Bottleneck happens at the top! (Part 1)

April 4, 2013 at 11:46 am Leave a comment

Few companies survive the start-up stage. Of the companies that survive the startup stage, many of them struggle in the adolescence phase of the organization. One of the reasons-and I would venture to say the main reason- that small and mid-size companies struggle is their leaders. More specifically, the party responsible for failure is the founder or CEO (often the same person).

In other words, the bottleneck is at the top. One might say that bottleneck is always at the top no matter the size of the company. However, for small to mid-sized companies, I believe the organization tends to suffer more because of the lack of growth of the leader and conversely is more likely to gain from the growth of the leader. To quote Michael Lazerow, “CEOs/Founders are their own worst enemy.”

One of the reasons that the bottleneck happens with CEOs/founders or leaders of growing organizations, particularly startups, is that they need to bring and utilize efficiently other talents beyond those of the founder. At some point, a leader of a growing organization cannot rely on his/her skills alone. To get an organization started, there is great deal of burden on the founder/leader. Success is directly connected to the leader’s efforts including 12 to 16 hour days and sometimes sleepless nights. As the organization grows, it will become crippled it if continues to rely so heavily on the efforts of the founder. Others need to step to the plate.  Problems happen with recruiting the right talent, keeping them on board and managing them.

1)      Recruiting the right talent

When it comes time to get others to replicate the effort of the founder, the first hurdle is recruiting right. It can be a chicken and egg problem to hire the right talent (that is someone with the skills to do the job). Having people with the right skills is only part of the problem.  The main issue is that entrepreneurs don’t pay attention in the early stage of their company to cultural fit. Having a brilliant jerk in a small organization can quickly lead to its destruction. 

2)      Being willing to let go

The second hurdle is for the entrepreneur to be able to make enough space for the new talent to operate. An entrepreneur typically has a lot riding on the success of their organization. In most cases, they’ve bet the farm. Their attachment to the organization goes beyond fear of failure. This is their baby and their idea. They can do most tasks better than anyone if they could clone themselves. Many entrepreneurs cannot deal with the fact that giving control away means that they will not agree, and don’t have to agree, with every decision made by the hires to which they are ceding control. This means allowing these new hires to make mistakes.

3)      Hiring complementary talent

Entrepreneurs may be talented but they have their weaknesses. They need to hire talents to overcome their weakness; that is people who are better than them in some areas. Complimentary doesn’t only apply to skills but also to certain attributes that may relate to character traits, such as someone who is introverted making sure they have an extrovert on their team to communicate with internal and external stakeholders; someone who is great in big picture thinking (visionary) may need to partner with someone who is good with the details. Hiring complementary skills requires the leader to be aware of weakness and to be accepting of the new talent.

 4)      Become skilled at human relations

As an organization grows, it is less dependent on the skills of the entrepreneur and more on the ability of the entrepreneur to manage the talents of the firm. That is the entrepreneur becomes more of a conductor of the orchestra as opposed to the first violinist. Working with people and getting the most from their talents is an art and an area of expertise by itself. Few entrepreneurs make the transition. 

When I started SciMetrika, a colleague told me that I would make a couple of bad hires that could potentially put me out of business.  I wish I had listened more carefully and been more prepared. The inability of the entrepreneur to deal with people issues can lead to atrophy and even the death of the organization.  Equally important is that the entrepreneur needs to deal with himself or herself.

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