Week 8: Discuss scaling issues as a startup evolves through various stages to maturity (Chapter 10, The Founder’s Dilemmas; “Transitioning from a Startup to Growth-Stage Company”).
The article “Transitioning from a Startup to Growth-Stage Company” refers to A-Players as hidden gems. This article explains how hidden gems can make all the difference in your company and possibly future companies. If they are what makes all the difference then you would want to take them with you on whatever your next business venture is. The article also refers to this as a secret weapon. When these employees are preforming so well in their role, a strategy would be to pass this type of performance on to other employees by trying to capture the traits and abilities of that key player and train them to other employees to replicate the performance. Creating a well-oiled machine. The other piece of this is if their traits are their strength in this position, you don’t want to take them away from their strengths by moving them up to a higher position. But you do want to reward them for their hard work and move them up without losing their key talents. Try to do a combination of a higher up position where they can still use their strengths and their abilities. Possibly training others to perform successfully while also being able to still contribute their abilities.
Investors, board members and advisors can help you to grow your company and to strategize in order to get stronger as you grow. They will help you to collect energy over time and to make growth easy. This is why choosing the right board members is very important especially when your business is expanding. You need to find board members with experience in this area.
In the Founder’s Dilemma it shows how over time companies go from starting with the founder as the CEO to slowly being replaced by other CEOs, why is this? The factors that go into this search for new CEO being put in place are:
- The degree of success of the CEO
- The Rate of growth and change of the company
- Loss of board control
- Founder capabilities and centrality
- Founder burnout and motivation
- Trigger of succession: founder, board, others
Sometimes the CEO voluntarily decides to step down and may become chairman of the board or have some involvement on the board. They still want to be a big part of the company’s decisions but maybe realize they are not able to do the best job as CEO. The other possibility is that the CEO can be fired by the board if they all agree that the CEO is not doing an adequate job and needs to be replaced. If the CEO does not voluntarily step down then the board has the power to fire the CEO.
Then begins the search for a successor, usually the successor comes from inside the company. The founder CEO needs to be convinced to be supportive of this change due to their role on the board. Gaining the predecessor’s support is very important in the new CEO’s actions. “Founder’s should also realize that they can gain some control over when they lose control of the startup by “getting ahead of the board” and initiating the succession themselves.”(pg.328)