As I mentioned in my last blog post, anyone who has worked with bootstrapped technology companies knows that scalability challenges are notorious for sucking all the fun out of growth for entrepreneurial founders.  What types of scalability challenges do small businesses encounter as they grow?  How do we tackle them in a way that preserves an entrepreneurial spirit?

In my experience, scalability challenges for small businesses fall into three distinct categories:

• Incomplete delegation
• Lack of repeatable processes
• Business model limitations

While “Business model limitations” will vary quite a bit across the landscape of service businesses, the challenges of “Incomplete delegation” and “Lack of repeatable processes” apply fairly consistently.  As a result, the fact that the majority of my growth experience has been in technology businesses should not be too much of a handicap.

Let’s explore each scalability challenge category in more detail…

• Incomplete delegation.  Successful entrepreneurs micromanage–because they have to!  Launching a small business successfully involves getting hundreds of details right, and the founder(s) is often the sole decision-maker.  As the company grows, the number of decisions that need to be made begins to overwhelm a sole decision-maker.  As the founder identifies leaders to assist with decision-making, she/he can find it difficult to let go.
• Lack of repeatable core processes.  When the founder is at the center of all decision-making, documented, repeatable processes seem unnecessary.  Employees handle tasks fairly consistently when a single decision-maker is able to coordinate all daily activity.  However, as the number of employees and tasks expands beyond the founder’s direct oversight, errors and omissions begin to creep in.  If you’ve ever experienced the chaos in a small company when the founder is away from the office, you understand this phenomenon!
• Business model limitations.  As a small business grows its client base, it can outgrow a number of early decisions–how it prices its products and services, how it delivers these products and services, and/or how it supports its clients over the long-term.  It may be that the pricing model allows a new large client to consume a disproportionately large amount of the business’ resources, or that a specific service offering becomes unsustainable beyond a certain number of clients.  In a Software-as-a-Service company, the latter scenario can manifest itself as a noticeable slow down in product performance or an inability to keep up with client demand for support services.

So how do we “scale” each of these scalability walls?

To address the challenge of incomplete delegation, a culture change is necessary.  The founder must transform the culture from one in which she/he is at the center of all decision-making to one in which certain day-to-day decision-making is authentically delegated to other leaders.

Keys to success:

(1) The founder must drive this culture change–she/he is the foundation of the existing culture and is the only person who can effect real culture change, and

(2) The delegation must be authentic–the newly identified leaders must be allowed to make decisions independently.

If the founder gets into the habit of overriding/vetoing the new leaders’ decisions, employees will quickly see that the new leaders have no real authority and resume going directly to the founder for decisions.  However, if the founder sets boundaries, provides coaching, and allows the new leaders to learn from their mistakes, those new leaders will develop into competent decision-makers, scaling the business’ decision-making ability, and freeing the founder to focus on more strategic imperatives.

Another culture adjustment is required in order to address a lack of repeatable core processes–the founder must educate employees on why documenting core processes is a typical and necessary prerequisite to healthy growth.

Veterans of the organization will resist–they will proclaim that efforts to standardize and document processes are “too corporate,” and they will reminisce about the “good ol’ days” when employees just got things done without the “bureaucracy” of repeatable processes.

It’s important to point out that no one is asking for 800-page volumes documenting every action in the workplace.  What’s needed is standardization of the core workflows that must be performed accurately and completely, every time, even when the founder isn’t looking or key employees aren’t involved.  An indicator that repeatable core processes are working?  Your business no longer relies on “hero mode”–key employees working 12-hours or more–to get through the typical day.

Once the new leaders are truly empowered to make decisions and repeatable core processes in place, the business is in a much better position to attack any business model limitations that arise.  If nothing else, the founder is freed up sufficiently to focus on them!

Tackling these three scalability challenges can help put the fun back into growth without losing the entrepreneurial spirit in the process.

Final Note:

As new leaders are elevated in the organization, harmful “siloes” can develop.  Siloes are teams that tend to focus inward at the expense of communication and collaboration with other teams.  Thinking in terms of collaboration rather than hierarchy when delegating responsibilities to new leaders will help keep siloes from forming.  Yes, employees will report to specific leaders, but many core processes flow across multiple teams.

Rallying the business around a strong, unified vision, and holding leaders accountable to the success of the company as well as their teams provide a starting point.  Educating the entire business on inter-team dependencies, and celebrating collaboration and win-win solutions will help keep the siloes from going up.

We’ll talk more about moving away from old-school hierarchies to a more collaborative organizational structure in a future post…stay tuned!