an Early Stage Company for Rapid Growth
Modes of Management – Shifting Management Gears
Adjusting Your Management Style to Your Company’s
moment a new company is founded to its appearance on the Fortune 500
list, executives must be able to transform the way they manage a company
— shifting gears, often dramatically to a different management style —
to ensure the company’s optimum development. I am not referring to
individual executive style here. What I am talking about is the total
adjustment and evolution of the context in which major management
decisions are made. I call this the “Mode of Management”, which is very
dependent on the company’s current developmental stage.
make the same product development decisions in an identical way with one
hundred dollars in the bank and no customers as you would with $50
million in the bank and 1,000 customers? Of course not! So why do many
managers often run an organization in the same way, despite the many
gradual and often sudden changes that happen between these two
extremes? It is human nature to continue to do what we have always
done, to simplify and repeat what worked in the past, despite vastly
differing circumstances. We need a system or context for adjusting and
teaching the different “modes of management” as companies evolve. Some
of these changes come naturally, but most are very subtle and linger far
longer than they should. A failure to change can do substantial damage
to a company before adjustments are made, or even doom the company to
flat sales in the long term.
A key to
ensuring corporate success is to let the various stages of a company's
development determine its overall management “mode”. It is a given that
we must use the appropriate management mode for each and every decision
and action we take in a company. The company's existing condition
and/or stage of development is always the most significant
determining factor, or the main context, for almost every decision.
Companies can reap enormous benefits when the style by which they are
managed is adjusted quickly to accommodate the company’s shifting
complexities, stages and sensitivities. In fact, quickly adjusting this
mode of management can be a huge competitive advantage since most
companies fail to adjust quickly enough. Just about every company
exhibits often-overlooked, but critical, stress points that signal the
need for decisive action or gradual reorganization. Recognizing these
signs during a company’s gradual metamorphosis, and responding to them
appropriately, may mean the difference between bankruptcy and survival,
or at least will help avoid stagnation.
good manager knows an adjustment in style and tone is warranted for
different individuals and situations. People have different
motivations and often respond differently to the exact same
circumstance. This is natural; people react to other people’s tone and
body language in very individual ways. We receive immediate feedback in
the form of facial expression, body language and actions, and adjust our
reactions accordingly. However, a company, which is a much more complex
organism which consists of many individuals interacting with complex
outside market conditions, provides little immediate feedback.
Therefore, it is very difficult to use direct feedback to fine-tune your
management mode. Only years of experience can build enough data to form
theories and adjust management modes with proper timing.
Why We Simplify Too Much
Millions of years of evolution have taught us to run from danger and
created a mind that adheres to simple "rules" that have worked for us in
the past. Our mind wants basic rules we can reuse and has been designed
to use these learned shortcuts again and again. For example, we all
know that fire is hot, don’t touch it. The more pain (failure) or
pleasure (success) that results from a lesson, the deeper these rules
are ingrained in our minds. “Experiential” learning like this is
remembered better because it involves more senses and pain and pleasure
than simply reading something. This is why people who experience a
single, huge success often have a tougher time changing or accepting
inputs from external sources. They take this success as proof that they
are “always” right and begin to repeat what has worked for them before.
If they use their one ‘learned’ mode in a different context then they
are more likely to fail.
Unfortunately, the world is much more complex, and changes much more
rapidly, than ever before. In fact, this trend is accelerating because
human knowledge is now doubling every few years. One hundred years ago,
most people still used horses to get around and technology of any kind
was primitive by today’s standards. Because life is currently so much
more complex, we need these mental simplifications more than ever. Yet
now, we must overcome these past evolutionary behaviors
and discipline ourselves to take hundreds of variables into account for
complex and unique decisions we may never again make under the same
Overcoming evolution can be difficult, but it is simply an exercise in
conscious thinking that can be facilitated by some simple methodologies
that force us to review important circumstances. The challenge as an
executive is to force ourselves to think through all the variables of a
given situation and make a decision in the proper, current context, not
simply by referring to past experiences or rules of thumb.
Cognitive dissonance, the mind's tendency to see only those factors that
reinforce what we are expecting to see, greatly aggravates this
problem. We tend to distinguish only those things that reinforce our
beliefs and actively avoid or explain away those things that disprove
these beliefs. At the extreme, this can become the proverbial ostrich
with its head in the sand — the "What I don't know can't hurt me" pose.
Of course, this statement couldn’t be further from the truth. Any
company that fails to adjust to the rapidly changing world, economic,
and market conditions, is doomed. Today even great Fortune 500
companies are rarely still there twenty-five years later. As managers,
we have to overcome human nature and cognitive dissonance in order to
make the proper contextual decisions for the benefit of our company.
Five Stages of Company Development
The Five Stages of a Company's
1) Raw Startup
Little or none (by definition)
a) Innovation as a priority
b) Always in flux, high risk
c) More unknowns than knowns
d) Product or service looking to prove its market exists
e) Everything is fragile
2) Early Revenue
5 to 100
Product delivered proving some
value proposition, but still no proven sustainable or
profitable business model.
Most companies slow
or stop growing here due to organizational and people
limits. This is often the hardest leap to make which
requires the most changes in the smallest period of time.
Most often it is the founder who can not shift gears.
3) Established Customer Base
20 to 200
a) Profitable or clear path to
profits, based on scaling business.
b) A proven market and value or price formula, with profits
clearly available in a steady state world when scaled.
4) Expansion/ Growth Phase
100 to 1,000
Market opportunity is many
times larger than the company and there is a desire and
ability for significant market share and/or revenue growth.
5) Mature (or large)
100 to ∞
a) Slow growth, stagnation of
market or company, or focused on harvesting past
b) Slow/little change in market and/or company or
commoditization of products forcing a focus on costs above
c) Consolidation of competitors
and focus on finding new distribution and/or leverage.
Defining the Stages of Development
How Many Stages? How Many Modes? Why?
Companies come in many
types, styles and sizes, and an approach that works tremendously well at
one company can be a miserable failure at a different place and time.
Every company and situation is different, so there are literally
hundreds of possible “styles” or “management modes.” For practical
purposes, it is necessary to create a simpler, more workable model,
which can be used to illustrate a company’s major plateaus and organize
this infinite spectrum into useful stages. Then we can probe along the
required dimensions for key issues.
Only experience at
executive levels in large, medium and small companies can help to
identify the pivotal developmental stages that dramatically affect the
context of a given company’s decisions. Success comes from implementing
a management mode that is a direct function of the company’s current
stage, industry and market conditions. The risk is that a company will
be run in the same way as its VPs, managers and/or CEO have always run
their past companies or departments, irrespective of the important and
differing macro variables created by this stage of development.
What is Different about This Philosophy?
Conduct a search via
Amazon.com or on the Internet on the term “management” and you will
literally find tens of thousands of books on the subject. From project
management to company management, lots of authors push their particular
methods and styles. These range from micromanagement and the One-Minute
Manager to how to transform “good” into “great” behavior. What you will
not find is many books about an approach that helps you define and
implement a management mode that clearly correlates to your company’s
current status and position in the market. Yes, there are a few good
books on startup management, but, in general, there is little on the
topic of “shifting management gears” available in the millions of books
in print! I don’t know if the lack of discourse is just because authors
want to appeal to the broadest possible audience, or if most people and
authors are actually naive as to how one must manage differently
according to the different stages of a company. I am certainly not the
first person, probably not even the first 100,000, to recognize this
natural phenomenon. I suspect that authors are addressing the stage of
company they are most familiar with, without much thought to the
others. Unfortunately, for the bulk of their readers, this can make the
majority of their recommendations and advice wrong, which is of little
help. When making a major decision, too little credence is given to the
enormous number of variables that make every corporate situation unique.
Actually, I have seen very successful executives with significant
experience in large company environments give perfectly good speeches on
management, or leadership, that are 100 percent true for large companies
— and almost 100 percent wrong, and potentially fatal, if taken
seriously by smaller companies. They are talking about steering an oil
tanker when their audience consists of nothing but little speedboat
captains. I suppose that these executives must have little experience
and perspective beyond that large company perch, and they often wind up
preaching to a crowd of entrepreneurs about things they must do,
when in fact, following that advice could literally kill their
companies. I once heard an experienced senior executive tell an
audience of entrepreneurs that it can, and should, take six to twelve
months, or more, to make a change flow through an organization. Maybe
this is true for a cultural change in an old-line (read incompetent and
uncompetitive) organization with several thousand employees, but this
advice is crazy for any company under 100 people, and maybe even most
companies under 500 people! I have done changes like this in a week in
smaller organizations, and in a startup you may need to make many, many
changes like this over six months. The problem here is that there was
no context defined for the lecture and no language or thinking in the
advice about a company’s current stage. If it had been qualified as
advice for companies over $70 million in sales, for example, it would
not have been a potentially lethal lecture for the many startups and
entrepreneurs in attendance that day. It seems we pay little heed to
the simple fact that what can be right for a small company can be
totally disastrous for a larger company and vice versa.
Managing an Early Stage Company for Rapid Growth