of these values.
It was not uncommon during my time at Qumulo for decisions to be made — and rapidly — because they were in violation of one or more of the company’s values. More importantly, these decisions would be made organically within the organization, including some critical ones like delaying the launch of a product.
When a company is young, decision making, planning and knowing what everybody works on is easy. However, as a company grows these become difficult to do without the introduction of processes and frameworks like OKRs. The introduction of these tools should be to help with prioritization, alignment and transparency. A company can still operate with speed in spite of the introduction of processes and bureaucracy.
Delegation is also key to being able to scale a company whilst maintaining the speed of a small and nimble early stage startup. As teams are scaled, decisions that were once only done by the upper management layer, should be pushed down to the layers below. Companies in the startup phase typically have flattish organizational structures, which will evolve as the company grows by adding additional layers of management.
It is therefore critical to keep on rebalancing the decision making load across the organization as it scales. What was once a decision that only a VP would do, could be delegated to a direct report and so on.
Type 1 and Type 2 decisions
I’ve never worked at Amazon and am not privy to how the company operates. However, judging on their incredible success and ability to continue to innovate in spite of its gargantuan size (~800K employees), one can make a reasonable assumption that Amazon got a few things right. I believe that one of those is the ability to remain nimble as the company grows.
Jeff Bezos was aware of the risk of deceleration of decision making as a company grows. He shared his thoughts about it in a 1997 letter to Amazon shareholders.
We want to be a large company that’s also an invention machine. We want to combine the extraordinary customer-serving capabilities that are enabled by size with the speed of movement, nimbleness, and risk-acceptance mentality normally associated with entrepreneurial start-ups. Can we do it? I’m optimistic. We have a good start on it, and I think our culture puts us in a position to achieve the goal. But I don’t think it’ll be easy. There are some subtle traps that even high-performing large organizations can fall into as a matter of course, and we’ll have to learn as an institution how to guard against them. One common pitfall for large organizations — one that hurts speed and inventiveness — is “one-size-fits-all” decision making.
Some decisions are consequential and irreversible or nearly irreversible — one-way doors — and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that — they are changeable, reversible — they’re two-way doors. If you’ve made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgment individuals or small groups.
As organizations get larger, there seems to be a tendency to use the heavy-weight Type 1 decision-making process on most decisions, including many Type 2 decisions. The end result of this is slowness, unthoughtful risk aversion, failure to experiment sufficiently, and consequently diminished invention.1 We’ll have to figure out how to fight that tendency.
And one-size-fits-all thinking will turn out to be only one of the pitfalls. We’ll work hard to avoid it… and any other large organization maladies we can identify.
Source: Amazon Shareholder letter 1997
I’ve a huge fan of differentiating between Type 1 and 2 decisions. Once you look at decisions through this lens, you quickly realize that the vast majority of decisions you make are Type 2, which should be quick to make without complete information or data, which admittedly is almost impossible to attain.
I have only focused on one element — decision making — that can be dramatically impacted by growth but there are undoubtedly many more. One important thing to note: growth is absolutely critical for a company to survive. A Burroughs quote sums it up quite nicely.
“When you stop growing you start dying” William S. Burroughs
Originally published at https://karimfanous.substack.com.