Tech Panel: Scaling up a people centric business
We were delighted to host a tech panel recently on the challenges and pitfalls in scaling a people-based technology business. On the panel were Charlie Cannell (former Digital Director at Inflexion and non-exec at JMAN Group and Trilogy), Paul Henshaw (co-founder and former joint MD of Infinity Works) and General Sir Peter Wall (CEO Amicus).
The panel discussed the transition from start-up mode (founder led, creative, adaptable, ‘move fast and break stuff’) to scale-up mode that requires delegation, common purpose, defined roles, discipline, systems and process and ‘rules of the road’. The challenge is to build a structure without becoming rigid and losing the things that make the company special in the first place. All this whilst taking the workforce on the journey and attracting the talent needed.
Get this wrong and growth stalls.
Navigating the switch from start-up to PE ready scale-up
- There isn’t a direct link between change of ownership and what you’re trying to do with your people as the business grows. The step change is when founders let go; it doesn’t matter if that’s with 30 or 300 people.
- Commit to doing one thing. A good analogy for a start-up is a kids’ football team. They run around chasing a ball and have lots of tactical successes, but no sense of direction. It’s exciting but limited. Something will trigger the need to move to the next level – that’s when you commit to plans and must be willing to give parts up.
- It’s about resilience and refining processes without being too corporate too early. Loosen the grip on outdated processes to respond better to the competitive environment and client opportunities.
Introducing guiderails without stifling the growth process
- It’s a balance between influencing and introducing ideas and doing too much. A little bit of external advice is useful – as is a reliable deputy. You want to be able to test things and be comfortable saying ‘no’ before you commit. A ‘dual CEO’ role can be an effective way of doing this and splitting responsibilities to play to one another’s strengths.
- There are three preconditions for ‘letting go’ and giving trust to people you’ve recruited. The first is purpose – your common intention – and remember it needs to have emotional significance. Second is trust and respect, they go both ways. Finally, a shared consciousness of the methods you’re using (like IT, CRM) and these require careful design.
- The ‘just enough’ principle is important. The first few people joining a business won’t need a lot of management. They prefer working on a blank whiteboard. As the business grows and less experienced people join, the blank canvas can terrify them. They need some governance and structure, but just enough to guide them. You don’t want to scare off your first group.
- Accept changes happen quickly. If a structure lasts three months and then doesn’t work because you’ve hired more people or changed focus then be ready to rip it up and start in a different direction. When you reach a certain size and scale, people expect consistency (structure and guidelines). That’s another inflexion point.
- Once the initial spark dies down be ready to rely on the more structured people in the business to provide clarity.
Overcoming the natural resistance to change
- It’s about how you respond to the change personally. There is a need to pull back where delegation becomes essential. This will require governance and it may be the first-time external advisors enter the business.
- As we moved to the next phase, we had to get out of the operational day to day running of the business. It’s a different role, moving from leading by example to talking to people and giving guidance.
- Strongly encourage mentoring of senior leadership. It’s also about having someone you trust within the organisation to tell you when you make mistakes. Somebody you can share ideas with and helps you think more clearly.
Private Equity’s role in mentorship
- It’s one of the key reasons for committing to PE. We were looking for PE to help us achieve our ambitions. They helped us fill the gaps, step out of the roles we were doing, avoid pitfalls and address issues. We wanted to learn and were willing to take on new ideas.
- There must be alignment. You need to be able to challenge and find the very best fit. In a busy deal flow scenario that can be difficult. Understand the nuances of the management team and be creative.
- There is a tendency to defer to an investor view even when this might not be optimal for the business. Investor / management relationships require clarity and openness.
Bridging ‘ivory towers’ with messy reality of a people-based business
- There is no ‘one size fits all’ approach to balancing running a business and wanting to be involved in the day to day doing.
- It’s important to manage expectations of the impact that a PE partner will have on the business. Senior staff need to reassure people that PE will give a sense of direction and help refine the plans they already had. They also need to be leaders, not doers. As a leader you no longer need focus on specific projects, you have 300 people in the business who can potentially do that for you.
Successful transitions for management teams
- The first rule of the plan is that it won’t go according to the plan. It can be very hard for leadership to adapt and let go of the business.
- Changing ownership/senior personnel is like changing DNA of the business and this comes with risks.
- When you start, you wear multiple hats – consultant, manager of the team, director of the business, entrepreneur/owner. As you scale you start losing some of these roles and even separating these can be difficult. You have to rid yourself of ego.
- Once you’ve clarity on where you want to go it’s about accepting someone else can deliver that plan, providing all the measurements are there. Being a founder is a very different skillset/mindset to an MD/CEO.
Scaling a people business, hiring ahead to meet future demand whilst limiting risk
- Don’t be afraid of having a bench. It’s not just about recruitment, it’s cultural. Internal training programmes, career paths etc. are all part of keeping people excited and motivated, they don’t need to be on live projects 24/7.
- Discipline and hygiene. Be prepared to bring cost in to replace yourself doing all the roles you used to do. Think about how to sell what you do slightly differently. To grow from 350 people to 500 people requires structure and support. It might be possible to do the same with 350 people sold more effectively.
- Hiring people brings opportunity, but it also brings problems and complexity. These can be distracting so do it properly. Give yourself time as a leader to understand the wider perspective.
- To professionalise your business, you need to bring in specialists earlier than you think. FD, HR specialists etc. It’s a hard sell to your team but it makes a big difference.
- It depends on what the plan is and who the partner is going to be. It needs some humility from leadership.
- Work out selection criteria, measure best internal and external candidates to allow for organic growth but send the message that you are looking for talent.
Speak to myself or a member of the team about opportunities in technology.
Ifan Dafydd, Senior ConsultantEmail Ifan
Charlie Mundy, Senior ConsultantEmail Charlie