In the last newsletter I spoke about the differences between large and small product companies, and how different they are and how different type of people thrive (and struggle) at each. However, I did not talk about the case where a small company quickly grows into a large company.

When companies grow rapidly, while this is generally a very good thing and something that those of us at startups typically try very hard to do, it nevertheless can be very stressful on the organization and the people in it.

Ironically, some of the practices (and people) that helped the company get to the point where it could do very well and grow rapidly can actually hinder the company as it gets larger.

I know that many people are skeptical when they hear of CEO’s leaving a company because the boards says he has taken it this far but that someone else is needed to take it further. But I believe this is usually the truth. There are different skills and personalities required for startups versus larger companies. This is not to say that there aren’t some people out there that are able to grow and change to meet the new demands of the job, as there certainly are, but I think these people are extremely rare. More often, there are some leaders that are great fits for startups and others that are great fit for larger organizations (and yes, there are of course many that aren’t cut out for management at all!).

The key is to understand that organizations are designed to solve problems. As the problems or challenges the company faces change, the organization needs to change accordingly.

There are countless examples of this, including the hiring process, the product development process, QA, and customer service, But for purposes of illustration, let’s take that most basic of organizational functions – a decision. Every day the employees of a company make countless decisions, most are minor but some are major as well.

At a startup, the decision making process usually involves gathering the key people (often most of the company) together in a room, debating the options, and then making a decision and moving forward. Decisions at startups must be made with imperfect and incomplete information, but if the company is to get their product out they must be made so the team and product can progress.

As the company gets larger, first of all it no longer becomes feasible to get the key people together in a room. There are too many people now, and too many decisions to be made, and their schedules are too booked to get them together anyways. Yet the people are used to being involved in every decision, so what typically happens is that someone later overrides or vetoes a decision, or they insist on no decisions being made without them. Either way, the company quickly descends into either meeting hell or micro-management (or both), where the leaders don’t empower their subordinates to make decisions so they must make the decisions for them.

Moreover, once a company becomes larger, there’s much more to lose. Much of the company focuses on not losing what they have, rather than reaching into new areas.

Chances are if you’ve been at a large company that’s experienced rapid growth you have seen this all too often. The founder that is the bottleneck on all decisions. The endless meetings to try to get every possible person that is impacted by a decision on board and supportive. The feeling of paralysis by analysis.

Little surprise when you see people that are part of a successful startup that’s acquired by a larger company leave to form a new startup. Usually they just can’t (or don’t want to) adapt to the new culture and organization.

You can manage through rapid growth, but you have to be aware of the different requirements that larger organizations bring, and you have to tackle these changes head on by adjusting the organization, the processes, and helping your staff to adjust and change the way they operate.

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