The most common questions I hear from startup founders and team members is, “What are the best practices? What lessons have others learned? What’s coming next?”
The purpose of the Maturity Framework Series is to help startup founders and employees anticipate what is coming next. This post will specifically look at the Expansion stage, when a company grows from 30 employees to 50.
Company Stages by Number of Employees
Links to full posts detailing the Early Stage and Momentum Stage.
Expansion Stage: 30 – 50 employees
You’ve probably been at this for a few years. Only a year ago your company was only in the Early Stage with 10 members of the team. How quickly things change. Your product doesn’t look anything like the MVP. Your customer base has grown 10x from that time. You’ve got all engines firing but there is still so much to get done.
Your team is growing in all directions. Work is getting done that the CEO might not know about. That’s a new thing. Metrics are increasing but it’s harder to pinpoint exactly which person or team shipped that new update, found that bug, or closed the newest clients. You have a team that thrives when they collaborate. You’re on your way to building the organizational side of your business.
The organization needs a leader, now is the time to hire a full time HR or People person. Their role is to setup the people-side of the business for success: hiring, compensation, interviewing, reviews, feedback and resolving any issues. The CEO should still be focused on hiring, but now there is someone to lead the charge.
You likely have a laundry list of other hires you want to make in the next 6 months, having someone fully dedicated to bringing on new talent and making sure to retain the existing talent is crucial. Don’t wait until you have 50 people to manage to hire HR, do it when you are 30 FTE and about to hire 20 more people so they can help onboard, interview, source and grow those people. Hiring an HR manager or promoting someone internally from operations should be your 30th hire. If you’re not sure what to look for, you can bring on a HR consultant to help you hire a full time HR person.
At this point, you’ve lost some talent but you are now attracting more applicants. They aren’t all necessary the skill set you need but it’s nice to have talent arriving at your door for a change. There is a brief time period where you believe that it will be easy to fill that next open position. The company is known, you have customers and you have inbound candidates. The unsettling news, the types of hires you want to make now are in a different realm than the one’s you’ve made to date. Things need to change.
Your hiring plan likely includes a VP of Engineering, QA Manager, Head of Marketing, Product leader, HR, DevOps, Engineers, Sales and Mobile. These jobs commonly come up for the first time at a company moving from 30 to 50 FTE. This is new territory for most of your team, what does an excellent QA Manager do, where is the bar set?
Equity and compensation change once again. You quickly realize that if you give 50 people 1% that’s half of the business. You want to attract the best talent but where is the balance to comp and equity compensation? What structures make sense now or will in the future?
Time to step up your hiring game. In order to grow your team, hiring needs to become more of a machine. You can’t ask all of the questions anymore. Instead, you have to make sure the right questions are being asked throughout the rounds of interviews. The right people need to vet new candidates. The bar for new hires should be roughly set, not just a matter of ‘gut’. A process will help save everyone time, it may sound daunting to set up but that’s why you hire someone to run this side of the business. The better your company is at hiring, the easier it will be to expand with customer demand.
Larger teams mean more leadership required. If you have a team larger than 9 people, it should be split into two smaller teams. That means instead of one team leader, you need two. Perhaps you need two team leaders, Engineering Leaders for example, and one functional leader, CTO. There are more layers of management in order for teams to move faster, not slower. The only way to achieve that is by ensuring leaders know what they’re doing.
Hire experienced people leaders. It’s scary to consider hiring someone from outside of your company culture to come in and lead your team. Recruit from companies that have great management training programs like Twitter or GE. Try to instill the culture of management training into your organization.
Adding new hires into management will surface concerns. There will be push back from existing employees that think they would be the best fit for the job or are seeking a title and pay increase given their loyalty to the company. These battles may happen in the open or only exist in whispers among the disgruntled. Be as transparent as possible in your rationale and criteria for people leaders. Don’t cave to the pressure of loud voices at the cost of putting quality management in place. If an existing employee wants to be considered for the role, evaluate them accordingly.
Embrace new people leaders. You’ll promote people from in to fill leadership roles but they may have no idea what they’re doing. Expect that. Build training, seek coaches, find leadership curriculums and use them. Just because a person is talented as an individual contributor (IC), it doesn’t mean they will be great at leading other people in that skill. Plan for it. Coach them through it. If they realize they would rather return to an IC role, consider the growth path for them there.
Most companies revaluate how teams are structured at this stage, not just by adding more leadership, but by dividing up teams. Some structure teams around features, so the team includes one designer, one engineer and one product manager. Others structure teams to revolve around KPIs, so cross-functional teams focused on onboarding vs. retention. Another option is to keep teams split by function, engineering vs. sales vs. design. The setup depends on the company and the people you already have on the team. Team structures will change again when you hit 75+ employees so don’t get too comfortable.
Adding new people to the organization will accelerate the output of the company but not always in the short term. Getting up to speed on how you will construct management teams in order to remove roadblocks will be the biggest priority. It is very easy to add more people and decrease output. Don’t crush your dreams of, ‘if we only had two more mobile engineers we could get this done faster’, by not being prepared to setup the organization correctly.
You will no longer know everyone personally. You won’t have the time or interactions to truly know each person in the company. You can no longer fit your whole team in one meeting at the same time. You should build systems in that can help make sure you’re getting exposure to different parts of the business. One-on-ones with team leaders is a must for CEOs. One-on-ones within teams are a must. Townhalls with everyone present should happen between 15-30 employees, keep those up on a frequent cadence. Provide a tool like Slack, HipChat or Yammer to keep communication lines open.
A clear vision of the future and matching KPIs are required. The company burn has increased with positive metrics, you’re likely in the window to fundraise your Series B or C. Unlike most Seed and Series A fundraises, you have real metrics, historical numbers to compare to and more costs. No longer are things projected purely on speculation, you now have enough of a path to make future forecasts. Putting together the next round of funding will eat into the leadership team’s time and may require additional ad-hoc work from data, design and business teams. The more you can align your weekly metrics with those you’ll use in your pitch process, the easier it will be to streamline.
Opportunity is ahead; make sure on the right path. Growth can mask a lot of management issues. They will likely happen over the coming 6 months, just try to ensure it doesn’t happen in the long term. Over communicate with your team about the reason you’re all here and working so hard. It’s easy to get distracted by job titles, competitors or the quality of the free beverages. Drive home the reason you’re here and working together. Keep the beat of the drum loud and consistent. Your team should be able to recite your mission in their sleep. Don’t shy away from building something together. There are new challenges here but that’s what comes with growth. Make sure to take some time to reflect on how you got here because it’s just the beginning all over again. Appreciate the past behind you and prepare for the path ahead.
Current state of the organization:
- Every employee has weekly 1-on-1s with their leader
- Everyone attends weekly Town Halls
- CEO should be focused on vision and hiring up
- More management and restructuring of teams within sales and product
- You’re raising your Series B or C
- You have a few years of metrics and you’re starting to run A/B tests
- More management brings up questions around career progression
- You have process in some places, like product sprints, but none in hiring or career progression
Things you’re doing for the first time:
- Hiring HR or People Ops
- Setting up a new hire referral bonus program
- You’re big enough now that a data breach will matter, make sure you have a plan.
- Increasing communication: Town Halls, 1-on-1s, and more tech tools
- Raising your Series B or C, using more metric-driven forecasts
- Training new people leaders
- Hiring more management level talent
- Deciding how to recognize great ICs without management promotion
- Structuring your teams around KPIs to align with the company vision
- Setting up an interview process that gets the hires you need
- Negotiating down rates for per-use services like MixPanel & AWS
What you’ve already solved:
Software you use:
- Payroll - JustWorks, Paychex, ADP or Zenpayroll
- Benefits - JustWorks, or Zenefits
- Accounting - Quickbooks, Intaact, or Netsuite
- Google Apps for email and documents
- Google & Flurry Analytics plus MixPanel or Localytics for data
- AWS, Digital Ocean or your own servers
- Mac books
- Zendesk or Desk for customer support
- Sprout Social or Hootsuite for Social Media
- Trello, Asana or Jira for Product Management
- Github for permissions & software sharing
- Highrise, Bases or Sugar CRM for sales pipelines
- Careers 2.0 and Indeed to hire outside of your network
- Stripe, Amazon, Dwolla, or PayPal for payments
- Skype or Google Hangouts for remote meetings
- Hiring Platform, like Lever.co, Greenhouse.io or BambooHR.com
Who you need to know:
- Recruiting firm for hard hires: engineers & VP+ level tech, product talent
- Real estate broker for your new or next office
- Architect or interior designer for office setup
- Lawyers to review equity documents and to negotiate contracts
- Journalists you’ve built relationships with to write-up new features
- Skilled friends who may refer top talent to your company
- Mobile platform gatekeepers to promote you in their stores
- Full time accountant to manage books
- 409a consulting firm to evaluate equity
Additional decisions that may start in this stage:
- Having multiple offices or remote employees
- Offering your product in more than one language
- Securing visas for international candidates
- Hiring outside or in-house council, for more regulated industries
- Negotiating a lease on a new office
- Hiring a white hat security firm to run an audit
If you have something to add to this list, please share in the comments or send me a line on Twitter.
Next up, the Growth Stage, growing from 50 to 75 employees. To subscribe to weekly updates via email, sign up here.
If you’re interested in giving back to the startup community this week, please check out some of the great panels from USV companies that are up for consideration for SXSW 2015. Review and vote here.
*Please note, this outline is based off of trends I’ve seen in venture-backed startups. It very easily could apply to bootstrapped or non-venture funded companies, but not necessarily. In this outline I assume the company has taken funding, whether Seed or Series A
**We’ve invested in a number of companies mentioned in this note. For a full list, visit our Portfolio Page or find opportunities with them through the USV jobs page.