Has your company outgrown your leaders?

Is your company in a growth spurt, or is it stuck in a rut? A tough question to answer for a company experiencing rapid change. If the answer for your company is “both,” then it might be time to ask an even tougher question: does your company have the right leaders?

Shoutout to ChatGPT for helping make my section titles more catchy

The “school system” of company growth

When taken to its logical extreme, it’s very easy to see why a company might need different leaders at different stages. Like a startup CEO and a Fortune 500 CEO, an elementary school teacher and a college professor are technically in the same profession. But their actual work, and the skills required to do that work, are very different. Children in elementary school require a hands-on approach and basic development across many different subjects. College students, conversely, don’t need any hand-holding, and their learning is focused deeply on individual subjects. Give the elementary school students a college professor, and they’re not going to get what they need. The opposite is also true.

Companies, like students, grow over time. They have different needs at different stages of their development. The problem is, unlike students, they don’t naturally graduate from one leader to the next. At the end of a school year, this happens for a student automatically. But quite the opposite is true for a company: changing leaders as a company grows is an unstructured, often contentious process.

When is a company ready to graduate from its leaders?

As a company executive, it is your responsibility to identify when your company has “graduated” and needs new leaders with different skill sets. While the actual transition process is challenging (more on that in a separate post), the signs that this needs to happen are actually pretty obvious. I’ve picked three common ones to discuss today, but there are many others, too.

A busy bee with no honey: your company has become long on execution but short on strategy

Early-stage leaders, like elementary school teachers, have to take a very hands-on approach. The company doesn’t have established internal processes, very little tooling or know-how, and every day brings with it new challenges that require quick pivoting and an ability to execute on a number of different tasks. The most successful leaders at this stage are generalists and executors.

Once a company has grown past a certain size, typically around Series A/B or 50-100 employees, that approach no longer works. At this stage, a company has a lot more people, and those people are solving ever-more complex problems. A leader who is a generalist and execution-focused isn’t an asset anymore. What before was pivoting has now become a big team being constantly pulled in multiple directions. What before was hacking and patching things to work just well enough to deal with the next problem has now become sloppiness and ever-growing operational debt. At this stage (like every other), you need great executors. But those executors now need to be led in a coordinated, strategic way. The most successful leaders at this stage are subject matter experts and strategists.

(Note: In this example, the company evolves its needs along the lines of both generalist<>subject matter expert and executor<>strategist. Many companies experience an in-between phase where executors are still more valuable than strategists, but in order to execute effectively they need to now be subject matter experts rather than jacks of all trades).

Your org chart is staler than last month's doughnuts

Companies need changes in their org structure as they grow in order to make the most efficient use of their resources. An early-stage leader needs butts in seats and therefore is really good at hiring people quickly and getting them to deliver. But you’ll know the org has outgrown them if their team’s role types and structure aren’t changing alongside that growth.

In Uber’s early days, the org was rightly designed to be very execution-focused. The company’s strategy was to grow its individual markets (cities) quickly. The functions that were needed for that individual market growth were marketing and operations, so those functions were therefore hired locally. Those local teams and functions grew in lockstep with the growth of the markets they supported.

As a company grows, though, it needs to get more efficient. Uber’s org structure was resulting in local teams becoming more and more costly as the company grew. At some point the decision was therefore made to centralize some of the work that was being done locally into a single function that supported all markets. Whereas one person in each city was doing weekly promotions before, now a single person would do it for the whole country in this central function. Now markets could grow much faster than their need for resources would.

Leaders need to be able to identify when their teams require changes in function and scope, and execute those changes in a timely manner before their orgs become bloated or dysfunctional. If your leaders have stale org structures, they may be in a position of having been outgrown by the organization.

Was there a fire drill? Employees are sprinting for the exits

The old saying is definitely true: people don’t leave jobs, they leave managers. People are unhappy when their managers are doing a bad job. And if a bunch of managers are doing a bad job, then it’s probably a senior leadership problem. If you are noticing great people leaving a certain org at a high rate, that might be a sign that the leader of that organization is no longer being effective. This could be for any number of reasons, including lack of vision or communication of that vision, stagnation of growth opportunities due to archaic org design, or just bad decision-making leading to low performance and morale. Unless a leader is proactively transitioning to a new type of talent as their organization grows, a wave of departures is absolutely cause for concern.

One caveat I will note about this particular sign of poor leadership fit is that this situation can also be caused by a CEO’s actions. A leader under a CEO might be losing people because that CEO has not kept pace with the larger labor marketplace for compensation and benefits. It’s also possible that this org has been backed into a corner by a CEO’s lack of willingness to resource it. I therefore recommend using this “sign of poor fit” only as a confirming data point for other concerns about a leader’s fit, rather than considering it as an independent indicator of poor leadership performance.

tl;dr

Companies have different leadership needs over time. Since it is very rare for a company and its leaders to grow at the exact same pace and along the same trajectory, it is inevitable that your company will need changes in its leadership team at some point. Be proactive about this and your company will continue its trajectory of growth. Ignore or delay, and your board might make these decisions for you. Dun dun dun.