Getting your company off the ground to a sustainable place should be the hardest part of starting a company, right? That’s what many think, and how the growing pains and problems that occur within larger organizations go unanticipated or considered until it’s too late. Rick Thomas, business advisor at Pilot Wealth Management, joins Brandon Laws in a discussion of the common issues companies experience when they go from 10 employees to 20 employees and beyond, and how you can lay the groundwork for a successful organization – no matter its ultimate size.
Brandon: Hey there, it’s your host Brandon Laws. In today’s episode I have a discussion with Rick Thomas, business advisor and partner at Pilot Wealth Management in Portland, Oregon. He’s also a returning guest – last time we talked about brand promise and what it can do for your business, it’s a good episode. Rick also recently launched a podcast called The Idea Revolution.
In today’s episode, we discuss an article Rick ran across on Medium written by Eric Jorgenson on Why Growing Past 20 Employees Is So Damn Hard (and what you can do about it).
I really, really enjoyed this discussion with Rick. It was a lot of fun and this article was great. We kind of put our own spin on it and talked about a lot of points that the author makes. Without further ado, here is the discussion with Rick.
Brandon: Hey, Rick, it’s great to have you back on the podcast! Welcome.
Rick: Hey, Brandon! Thanks for having me again.
Brandon: About a week or so ago, you found this article in Medium called Why Growing Past 20 Employees Is So Damn Hard (and what you can do about it). I love that title and it was on Medium written by Eric Jorgenson. I think the title makes it obvious, what this article is all about, which is why growing past 20 employees is challenging and how there are always headaches that go along with it.
But I want to back up real quick. What about companies that are smaller, a team of 10 or less? What does that team look like versus 20 or more?
Rick: The title caught my eye, and it’s related to your question, because invariably what I will eventually hear from the organizations that I work with, especially the small ones that are growing, is the common complaint of We’re becoming too corporate or How do we keep from turning into this corporate whatever? and lamenting that this used to feel like a family and it’s not a family anymore.
I hear this over and over and over again and this is why this article really caught my eye and as I read through it, it really resonated. Back to your question, the identity for most businesses under 10 is it truly feels like a family. You are working shoulder to shoulder trying to grow the business and often doing things that nobody ever expected they would have to do just to make it work whereas in a 20 person company or much larger, you now begin to have fairly defined swimming lanes. If you’re in product engineering you actually get to do product engineering and not have to clean the toilet or figure out how to sell a product or something, right? So that’s the simplest answer.
Brandon: You mentioned it feels like a family and partly that could be true because it might be a family! You might hire your friends and family when you’re a few people starting up, I think it’s pretty common. But once you start hiring outsiders, it doesn’t feel like that anymore.
But also the shoulder to shoulder comment, I think a lot of times when you’re in growth mode when you have 5, 10 employees, you’re probably working 16-hour days and you’re doing everything from cleaning the toilets to balancing books and doing marketing. I think everybody has to pitch in at different levels.
Rick: It is. It’s amazing. For anybody who has gone through a growth curve from a small business to a medium or a large one, they look back on those times when it was small with nostalgia because when you’re working that hard side by side with those kind of hours, you see the best and worst in people, both of your colleagues and yourself, actually. It’s those times that actually define the really cool memories, for most people at least, if the business gets beyond that phase.
Frankly this could be an entirely different podcast discussion! When people talk about how it’s a family here, that’s a huge red flag because, frankly, I have yet to meet a family that is not dysfunctional in some way. A family model is not a good role model for a business to type itself after. But, again, that’s an entirely different discussion.
Brandon: I think what makes a smaller company really interesting is that a lot of times when you’re that tight you often are living and breathing the same mission and values. When you start adding to that team it gets a little dysfunctional unless you’re still focused around that mission and a lot of times when you bring in outsiders, it just doesn’t feel that way anymore. We will talk about that more later, but I think that’s where leadership could really help redefine the mission and continue to articulate it so everybody is aligned because otherwise, it can get just completely lost.
Rick: And let me add one more thing – one of the things that is much easier to do when you’re a small business under 10 people is when you add somebody to the team that isn’t a fit, guess what. It is very obvious. You experience it, you feel it in multiple ways and scenarios and it’s like, ok, bad hire, bad decision. We got to do something about this and move on. The larger the organization gets, the more difficult it becomes to be that clear around whether this is a good hire or not.
Brandon: The author of this particular post, Eric Jorgenson, put together a really nice illustration of what it’s like between the social networks of a 10 person company, looking at how many one-on-one relationships are there in a 10 person company, and it’s 45. And how many are there in a 20-person company? It becomes exponentially larger. It’s 190! Talk about that illustration and just really what that means.
Rick: The geeky engineer part of me loves what he did!
Brandon: I thought it was a great illustration!
Rick: He used something that comes out of network communications called Metcalfe’s Law that describes the exponential nature of networking nodes or relationships as the network grows and he applied it to the interpersonal relationships that grow exponentially in a growing business. I thought that was a beautiful analogy.
But absolutely, I think about in my own experience just from working as an individual. I was off consulting as a lone gun for hire for about eight years before I joined with Nick and Jason at Pilot back in 2013. Even just going from myself to having two other people that I need to consciously think about Ok. Who did I say that to and did I communicate it to both guys? It has challenged me at times. Sometimes I thought I communicated that when in fact I haven’t or I only communicated to one person or in the wrong context or whatever.
Now multiply that by 10 and all of a sudden you begin to get an appreciation for the complexity that builds in communicating what needs to be done or why we’re doing something or if it’s a policy or a strategy, how complex that can become.
Brandon: I think that’s why organizations tend to develop hierarchies. Like the author pointed out, when you have a 10 person company, you’re a lot of times working side-by-side. You’re very flat. But when you have a 20-person company it just becomes so much harder to have these one-on-one relationships, so you need managers in between employees and the founders or the senior leaders. What are your thoughts on that?
Rick: It’s so incredibly necessary, and by the way, the hierarchy that we know it as today comes from the military model. There was a French military commander that created the hierarchy that has been adopted in most global businesses but at least certainly in the US in terms of this hierarchy of generals to commanders to lieutenants to sergeants. We follow the same model in business and it’s not just because it was convenient, it’s because it worked and it was an efficient way to communicate the mission of the organization and what needs to be done and what is priority.
Now does it go off the rails? Absolutely. But it is a very efficient model.
Brandon: The author pointed out that once the hierarchy really starts to take shape, you add a new layer of management, people start getting hired above early team members, and he even mentioned that the founders oftentimes will spend less time with non-management, which ultimately means that some of those early employees that are doing contributor work often don’t feel like their voices are being heard. In your opinion, what kind of problems can arise from that?
Rick: Now we’re talking about the underbelly of what happens when it’s not understood, the implications of creating this hierarchy.
Let me take a little sidebar here. One of the laments that I hear more than anything else from the owner operator, CEOs of the various organizations that I work with, as the organization has grown and created a critical mass, and especially if that person is a founder, one of the laments I hear the most is, I don’t know what my role is anymore.
Brandon: That’s got to be a terrible feeling.
Rick: It is, truly. Everybody is looking from the bottom up going, Dude, you killed it here. Go off and enjoy life! And you’re like, Well, no. I’m part of this organization. But I don’t know what I’m supposed to be doing. What I continually tell them is your time should not be spent so much in those executive team meetings. You’ve hired smart people to thrive and manage the business. You’re there to oversee strategy, but as much as anything, your job is to make sure you’re having interaction at the very frontline of the business to make sure that they are drinking the Kool-Aid of the mission of the organization and there is no better person to communicate that than the founder or that key leader that holds the crown jewels of the vision.
Brandon: I couldn’t agree more with that. Actually I ran across a graphic yesterday that one CEO had put together a pie chart about how he spends his time and it was talking with customers and instilling the values and trying to build the culture. He even took part in recruiting people that fit the culture and it was interesting because everything was about talking with customers and making sure that the right players are coming in to the company so that it’s not destroyed.
Rick: There’s that cheesy reality TV show called Undercover Boss.
Brandon: Yeah, I like that one!
Rick: I poke fun at it because of the whole reality TV thing, but the goodness in that is it demonstrates what happens when those key leaders get on the frontline and start working side by side. The people around them are ultimately impacted in a positive way, assuming the leader gets it and have a true appreciation for what it’s like to be on that call center call or doing the work that whatever the front line is doing for that particular business.
Brandon: We talked about the leaders and how they can really start connecting with people to make sure that they’re not totally disconnected. What happens in regular contributor level jobs when you’ve grown from a 10 person company to 20 or more. What really happens to those jobs? Because they do fundamentally change.
Rick: Absolutely. Eric does a great job of explaining what happens. When the organization grows it becomes more about the specific skillset for that particular role. We depart from being utility players. Let’s say I am in product engineering but in a small business that’s not the only hat that I wear. I may play several roles within the business and my value is as a utility player. As the organization grows it becomes more about what’s the particular skillset as a product engineer that I bring and can I lead that team of product engineering?
So that evolves. Now, one of the things that he doesn’t talk about that’s so important for leadership to communicate along with Hey, this is what’s happening. We’re growing and this is what’s going to happen to your role as it evolves is reminding people why we’re doing this. Why growth is necessary. It’s such a simple thing and I think leadership assumes that everybody gets why we want to grow. But oftentimes people don’t understand why we are taking this on, because growth in many cases means more work or more problems as opposed to just enjoying the benefits of the larger organization and what that scale can mean. It re-grounds people in that original vision and mission of why that growth is important.
I’m kind of going off your question a little bit, but the other thing that is so important for leadership to understand is not everybody is going to get there and this is probably one of the most difficult things that leaders and founders have to somehow accept is that it may be that it was one of those people in that original 3 or 5 person company that you fought shoulder to shoulder with and laughed and cried and spilled blood with that ultimately cannot evolve with the business and either they will self-select out at some point but sometimes they won’t. And it just becomes a bigger and bigger obstacle for the business for that person to figure out how they fit in and it’s the job of the leadership to identify that and if they can’t ultimately evolve with the business, exit them.
Brandon: Eric pointed out the social structures that start to be created within the company as it grows. Talk about that, that was fascinating.
Rick: He’s talking about how what happens is you get these echo chambers that begin to happen. The people that are the longest tenured employees in the organization begin to chat amongst themselves about hey, it sucks around here. It feels really corporate. It’s not like it used to be.
Then the new people are like how come nobody is telling me what I’m supposed to be doing or where we’re going – it doesn’t seem as collegial for them as it does for the original group. There are multiple other aspects to that. Reading through that reminded me of my manufacturing days. I think it’s just human nature to do this within any group, for people to begin to point out the differences rather than the similarities. One of the differences in manufacturing is you’ve got the carpet people and the concrete people. The carpet people are the people that are in the offices with air conditioning and the concrete people are the ones out in manufacturing and they usually don’t have air conditioning.
Brandon: Oh, no.
Rick: They’re actually doing the work. And you name it, I think it’s just human nature for sub-groups to point out the differences and this really points out another huge implication for leadership, which is to really challenge that and call it siloing because you will see siloing in departments. But even within the departments, you will see siloing based on experience.
Brandon: He even talked about siloing between seniority levels, opposing strategies, personalities and all these little micro-divisions that can happen. How do you get control of that?
Rick: For one, you have to accept it’s just going to happen because this is human nature. It also underscores the implication for leadership that you have to continually challenge those microcosms within the organization for how are they connecting and relating with each other. You don’t do that by sending out an email. You don’t do that by creating a policy. You do that by getting down into those microcosms as a key leader and saying, Ok, what’s going on here? What about that group over there? How are we helping them onboard and learn about what’s going on and how do we leverage some of their experience that they’re bringing from outside the organization. How can we evolve as the tenured group? Or whatever that microcosm may be.
Brandon: The author spent a lot of time talking about how there’s a snowballing effect of complaints and culture can get destroyed if you don’t hold that together. There are a lot of good things that come from growing, right? It’s not all bad, wouldn’t you say?
Rick: No, not at all! I think a lot of this points at the temperament of leadership just to A, not ignore it while at the same time B, not totally indulge it. And sometimes it is kind of a tightrope walk to say, Ok, how do we allow people to kind of vent what they’re experiencing without letting that drive the agenda and the direction of the business? That requires leadership to get perspective by getting out of their own echo chamber.
Brandon: It seems like leadership should really open up the lines of communication between those employees to be able to vent and to be able to really say that this is what we believe in as an organization. You either get on or get off. It’s ok to vent once in a while, but if they give them that outlet, like here’s a little survey we’re doing or we continue to reaffirm where we’re going as an organization. Here’s why we’re doing what we’re doing. I think that might help some of that, those negative things that come out.
Rick: Those can help, but my bias is there is nothing that can replace face to face communication.
Brandon: Sure, yeah.
Rick: Now, let’s talk about that because it can be challenging in an organization that is 20+ people. How can you have that kind of communication? One of the mistakes I see made the most by, let’s say, the CEO of the business is they will go to an all-team meeting and they will talk. They will just talk. They will talk at them and they won’t allow any exchange and even if they do allow for exchange, oftentimes they will get this kind of uncomfortable silence and they will fill the space. It takes time to create trust that you are willing to listen. So one of the things that I counsel to CEOs that I’m coaching is to be comfortable with silence. Just sit there. Just sit there and eventually somebody is going to say something and ask a question.
Now it’s a matter of how do you kind of draw that dialogue out. I met a guy a few years ago who is a merchant sea captain on a freight container that travels back and forth between China and San Francisco. I was curious in asking him how does he manage that ship. Interestingly enough, it’s no different than any other business. He said if you didn’t look out the window, you wouldn’t know that you were on the open ocean. He has got a desk, he has got seven unions that he has to manage.
Brandon: Oh my goodness. Wow.
Rick: So I was talking to him about how does he handle communication in the all-team meetings and he rolled his eyes. He said he calls them the free swim. The free swim referred to the point in the meeting when he had nothing left to communicate, because he dreaded it, because there would be a million questions. But being willing to open up the room to the free swim is huge. To an organization that doesn’t have that in their culture, it takes them time. And then once it starts coming, how do you manage that so you’re not taking on the task of having to solve every problem? Because that’s not what it’s about.
Brandon: It’s about giving people a voice, is what it seems like. A lot of beautiful things can happen from that free swim because you don’t even know where it’s going and that’s the great thing. I’m sure it makes them anxious as a CEO or leader who has to actually answer some of those questions or deal with them head on, but that’s why you get paid the big bucks, right?
Rick: Exactly! Nobody likes uncertainty and nobody likes to be challenged, actually. But it’s a healthy thing. You could have boundaries on it, but anyhow, back to how do you manage that balance between no communication and just dictating how things will go versus indulging every complaint and getting kind of caught up and wrapped around the axle of everybody’s issue that may be important but isn’t really what the organization needs to be working on from a strategy perspective.
There’s a way to balance that. But it starts with the willingness of leadership to open it up to that free swim and not feel like they have to solve every problem but give the opportunity, as you said, to have a voice.
Brandon: That’s in an all-team meeting, the free swim, but what are some other ways that leaders could connect more with either smaller groups or individuals to give them that opportunity to have that voice?
Rick: The other kind of axiom is the good old-fashioned MBWA, management by wandering around.
Brandon: Oh, gosh. Yeah, there are two schools of thought on that, whether it’s good or not. But I would love to hear your perspective.
Rick: Nothing is perfect! I’m an advocate of it for a few reasons. If you go back to that networking diagram that we talked about in the article, when you make a connection with one person, it has a networking effect, good or bad. If you have a bad one, guess what. It’s going to multiply!
Brandon: It’s going to snowball. Oh, yeah, absolutely.
Rick: But conversely, if you have a great interaction, it will also have a networking effect. Now, the key is don’t have that with the same person every time. Management by wandering around means that you’re actually going to go into a department that you wouldn’t normally go into all the time or seek out a new employee or whatever that may be and allocate a part of the day or a part of the week towards having one new conversation that you haven’t had before.
Brandon: I love that.
Rick: Even more so, it could be about what their experience is in their role or whatever, but make it about nothing to do with work. That builds, as Covey used to refer to it as, the trust bank and building that trust bank with the employees. And it does have a networking effect. So you don’t have to do it with everybody, just don’t do it with your favorites. Do it with a varied cross-section of people within the organization and that will begin to build that trust and relationship beyond the ability to connect with every single employee in the organization.
Brandon: Eric wrapped up the article with a list. There were a bunch of tips on how to become a better start-up leader in terms of growth. What were some of your favorites from that?
Rick: He highlights this in the article – work hard to be empathetic. Empathy is such a key component of emotional intelligence and the necessity for that attribute in a leader’s profile becomes bigger and bigger and bigger. As a matter of fact, in today’s news the CEO of Uber just stepped down. There is a huge gap of empathy in his leadership profile.
Brandon: Yes, there was. Everything I’ve read about that, not so pretty.
Rick: And to Eric’s point here, you have to work on that to be effective. You have to work on that to have a healthy organization. It can’t always be this hardcore, kick-ass, grinding company. It may seem like you can go a long way with that, but it will not sustain. At some point, that will hit a wall.
Brandon: It goes into his next point, he says make an effort to keep the company feeling like it’s one team and I think empathy really drives that, to feel like you’re part of something, you’re part of a team and that you would do anything for the guy next to you, the woman next to you. You have to be empathetic as a leader. Otherwise, you’re going to end up like Uber’s past CEO.
Rick: He also makes a comment about quietly coaching or working with those who are unhappy and ways to create a smooth transition. In my estimation, that is very Pollyanna-ish.
Brandon: Can you do it quietly? I think people would probably catch on after a while.
Rick: I think perhaps you could to ensure it’s a smooth transition. I think the outcome is subject to two things that need to be present. One, a willingness for the leader to engage and coach, and two, the willingness for the employee to evolve and invest in themselves in maybe nothing more than a willingness to believe that things will work out even though they may feel insecure or uncertain about where it’s going or not sure where they fit in. I have never experienced a time when you could wish that for somebody and it would happen. They have to wish it for themselves.
I’ve often said to employees in the past when I was managing, I said, Look, I can’t believe in you more than you’re willing to believe in yourself. I could try, but that doesn’t get us anywhere. You have to be willing to believe in yourself as much as anybody and I can believe in that, and together, we can do something that will be really important here in how you evolve in your role. That’s the only part I would challenge about his statement there.
Brandon: Rick, let’s wrap this up. Put a bow on this for us – how can a growing organization, one that’s adding headcount and went from 10 to 20 to more, how do they get ahead of those issues that come with an increasing headcount? Because they will happen.
Rick: Yeah, absolutely. I think it is so easy in a small organization to be so absorbed by the work, and not step back and say, Hey, are we facing these issues organizationally? Be willing to ask the question before you think it’s happening because if you wait until somebody says something, it has already been happening for a while.
My biggest takeaway from a leadership point of view is begin to ask the question now when you think things are going well because you’re probably already sowing the seeds of this kind of discontent, but you don’t know it yet.
Brandon: Good stuff, Rick. Fun discussion. This has been Rick Thomas, our guest on the podcast. You’re welcome back anytime, Rick!
Rick: Hey, thank you Brandon! Let’s do it again.