Navigating the Growth of a Company: Key Considerations for CEOs
As a CEO, leading a company through rapid growth can be both exhilarating and challenging. With growth comes a new set of responsibilities and considerations that require careful attention. In this article, we will explore essential factors that CEOs should keep in mind when transitioning from a small company to a midsize or larger organization. Drawing from personal experiences and insights from industry experts, we will delve into areas such as technological infrastructure, management and relationships, addressing threats and accountability, the importance of awareness, maintaining privacy and time, and fostering constructive feedback. Let’s navigate the growth journey together.
Technological Infrastructure and Security
During the early stages of a company with a small team, strict permissions and security measures may not be necessary. However, as the company expands, it becomes crucial to implement robust security infrastructure and software to protect sensitive information. With departments functioning independently, the need for department-specific security permissions arises. A CEO must invest in a more comprehensive security and technology infrastructure as the company grows to ensure data integrity and confidentiality.
Management and Relationships
As a CEO, your role evolves from knowing everyone in the company on a personal level to managing a larger team. With the increase in employee count, it becomes impractical to spend extensive time with each individual. Delegating responsibilities and establishing a system of accountability becomes paramount. It is essential to develop a management structure that ensures effective communication, fosters employee growth, and maintains a strong organizational culture. Regular check-ins, team meetings, and performance evaluations can help in aligning employees’ goals with the company’s vision.
Addressing Threats and Accountability
As the CEO of a growing company, you become a target for various threats. These can range from lawsuits to attempts at misleading or defrauding the CEO. It is crucial to exercise caution and be vigilant. Implementing measures to mitigate risks and increase accountability within the organization is necessary. This includes establishing processes to protect the company’s reputation, ensuring compliance with regulations, and developing a strong ethical framework. As the company expands, accountability becomes even more critical to maintain trust among stakeholders.
Importance of Awareness
Awareness is a quality that is often overlooked but holds significant importance for CEOs. With the multitude of responsibilities and challenges that come with growth, CEOs can become focused on immediate matters and overlook emerging issues. It is essential to cultivate awareness by actively seeking information, staying connected with industry trends, and encouraging open communication within the organization. Being proactive and vigilant can help CEOs identify potential risks and address them before they become significant challenges.
Maintaining Privacy and Time
Growth brings increased demands on a CEO’s time, and the loss of privacy becomes inevitable. As the organization expands, the CEO’s involvement in day-to-day operations diminishes, necessitating delegation and trust in departmental leaders. Outsourcing tasks and relying on capable team members become essential to free up time for strategic planning and important decision-making. However, it is crucial to strike a balance between professional responsibilities and personal matters, ensuring that personal time and privacy are protected.
Fostering Constructive Feedback
The success of a CEO is often accompanied by a perception of infallibility. However, it is crucial to create an environment that encourages honest feedback and constructive criticism. As the company grows, the CEO’s ideas should be subject to scrutiny and thoughtful analysis. Establishing feedback mechanisms, such as regular team meetings, surveys, or anonymous suggestion boxes, can help foster an atmosphere of open communication. Constructive feedback provides diverse perspectives, mitigates blind spots, and enables the organization to make better-informed decisions.
Conclusion
Navigating the growth of a company requires CEOs to adapt their strategies and approaches to effectively manage a larger organization. By paying attention to key areas such as technological infrastructure, management and relationships, addressing threats, maintaining awareness, protecting privacy and time, and fostering constructive feedback, CEOs can successfully lead their companies through the challenges and opportunities that come with growth. Remember, growth is a continuous journey, and by staying adaptable and proactive, CEOs can steer their organizations towards sustainable success.
Video Transcript
If You Are Growing From a Small Company to a Midsize Company, What Should You as a CEO Pay Attention to?
Well, I am going to share with you some mistakes I have made as I was growing a company. And I am going to share with you some of the insights I learned from other people.
Technological Infrastructure and Security
First, I will share with you some simple items. From a technology standpoint, usually when you have less than 10 people, you don’t have to have strict permissions. A lot of people can access everything except maybe an HR or confidential folder. But as you grow larger, the marketing people don’t want the other departments dabbling in their materials, and the accounting people don’t want everybody to have access to all the financials, and every department needs its own security permissions. And so as a result, you need a more robust security infrastructure and software infrastructure as you grow.
So typically, when you go from 10 employees to 25 or 30 employees, you need a whole different set of software to support your organization. And then again, when you hit 100 employees or more, again, you need that. Another reason for that is when you have five or six employees, you know what each one of them is doing, but when you have a hundred employees, statistically, you are more likely to have a rogue employee or internal fraud or deception. And so you need to have reasonable precautions in place to protect yourself as a company. That is the IT standpoint.
Management and Relationships
Next, from a management and relationship standpoint. You, as a CEO, are going to go from knowing everybody and being able to interact with them on a daily or at least weekly basis when you are 10 employees to say, 25 or 30 employees, where you can’t possibly spend a half hour or hour with each person each week. So you will find as you hit 25 or 30 employees, that all of a sudden, you have much less time with many of the employees. And then when you go to 80 or a hundred employees, obviously if you just do the math, you don’t have enough time in the week to connect with each person. At some point, you will find you have maybe a small amount of role in the hiring process, but you might even lose track of who some of the new hires are, especially if they are more entry-level employees. What does all that mean? It means you need a whole different system of management and supervision and accountability for each employee in the company.
Recommended Resource for CEOs
If you are navigating these changes, one book I highly recommend is ‘Traction: Get A Grip On Your Business’ by Gino Wickman. It talks about the entrepreneurial operating system or EOS, and it is written for companies of about 10 employees who are going to 20, 30, and 40 employees on up to a hundred. It is an outstanding book used by thousands, if not 10,000s of companies in the United States who are within 10 to a hundred employees.
Addressing Threats and Accountability
So we have talked about IT or information technology. We have talked about HR and the management of people, but now let’s talk a little bit more about the threats.
A CEO often comes under more threats. Those might be threats of lawsuits, people who are trying to get something from the CEO, or mislead the CEO. So the CEO has to be much more careful. We all have heard scandals that involve CEOs, whether it is affairs or other messes that the CEO has gotten involved in. And so, the accountability goes up for that CEO, and also the threats go up. CEOs have to be on guard, and the people closest to the CEO need to guard them. Likewise, the CEO’s time becomes even more important. So in the old days, when an owner of an eight-employee company can be involved in each department and each thing and really stay in touch with what is happening on the front lines, a CEO simply doesn’t have time for that. The CEO has to delegate so that the CEO can elevate her attention to whatever is most important for the CEO to pay attention to. What is that? Usually, the most important thing for a CEO to pay attention to includes the next 10 years and setting a strategic plan, the key outside relationships that support the organization, and holding accountable the key inside relationships, so those are going to be the officers and the department leaders, deciding what the company is involved in and what the company is not involved in. In other words, identifying what you are going to say ‘no’ to and what you are going to say ‘yes’ to, then, of course, the CEO is brought into many of the big problems that arise within the company.
Importance of Awareness for CEOs
I will never forget when I had a conversation with Jean Taylor. Jean Taylor is the daughter of Glen Taylor, who owned the Minnesota Timberwolves. And Jean is an outstanding executive and leader and a coach to leaders. I asked her to come speak to a conference with CEOs and business owners, and she and I had a conversation about what is the most important mistake she sees CEOs and business owners make, and she said the quality that often is overlooked is awareness. Because a business owner or CEO is so focused on what is happening, they may not be aware of the issues or concerns that are coming down the line. Sometimes, they are subtly presented and It was very ironic that at the time Jean told me this, I was not being aware of a scandal that was arising within my own law firm. I remember after talking with Jean thinking about, ‘How do I become more aware? What does that look like?’ Because it is easy to say you need to be aware, but how do you become more aware? I am not going to cover that in this video, but I think it is a great question for CEOs to consider. And what I will tell you is what happened next in my firm.
What I didn’t realize is the person I had entrusted with the finances of the law firm had misappropriated tens of thousands of dollars of money we were holding for clients and used that money for an illegal and wrongful purpose without anyone knowing. Of course, I later found out about it and reported it to the appropriate government authorities, and that person was suspended from the practice of law for a period of time. We repaid all of the money to the clients whose money was wrongfully taken, but it was a legal mess that went on for years. I could have avoided that, perhaps, if I had been more aware. If I had been more attentive to what was going on, if I had investigated certain things more that at the time I may not have realized needed further investigation, but in hindsight, I look back and I realized they did. So awareness by CEOs becomes of preeminent importance.
The Loss of Privacy and Time
The former CEO of Yahoo, Marissa Mayer, I believe her name, talked about when she became CEO of Yahoo, one of the surprises to her was how much she lost privacy. Because all of a sudden, somebody else was handling her email, her calendar, and all her communications with people. In fact, many of her personal errands and personal issues that she needed attending to needed some form of assistance so she could devote more of her time to the company. So often CEOs will find that the more people who report under them, the less time they have and the less privacy they have when dealing with all of their personal and family matters.
Avoiding Arrogance and Encouraging Honest Feedback
One other common problem faced by you as a CEO, as your organization substantially grows, is you will be perceived as having the Midas touch. You will be perceived by outsiders as being so successful. And sometimes, that can get to CEO’s heads because as it is growing, things are going well, the system is working, and you might be getting a lot of credit for it and start thinking, ‘Hey, I am pretty smart. It is pretty amazing what I put together.’ Obviously, arrogance and pride are a great risk for any CEO, but there is another part of that that CEOs often miss. And that is that the people around them often don’t provide honest feedback or constructive criticism of ideas because they perceive, ‘The CEO is so smart, who am I to challenge the CEO?’ That results in the CEO being in more of an echo chamber, the CEO says, ‘Here is an idea I had,’ and everyone goes, ‘Oh yeah, that is a great idea.’ ‘Here is an idea I had.’ ‘Oh yeah, that is a great idea.’ And you may have simply the problem of too many great ideas that you can’t execute. You might also have the problem that the CEO is putting out some bad ideas, and the CEO loses the protection provided from reasonable people scrutinizing ideas and giving honest, constructive feedback on those ideas. So I think it is an important part of any CEO’s job as they grow to remind everybody who works with them that they are not all-knowing. Every idea of theirs is not great, and it is the people’s job who work with the CEO to give critical analysis and feedback.
There are some companies that build this right into the management system. Ray Dalio, a great fund manager and author of a book on important principles of life and success in business, talks about how they have a process of voting on ideas, and when the votes are cast, it is cast by various people in management and people who have a different perspective than management. Now, there may be some waiting to the votes, so you are not giving the same weight to a person who has been in the company for a month as the CEO, and you are going to have an expectation that people will articulate their concerns with a particular idea so the merits of those ideas can be scrutinized. But the idea is many great CEOs build a system into their decision-making process in leadership so that the CEO’s ideas are scrutinized.
Growing Pains and the Importance of Structure
So as CEO or business owner, and you go from 10 employees to 20 or 30, or from 30 employees to 100 or 150, you will be making substantial jumps that require an entirely different structure in all different categories of your company. We have covered IT, HR, leadership, and management. Your financial reporting will have to look entirely different. Your organizational structure will look entirely different. This is why so many companies can struggle in that growth process.
Summary
So to summarize, one of the best things a CEO can do when navigating the growth of a company is to clearly identify what should the CEO focus on and stay laser-focused on that and delegate all the other aspects that would vie for the CEO’s attention.
Conclusion
If you have any questions that didn’t get answered, or if you are watching a recording of this, feel free to put your questions in the comments section below. I would be happy to answer them. If you like videos like this where you can learn about business law and avoid some of the common problems that business owners face as they are growing a company, feel free to subscribe on YouTube or any of the other social media platforms that you use. And if you would like exclusive online educational content for founders and business owners, you can get that at aaronhall.com/free. It includes a checklist of common problems faced by new businesses. It includes videos going in-depth into some of those problems so that you are empowered to set up your company for success. Thanks for joining us today. I look forward to seeing you at the next live session.