Unfortunately many leaders do not adapt their role as the business grows. Ron Ashkenas provides important insights into the importance of evolving.
By Ron Ashkenas
Pivoting from an initial product design or business model has become a given in the startup playbook. But even as startup leaders shift their businesses to meet a newly discovered need, they often fail to apply the same logic to themselves — and there they get into trouble. Startup leaders must be willing to pivot their leadership approach, or their board and investors will end up doing it for them; indeed, data shows that venture capitalists replace 20% to 40% of their founders with more seasoned and “professional” managers at critical transition points in a startup’s growth. And well they might: a chief revenue officer who successfully helps the company win an initial group of customers might not have the right skills to actually run a scaled-up sales organization.
Knowing and developing yourself as a leader is at the core of one of the six fundamental leadership practices that Brook Manville and I describe in our book the HBR Leader’s Handbook. As a leader in any kind of organization you must candidly look in the mirror, get feedback about what you do well and where you are lacking, and then work to close the gap. In startups, however, the rapid evolution of the business requires those on the leadership team to engage in these activities in short, intense cycles.
Each milestone achievement or shortfall in the business — revenue, headcount, product introductions, new markets, numbers or types of customers, and so on — must trigger a rapid reassessment of leadership. Ask yourselves: Are we the right people, with the right skills, doing the right jobs to take the company to the next key milestone and to the next level? Are our current roles aligned with the most pressing business opportunities? Is our way of working the right approach for the next stage of the business? If not, what shifts do we have to make?
Here’s a cautionary tale (the details of the story have been changed to protect the company’s identity): For the past several years I’ve advised an innovative medical device firm with two founders. The company started to take off when its core product won approval in its first foreign country. When that happened, however, the founders continued their regular responsibilities — fundraising, strategy, regulatory, R&D, product management, supply chain — while running the country’s operations remotely. Stretched too thin, without strong sales or operational leadership on the ground, they weren’t able to fully leverage their initial country opening. As a result, the board brought in an operational CEO to cut costs and run the company, relegating the founders to a vague “strategic planning” role. By that time however, the company had lost its momentum and competitors were entering the market. The firm now seems unlikely to succeed.
One of the founders has since told me that he believes that when the product was approved in that first country they should have revisited their leadership roles. He believes that if they had done so, at least one of them would have moved abroad to build the business there, while bringing in other senior people to take on activities that they had been doing. This missed opportunity cost them both continued leadership of the firm, and possibly even the firm’s existence.
Another company I’ve worked with, an innovative financial payments firm, similarly started with two founders (some of the details in this story have also been changed). When the company started growing rapidly, the founders brought in experienced managers from established companies to run customer service, product development, marketing, finance, and HR, functions that they had been overseeing, but which were not their strengths. Over the course of several years, the founders kept reshaping and evolving this team, bringing in new leaders, moving people out when they no longer fit, and creating new roles, such as a head of data analytics, when needed. The founders’ own roles shifted accordingly; for example, once the company reached a certain size, one of the founders began to focus specifically on values, culture, and internal communications, while the other gave up his operational responsibilities and brought in a “co-CEO” to run the day-to-day while he concentrated on longer-term innovation. The evolution of their leadership didn’t necessarily go in a straight line, and was sometimes painful when one or the other had to give up something that he liked doing; but it allowed the company to reach a point where it could profitably establish itself as a leader in its market, merge with a competitor, and get ready for an IPO. By regularly examining and shifting their own leadership, the founders were able to build a sustainable organization even while continuing to live into the innovative spirit of the company.
As you ask yourself how you might need to change your leadership approach alongside your business, keep these principles in mind:
Leadership jobs will change faster than leadership titles. However your job is defined today, your real responsibilities are probably going to change as the company grows or pivots, even though you won’t necessarily get a salary boost or a new business card. For example, running a team that services a few dozen customers will significantly change when you have to take care of hundreds, even though both jobs carry the title of “customer service manager.”
If someone on the team isn’t willing to periodically work differently, they may need to take on a new role or leave the company. (I call this “step up, step over, or step away”). This can be hard for successful leaders to understand, but it’s like financial disclosure statements: “Past performance, no matter how critical to the company, is no guarantee of future success.”
Developing yourself is hard to do alone, especially in an intense start-up environment where everyone is emotionally and financially invested in the success of the firm and may not want to even consider the possibility that their skills no longer fit. Therefore the team needs to either work together or get outside help to identify and make the necessary shifts. This could mean doing regular assessments of each other’s portfolios as a leadership team, and narrowing or refocusing them as needed; using a coach to work with selected executives or the team as a whole; conducting 360 assessments of the leadership team at regular intervals and using the data to inform decisions about senior roles; or setting up quarterly (or more frequent) state-of-the-company reviews where everyone can candidly talk about what’s working and what is not.
Don’t put off painful decisions. Pivoting your leadership approach and making tough decisions about your own and others’ leadership skills can be difficult. The CEO of another medical startup I worked with recently realized that he had to replace his head of R&D, a friend who had been instrumental in launching the company but was more suited to working alone than to managing the labs, supporting leadership colleagues, and working collaboratively with outside experts. While the CEO knew that something had to be done, he agonized for six months about actually making the move. When he found an experienced executive as a replacement and had the tough conversation with his friend, his only regret was that he didn’t make the change much earlier, which would have spared the team a great deal of angst, and (as the new executive proved) brought products to the next stage much more quickly.
While instituting this kind of change in yourself (and others!) can be painful at times, doing it regularly to mirror your company’s growth can also be an exhilarating opportunity for you and your team to learn, and develop themselves — while dramatically increasing your company’s chances of continuing to achieve new levels of success in the future.