How Growth Can Change Your Culture

What to do when your company no longer resembles the one you started up

Written by Randall Litchfield

Maybe they have a God complex, but entrepreneurs tend to create companies in their own image — an extension of their personalities, skill sets, values, work ethics and (mostly) egos. This works through the startup phase, the early growth phase and even the what-initially-looks-like-maturity phase. But this creation inevitably hits a ceiling when, suddenly, the company no longer looks like its founders at all. It has outgrown them.

Welcome to my world. As the CEO of one of Canada’s Fastest-Growing Companies for the second year running (my ego shamelessly emphasizes), I scratch my head, wondering why life isn’t getting easier. For all of the outward appearance of shining health, Inbox Marketer has internal growing pains that ache like appendicitis. I’m sure you recognize the symptoms:

Breathing room
We’re scouting our fourth location in seven years. Every time we re-locate, I think we’ve taken care of the next five years — only to be disappointed by Year 2. The barometer is always my own office, which begins large enough to hold sizable meetings but ends — well — I don’t really have an office at the moment.

Dated processes
Those production, invoicing, timekeeping, HR and accounting processes you set up years ago when you had six people? They’re not cutting it anymore now that you have 30. That well-oiled, internal efficiency you project so well to clients threatens to break down at the most damaging times.

Stumbling on first names
Granted, I’m not getting any younger and have a problem remembering names anyway, but recently I met an employee for the first time at a company gathering. This has never happened before, and it is not that long ago that I hired everyone personally.

Growth ceases to be fun
What?! Never thought I’d catch myself muttering that. But growth is only fun when everyone enjoys their work. When stress levels build because growth strains your existing processes, people and infrastructure, it’s time to retool (itself a stressful exercise). And at this particular stage, it is not the normal, incremental retooling you’ve performed so flawlessly in the past. We’re talking transformational, gut-wrenching change.

There are more symptoms but, the point is, we have $3 millionitis. It’s when companies typically find that the systems and procedures that had served so well from startup begin to strain under the accumulated weight of those years of growth. Our accountants, lawyers and other trusted business advisers say this is classic. All we have to do is a proper job of retooling and we should be good for $10 million.

So, that’s where we are — retooling for a $10-million Inbox Marketer. Bearing in mind that this is all a work in progress, here’s what we’ve learned so far:

Lose the denial
It takes a while to admit that you’re stalled, especially when you continue to “grow.” But this is the growth paradox — it isn’t real if it isn’t sustainable. If your company can become unglued in mid-flight because of dated processes, you can do a lot of ungrowing really fast, and you’ll be closer to making a list of Canada’s Fastest-Shrinking Companies than you think.

We’re particularly sensitive to this issue at Inbox Marketer because so much of what we do involves managing enormously complex messaging campaigns for some giant clients. When things go wrong, it’s never in front of a few people; it’s a few million. The production processes we invented years ago, when our campaign volume was a fraction of today’s, still serve us. We’ve dodged all the bullets so far, but it only takes one or two to cut down your carefully built reputation.

Bring in the professionals
Because you’ve been so successful, you probably have a great track record of retaining people that you have groomed over the years to be your senior team. If you are in the technology business, like Inbox Marketer, they may even have worked for you for most or all of their careers. They might consider your company to be the managerial norm rather than this idiosyncratic extension of the founders’ alter egos. This is where you need external, professional, management training. Your team needs mentors other than you, and you need new points of view. So, send the people who actually do the managing off for formal training in how to do that.

Personally, I benefited hugely from my pre-entrepreneurial years spent at some of the world’s best-run corporations, especially my first employer out of university, Procter & Gamble. There, I learned formalized management processes, forecasting, business communications (P&G’s famed edict of single-page memos is still the best writing lesson I have ever had) and corporate ethics. In short, I experienced first-hand a successful corporate culture and how it sustains itself. Although I still adhere to those management practices and try my best to pass them on to my team, the training environment just isn’t the same — it’s the difference between Harvard and a one-room schoolhouse.

Get the fundamental procedures right
These can vary by company, I suppose, but accounting and some form of production system usually top the list. On the accounting side, I’m told our off-the-shelf accounting software is probably good for $10 million but our own procedures are not. Here, we rely heavily on the consulting expertise of our accounting firm to help us retool and retrain.

Production is a different story. We are already experts in what we do, and there are no suitable off-the-shelf systems that improve upon what we have already built. Unfortunately, that doesn’t make your capacity problems go away. So, what do you do? Seek the best of both worlds: our solution is to retool using outside professionals while keeping the architecture and design in-house.

Don’t shortchange HR
You feel $3 millionitis most acutely in HR. It used to be your office manager’s part-time job, and what filled his or her time between bookkeeping, ordering supplies and organizing the office Christmas party. Now, it is a strategic imperative. If you’re in the service business, as most Canadian companies are, your principal assets come through the front door every morning. We’ve put all our main HR policies under review, from compensation to employee training. The operative word is formalization. Our big discovery on HR policy is that the more people you have, the greater the need for articulation. Your employee growth may be arithmetic, but the opportunity to misunderstand is geometric. Our first employee handbook comes out next month.

Hire from your best customers
Did I actually say that? Please don’t jump to the conclusion that we purposely pillage our customers for people. We don’t. But somehow some very seasoned former customers have ended up working here (usually having spent an interval somewhere else).

I have to say that former customers are among our best hires. One sure reason is that they get the culture. In our case, it is a customer-service culture and the reason why these former taskmasters selected us as vendors in the first place. The second reason is that they bring a client-side perspective of our company that is difficult to get otherwise. Third, they usually hail from very large companies. Not everyone can make the adjustment from a large to a small company, but the ones that can bring great insights and add significantly to your gene pool.

Now that Inbox Marketer is seven years old going on eight, it’s uncanny how everything I learned as a parent about the stages of child growth comes back to me. Children grow incrementally for years, then suddenly morph into a new animal approximately every seven. That’s how it feels today. Heaven help us when corporate puberty hits in another seven!

Inbox Marketer resembles its parents less each day. All the turmoil has made one lesson abundantly clear: when $3 millionitis hits, the real growth strategy for entrepreneurs is planned obsolescence — your own.

Randall Litchfield was the editor of PROFIT from 1986 to 1990 and has been an entrepreneur ever since.
He is most recently the co-founder of Inbox Marketer Inc., an e-mail marketing services firm that’s No. 106 on this year’s list of Canada’s Fastest-Growing Companies

Originally appeared on PROFITguide.com