Previously on Scaling Start-Ups...
Founders Chen and Olga successfully raised their second round of funding and saw incredible growth from Phase 2 to Phase 3 of Greiner’s Curve, only to watch their global company slip gloriously out of sync as they moved into Phase 4. They faced the challenge head on and implemented new processes, team structure and systems to balance out this problem.
In this episode, we'll see how this new-found coordination leads to yet another crisis our founders will have to overcome in Phase 5 and 6 on their growth journey to having Mugs 'L' Us become a global, household name of left-handed products.
Greiner’s Curve captures organisational life-cycle growth in 6 phases. Each growth phase is made up of an evolution and stable growth, followed by a crisis when revolutionary changes are needed for the company to carry on growing.
Greiner's Curve: Organisational life-cycle and growth journey
Chen and Olga, the founders of Mugs ‘L’ Us, have grown the business through Creativity (Phase 1), Direction (Phase 2), Delegation (Phase 3) and Coordination (Phase 4). Along with the business, they have also grown as founders as they weather the crisis points at each phase. During Phase 4, they have put in place effort to tackle the lack of coordination across various parts of the business. They saw global production become more frictionless, more profitable and the people more motivated and connected. Crisis averted, right?
Well… not so much.
Key characters in Mugs ‘L’ Us
💥 END OF PHASE 4: Red-Tape Crisis
While there was an initial global alignment which resulted in uplift in productivity and a reduction in accidents and repeated mistakes across the plants, the QA and HR teams were trying to counter every scenario possible in the plants. This meant more and more procedures were put in place, and the balance started to tip.
Manufacturing Managers became frustrated by the growing number of policies and procedures. How could these people sitting pretty in HQ possibly know what was best for their teams? They begin to let procedures slip, make their own local amendments or ignore them altogether.
In return, the QA and HR teams became equally irritated by rogue Manufacturing Managers. Why couldn’t they see the well thought-out policies benefit them? They began to make more onsite visits, hold more policy meetings and deal out disciplinary measures. With these repercussions, managers and teams began to feel afraid to make day-to-day decisions to problem solve. Now things were being done because “that’s what the approval guidelines says”, even at the cost of improvement, efficiency and innovation.
Although production continued on, it is not growing at the rate it was before. No amount of perks introduced by HQ such as team socials, Yoga Tuesday or Friday Beer could reduce the feeling of disgruntlement and frustration. Suddenly, a company that started as a tiny start-up between friends had become a bureaucratic, slow-moving global machine frozen between indecision and a mountain of approval processes.
The founding team knew they had to rip down the red tape that had wrapped up the company. They wanted a culture where everyone is able to solve problems that are closest to them and try new things, while still maintaining alignment on key areas. Olga as the COO was tasked to do this. This wasn’t an easy change. Everyone had grown used to reliance on the policies to guide them, and to the HQ teams to green light any decisions that fell outside those written guidelines.
The company needed an organisational makeover but this is not something that will happen overnight. After researching different ways of working, frameworks and methodologies, the founding team found one that is aligned to what the business is trying to achieve - be nimble, learn fast and often, and try new things. They decided to adopt Agile philosophy and practices.
From top to bottom, everyone was involved in contributing to the company strategy to move towards Agile ways of working, crafting the new organisational structure, defining clearly the skills and capabilities needed to adopt the new ways of working, design processes that reduces bureaucracy, collecting data to monitor how their transformation succeeds and last but not least, living and breathing the key principles that align all their efforts towards their goal.
How to overcome Red Tape Crisis?
Red tape creeps up when policies, procedures and guidelines become a controlling mechanism rather than enabling agency and collaboration.
Many start-ups encourage employees to exercise “ownership” or “accountability” to guide decision making. However, this leaves a gap between intention and impact. Ownership is the act, state, or right of possessing something. Do we really want ownership, or is what we are looking for actually agency: the acts to produce a particular result? Asking for ownership without defining what success looks like may not deliver the required result. There are 4 things Chen and Olga should consider to bring ownership and agency together to create more clarity as well as agency for better collaboration.
Start by (1) aligning wins across 3 core areas: products, customers and employees. By defining what is good for customers, we will in turn benefit our employees and our products. When Mugs ‘L’ Us aligns what it means to win, they are (2) creating empathy for their products, customers and employees. This is important as it channels the company’s mission and employee passion towards putting these 3 core areas at the heart of the business.
As a result, it changes how Mugs ‘L’ Us views each role as they transform the organisation: everyone is responsible for creating value for products, customers and employees. Leadership must ensure that everyone has (3) clarity of roles; for example, articulating why a role exists and how that role can create value in the contexts of the 3 core areas. Lastly, (4) making good communication inherent. Find ways to make routine communication (updates, reporting, etc.) a bi-product of ‘doing your job’ rather than a separate process -- the more separate governance processes in your business, the more likely red tape is to flourish.
Understanding the collective drivers of your business is key; any process improvements must tie back to these core drivers to be impactful in a positive and productive way.
Steve Bianchi, Chief People & Operations Officer at Beamery
📈 PHASE 5: Growth through collaboration
The growth rate in Mug ‘L’ Us starts to see improvement again. Some of the new practices such as daily stand-ups and retros enable teams to identify problems or gaps and solve them quickly. The transition took some time, but it is absolutely worth the effort as the founding team noticed that distributed decision making reinvigorated the teams to take ownership and accountability for quality, performance and innovation.
Their customer base was continuing to grow and these customers were incredibly loyal to the Mugs ‘L’ Us brand - Mugs L-ifers, as it were! 90% of clients want to increase commercial contracts if Mugs ‘L’ Us could offer more left-handed office supplies. Their investors recognise this opportunity and want to fund them for the next stage of growth.
💥 END OF PHASE 5: Growth Crisis
Chen and Olga in Mugs ‘L’ Us recognise the limitations of internal growth and know they need to look externally if they want to diversify their product offering. They have a decision to make: would they buy or borrow? Should they acquire another company that is already producing these products (buy) or form strategic alliances to share expertise (borrow) so they can hit the market earlier?
As it happened, Crafty Lee’s who is operating in the left-handed space is open for acquisition. They specialised in left-handed office supplies, scissors and staplers being their highest selling items. They had a stronghold on the UK left-handed craft market, but their global brand presence wasn’t anywhere close to Mugs ‘L’ Us.
While both companies held shared values around making the world a better place for left-handed customers, their ways of working were starkly different. Mugs ‘L’ Us had adopted a more agile methodology based on their learnings, but Crafty Lee’s was a more ingrained business, 40 years old and with little change in organisational practices since then. The culture is based on top-down decision making and many of their operational systems have not been upgraded for the last 10 years.
On paper, all things financial and business make sense. The last consideration for the founders of Mugs ‘L’ Us: what is the likelihood of success when the culture and identity of both businesses come together?
How to overcome Growth Crisis?
“Mugs ‘L’ Us and Crafty Lee’s look a good match, but when you lift the lid, they could be worlds apart. However, with careful planning, strong leadership, management practices and continuous dialogue most blockages can be smashed through.
Outside the ‘financial business case’, there are 3 things Chen and Olga need to determine if they should merge with Crafty Lee. Strategy alignment - are the current strategies divergent, parallel or coming together. Divergent strategies can be adjusted, but they may have fundamentals in place that make it hard to shift quickly. Culture - will the cultures compliment or challenge each other, the cultural barriers may be too big to overcome. Business baselines - will there be blockages (e.g. business processes, systems, IT security, data rights) significant enough to stop performance.
If Chen and Olga decide to merge/acquire, here are 2 key challenges they need to overcome to ensure success.
The Leadership Challenge. Leadership is the space between management and performance. The simplest integration can fail when leaders are not looking at the whole ecosystem. What are the challenges? Lack of leadership cohesion, clarity, inconsistent decision making... to name a few. How to beat it? Mugs ’L’ Us and Crafty Lee need to build a united leadership agenda that conveys the strategy, priorities and outcomes the new partnership wishes to deliver and align the organisation behind it.
The Culture challenge. If leadership is the space between management and performance, the outcome of leadership is organisational culture. Cultural integration can present many challenges, because it involves people. What are the challenges? Cultural conflict, differing styles, disengagement ... to name a few. How to beat it? Mugs ’L’ Us and Crafty Lee need to set a culture strategy, look for the positive attributes where the two cultures are similar combined with harnessing each other's unique cultural strengths and create and promote an enhanced cultural paradigm.”
Warrick Chan, Global People Business Partner for Digital Transformation
📈 PHASE 6: Growth through alliances
We say goodbye to Chen and Olga as they head into Phase 6 of the Greiner’s Curve. They addressed their internal limitations to diversify their offerings into office supplies by looking externally to grow their business. They will weigh up the decision to acquire or form a partnership with Crafty Lee’s to continue to grow their business.
Growing pains are unavoidable but armed with awareness, you can prepare for them
First and foremost, this is a work of fiction. Names, characters, businesses, places, events, locales, and incidents are either the products of the author's imagination or used in a fictitious manner. Any resemblance to actual persons, living or dead, or actual events is purely coincidental.
This fictional account creates awareness for founding leaders and HR folks of organisational life-cycle, the growth phases and crisis points we will most likely encounter as the business scales. Knowing this can help us anticipate the needs and challenges ahead, make sure we are ready and have solutions at hand when needed. Crisis points are inevitable and it is not necessarily a bad thing. It may throw us into unchartered territories, but it is necessary for growth. How long you will remain at each crisis stage depends on how ready you are as an organisation to weather the crisis ahead.
In the next episode...
Although we find ourselves parting ways with Chen & Olga here, our next episode will dive into what you'll need to keep in mind as you go through these growth phases. So if you find yourself on a similar journey to our founder friends, stay tuned!