Startup Breakpoints and Evolutions
As startups begin to scale, they hit very predictable breakpoints where things start to go off the rails organizationally. At each of these points, the founders need to evolve their mindsets and the systems they use to run the company.
“Everything in your company will be going great, and then one day you walk in and realize everything is S#%@!” That’s how our co-founder Charles Jolley describes breakpoints. Your current mindset and systems usually work really well for the level you are at (or you wouldn’t have gotten to this level). But as you start to grow into the next level, problems are inevitable.
Breakpoints
The first three breakpoints are easy to visualize.
Breakpoint 1: When you can’t fit your company around one table. This is your team’s first experience of Amazon’s famous two pizza rule.
Breakpoint 2: When you can’t fit your company in one room. Your teams are multiplying and projects are getting more complex.
Breakpoint 3: Somewhere between 50 to 100 people. Now you have teams of teams, and it’s time to start implementing more sophisticated systems.
When you hit a breakpoint, the systems start to break down. There are communication problems and scheduling problems. There is often conflict between teams and even between founders. Projects get delayed, often because the founders are bottlenecks for the work. (See Beyond the Three Musketeers.) Sometimes, companies at breakpoints will even lose key customers. In general, the growth of the company slows and frustration increases.
There are additional breakpoints around 250, 500, and 1,000 people, but the first three are most critical for start-ups. If you can’t navigate these, you’ll never make it to true scale.
Evolutions
Each breakpoint requires a new evolution for the top leaders and the organization. In fact, the top leader’s evolution is the true bottleneck. Once the leader evolves their mindset, then they can begin to evolve the systems that will move the organization forward.
From a mindset perspective, the leader must begin to ask: Who am I as a leader? What is my core work?
From a systems perspective, the company must address different questions: How do we function as a team? How do we organize our work?
The leaders of growing organizations evolve through specific stages. These roughly correspond to the breakpoints described above, but leaders will sometimes be ahead of or behind the evolution of their company. Here is a quick look at the evolution of the leader’s role.
Evolution 0: Managing Workers. This is the hidden evolution that happens as you are building the team. Someone becomes the team leader. From this point forward, your primary work is to organize the team to do the work, but for now you probably function mostly as a lead worker, still deeply embedded in the day-to-day work.
Evolution 1: Leading Managers. As the team grows beyond a core team, the top leader will start to lead managers, not just workers. This is a major shift in structure and in how the leader thinks about the work. Now you have to think, not just about how you lead, but also about how your managers lead.
Evolution 2: Leading Leaders. As the team expands beyond a single room (25-30 people), the organization will begin to have teams of teams. You are now leading people who have multiple teams reporting to them. Cultivating the right balance of authority and accountability for these leaders is critical for success. Your leaders will also help you develop the systems your company needs to continue to evolve.
Evolution 3: Coaching Leaders. To grow your team beyond 50 to 100 people, you will have to become a coach. This means you’ll be spending a lot of time helping your leaders think about leadership. The goal here is to help your leaders make good decisions about novel issues when you aren’t around.
Evolution 4: Coaching Coaches. This is the ninja state of leadership. When you get to this stage, there is absolutely no limit to how big you can grow your organization. At this point, you are cultivating a team of master leadership coaches who are in turn actively developing the other leaders in the organization. Together, you are building an organization that will continue evolving for generations to come.
Broadly speaking, the movement is from a focus on tasks at the early stages to a focus on people as the organization grows. It’s a gradient, with some people focus and some task focus at all times. However, more and more, the leader needs to shift toward leading people instead of managing tasks.
Every leader in every organization needs to go through these evolutions–that is if they want their company to continue to evolve. Even experienced leaders who have successfully scaled several startups will need to journey through these breakpoints and evolutions. The company actually needs them to focus more on tasks in the earliest stages of growth. Then, as the company grows, a wise leader will recognize and anticipate the shift and begin to adjust their approach.
At Wisdom Partners, we help leaders evolve through these stages so their companies can evolve. Our sweet spot is the first three evolutions: leading managers, to leading leaders, to coaching leaders. This typically takes a company from Seed Round to Series B to IPO or exit, or from $1M to $20M revenue.
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