TO WITHSTAND TODAY'S MARKET, FOUNDERS NEED TO THINK DIFFERENTLY

The era of cheap capital and unfettered business growth is over. Founders need to be able to identify the frictions in their organisation and address them before they hamstring their path to growth and profitability.

By Rob Bier, Managing Partner at Trellis Partners, Author of Smooth Scaling: 20 Rituals to Build a Friction-Free Organisation

Back in the era of cheap capital, it was all about growth at all costs. When growth began to slow down, for whatever reason, the default response of entrepreneurs was to throw money at the problem: launch new products or features, expand into new markets, and hire more teams as needed to make this possible.

When product development slowed down, the CEOs’ first thought was to expand their product and engineering teams - rather than unpack the hindrances slowing down their existing organisation. Similarly, when sales were not firing on all cylinders, their instinctive response was to increase marketing spend or hire more salespeople.

For a time, this model made sense to both founders and investors alike. The marching order was straightforward: grow as fast as possible, by any means necessary. High growth justified high valuations, which supported huge capital raises —which could then be reinvested in continued growth. Needless to say, this model tended to overlook issues like efficiency, sustainability and stability.

Since the recent hikes in interest rates and the drying up of capital, leaders of high-growth businesses have had to switch up their game. With the dramatic drop in valuations and the drying up of VC funding, many start-ups, scale-ups, and even listed businesses have been forced to lay off staff, pull back on growth targets, and batten down the hatches.

Now that capital is scarce, or worse still, impossible to access, founders and CEOs need to learn to scale with an entirely new model - one that requires a different mindset with new skills and sharper insights.

It Will Never Happen to Us.” – Fail to Prepare, Prepare to Fail.

The biggest shift is that leaders now need to master the organisational frictions that slow them down and cost them money. Too many have said: “That won’t happen to us. We do things differently. We have a great culture and we’re super focused on getting stuff done!”  All common statements. Yet, rarely are these leaders associated with organisations that have actually scaled successfully.

The reality is that growth creates tremendous internal frictions, unless leaders are highly focused and skillful at preventing and addressing them. Every time you open another office, launch a new service, add a new team or outsource another, you create a ‘complexity bomb’ that dramatically increases the level of complexity in your company. Complexity creates friction. All too soon, people are spending their time in unproductive meetings and no one is getting anything done. Unfettered growth, which was once a great solution, now no longer works.

This shift from what was once a high-performing organisation to a low-performing one typically takes entrepreneurs and executives by surprise. Why are CEOs not on the lookout for this? Because they simply did not realise it was a problem.

Do you remember when people did not know what gaslighting meant? The lack of understanding stemmed from a broader societal unawareness. But as awareness grew, it empowered individuals to recognise the problem and confront it. The same is true for organisational friction. CEOs are simply unaware that it is a significant factor that can prevent them from achieving their goals.

CEOs Need to Redefine Their Role

At the outset of the entrepreneurial journey, every start-up CEO focuses on getting stuff done -and that is how it should be. Later, they learn that they need to delegate tasks and soon enough, they see the need to empower their management teams. In this second stage, they redefine their role to MAKE SURE stuff gets done. They try to crystallise this into their culture, which works until it does not.

Most founders not only are not on the lookout for these frictions, but what is worse is that they do not know how to prevent or remediate them when they emerge. Because they have no playbook for how to deal with them, they end up playing ‘whaca-mole’, solving one organisational problem at a time, only to discover there’s a never-ending stream of people with similar problems at their door. Or they ignore them altogether and focus on their ‘superpower’’ - driving growth.

In today’s capital-tight market, where having a path to profitability is a matter of life and death, founders cannot afford to allow organisational frictions to hamstring their efficiency or their growth. To accomplish this, they need to redefine their role in a much more profound way—from being task-oriented to organisation-oriented. To be a truly effective scaling-phase CEO, they should define their role as ‘building the organisation that gets things done.’

As they start to ‘tune in’ to their role in preventing and fixing these problems, they soon discover that the root cause of many of their growth problems lies in these organisational dysfunctions. Addressing these dysfunctions is dramatically more cost-effective than the old approach of throwing more people at the problem.

Trellis is a leadership development firm that partners with CEOs to help them build high-performance teams and scalable organisations. Led by scaling expert and former CEO Rob Bier, Trellis supports its clients across a stack of organization development needs including Leadership Development, creating high-performing teams, building cultures of accountability, and scaling. Visit https://trellis.partners for more information.