GROWTH & LEADERSHIP TEAMS
One of the most significant challenges that a Founder will have is how to grow a leadership team that matches the needs of the business and allows the organization to successfully move from startup to second stage. We often see our clients struggling with this issue and wanted to share key issues associated with successfully managing this growth including:
- The importance of intentional management
- Leadership team stages
- Leadership roles
- Typical structures and factors
- The process for making changes to your leadership team
1. Importance of Intentional Leadership Management
When done effectively:
- The leadership team operates at a strategic level while also driving execution.
- There are clear areas of responsibility/accountability that cover all key tasks and responsibilities.
- This structure allows taking on new opportunities, addressing challenges, and is scalable.
- The leadership team evolves from being nimble, fluid, and reactive to being stable, proactive, and accountable.
- Accountability is key - There are aligned reporting relationships. There are Key Performance Indicators (KPIs). It is clear who is responsible for what by when.
If the leadership team and structure do not grow with the needs of the organization:
- The CEO will be overwhelmed.
- Department leaders will become stressed.
- The staff will lack clear direction and guidance.
- There will be insufficient strategic planning and failed execution.
Growth will make significant impacts on a leadership team and organization, whether you manage it or not.
2. Leadership Team Stages
When a company is starting up, there is often a small team of people that have known each other before (perhaps friends or spouses), there is passion and excitement, and this group thrives on the mission. This team lays the foundation for success and creates the culture.Team members usually wear many hats, roles and responsibilities are fluid, and communication structures are easy due to pre-existing relationships and the relatively small number of leadership team members. Everyone is focused on building, selling, and/or raising money for the product and/or service.
As the team reaches its second stage (where the market and value proposition are well-defined) there are new priorities for the leadership team, including:
- Putting in place scalable systems.
- Identifying KPIs and holding their teams accountable for results.
- Building strategic partnerships.
- Mentoring and growing the future leadership of the company.
- Strategically managing cash flow.
- Attracting and retaining talent.
- Improving quality services and/or products.
- Reducing costs.
- Raising growth capital.
- Developing a repeatable sales process.
This requires the leadership to use new skills. What does this mean for your management team? Can people grow into these new roles? These are key questions that you will need to answer. Next, we will look at roles and responsibilities, followed by how to evaluate your leadership team and what to do if someone isn’t the right fit.
3. Leadership Structure & Roles
First let’s think about roles and responsibilities. Who is responsible for the critical activities and processes in your organization. There needs to be clear objectives, goals, and KPIs (e.g., revenue, number of clients, etc.) that have one person in charge. One person can be responsible for multiple seats / lanes / buckets / departments / goals / KPIs, but you should not have two (or more) people responsible for the same key area. These include:
- Vision - Who has overall responsibility for setting the vision and aligning the organization around it?
- Sales - Who is responsible for revenue growth?
- Customer Satisfaction - Who is responsible for delighting the customer? This can be divided up by customer segments.
- Finance - Who is responsible for setting the budget, managing cash, providing reports and analysis?
- Operations - Who is responsible for the internal workings of the organization? This could include office management, IT, insurance, purchasing, HR.
- Product - Who is responsible for determining the products/services that will be provided to the market? This responsibility can be divided into different product/service lines, market, or geographic segments.
- Marketing - Who is responsible for managing the brand, determining messages, advertising spend?
There are many different ways to organize a company around these areas. Here are a few common roles and responsibilities:
Chief Executive Officer
- Leads development of long- and short-term organizational strategy.
- Creates and implements the organization's vision and mission.
- Communicates on behalf of the organization.
Chief Operating Officer
- Responsible for day-to-day oversight of company operations.
- Executes business plans and strategies.
- Serves as an integrator, ensuring all departments are working towards organizational goals.
- Manages and aids in the development of the leadership team.
VP - Sales
- Provides leadership to the Sales team.
- Working with the CEO and COO, develops sales strategies that align with organizational goals.
- Working with the VP Marketing and VP Innovation/R&D, identifies opportunities for growth.
- Responsible for meeting revenue goals.
- Working with VP Marketing, ensures customer satisfaction with company communications.
VP - Marketing
- Provides leadership to the Marketing team.
- Leads brand development and strategy.
- Works with the VP of Innovation to conduct market research to identify opportunities and consumer trends.
- Develops marketing strategy and evaluates marketing initiatives based on return on investment.
VP - Human Resources
- Develops and implements an effective hiring and recruitment process.
- Responsible for the training, development, and retention of employees.
- Ensures compliance with state and federal employment laws.
- Develops human resource strategies, policies, and processes.
VP - Manufacturing
- Responsible for day-to-day oversight and coordination of production operations.
- Ensures production and delivery of product meets organizational standards and deadlines.
- Manages the development of supply chain and inventory management processes.
- Ensures compliance with health and safety standards and regulations.
VP - Finance
- Ensures business decisions are based on sound financial principles.
- Manages the organization’s finances, books, and records.
- Responsible for financial reporting, forecasting, and compliance.
- Develops organizational budget based on company goals.
- Provides leadership to accounting, treasury, and other finance teams.
VP - Innovation/Research & Development
- Works with VP of Sales and VP of Marketing to identify market opportunities and consumer insight.
- Translates customer and market insights into new product and organizational strategies.
- Works with all departments to seek out opportunities to increase efficiency and streamline processes through the implementation of new technology.
- Uses research and data to develop short- and long-term strategies for growth.
4. Typical Structures
After the roles are nailed down, you will want to put them together in a way that makes sense for the organization. There are different ways to organize these roles into a structure. Here are a few common options:
Visionary/Integrator - Gino Wickman, creator of the Entrepreneur’s Operating System, asserts that an organization needs a visionary and an integrator. The Visionary understands where the organization is going, and the Integrator helps align the resources to ensure that the vision is executed effectively. A common way to implement this approach is to have a founder and/or CEO who is responsible for setting the vision, communicating the vision. Then, there is a COO who is responsible for ensuring that everything gets done. This “strong #2” is someone that keeps the CEO from getting into details, and allows the CEO to work “on the business” instead of “in the business.” Everyone, or almost everyone, reports to the COO.
Functional Organization - The CEO has key leaders with clear functional expertise and ownership. These 6-10 direct reports often draw from:
- Operations (IT, HR)
- Product Development
- Manufacturing/Service Delivery
Geographic or Product/Service Line Organization - The CEO has key leaders that own a variety of functions, and each is responsible for a specific product line and/or geography. Sometimes the functions, such as marketing, are shared across these different departments/products/services/geographies. Some issues that can crop up are how to cost the shared services and how to allocate resources, among others.
5. Process to make changes to your leadership structure
The following is a framework that can be used when making a change has been identified.
- Recognizing the need for a new role.
- Things aren’t getting enough attention.
- The management team member who has this in their portfolio can’t make enough time for it.
- Creating the new role.
- Clearly define the activities needed and accountability for the new role.
- Make sure that the activities/accountability for the rest of the leadership positions are defined. Defining “lanes” and keeping everyone in them is important.
- Conduct a job analysis, and be as specific as possible for each crucial responsibility and competencies required to be successful in the position before hire and after a hire is made.
- Filling the new role
- Promote from within
- A leadership team member that oversaw this area might step into it, thereby creating another role to be filled.
- A person on the team is ready to take on the new role and responsibilities.
- Provide training, mentoring, and support to the new position holder, especially if they haven’t done this before.
- Hiring from outside
- Hire for hard AND soft skills.
- Clearly define your values.
- Can be beneficial if you are quickly growing and want to take the organization in a new direction and gain a new perspective.
- Onboarding and training are crucial for the success of internal and external hires!
- If this is going to be a key role, you hire them into a short-term role with the plan to promote. For instance, if you have a technical co-founder and need a CTO in place to put in place sustainable and scalable systems, you can initially bring in the CTO as a director reporting to the technical co-founder for 3-6 months. Then after it is clear that the CTO is going to be a good cultural fit, promote the new person to CTO, and then the technical co-founder can become a direct report of the CTO. The benefits include:
- Reduced risk for the organization
- Increased engagement of the workforce, especially those fond of the technical co-founder.
- Promote from within
6. What to do if someone on your leadership team is struggling
Sometimes you have someone on the team that did really well when the team was in startup mode, but isn’t a good fit in terms of scaling and growing the organization. I have met many people over the years that loved the early, exciting stage but would then leave to find the next early stage opportunity. Sometimes, you need to make a change because you need to bring in connections or experience that don’t exist in-house. Sometimes, you might have promoted someone that thrives as an individual contributor but isn’t able to successfully become a supervisor. These are very difficult conversations to have and decisions to make. Here are a few tips on making the situations easier:
- Be honest with yourself and the individual. Explore all options, including professional development and support. Moving someone back into an individual contributor role can work out very well.
- Focus on the needs of the organization. Think about what is best for the whole team, not just the desires of an individual.
- Be respectful. Always treat everyone with respect. The rest of the organization is paying attention.