Why is scaling past 50 employees so hard?
Hi friends! In terms of who I write for, this is one of those posts that is aimed at founder/CEOs but much of it can likely apply to leaders in bigger companies who are scaling a team. If that’s you, then just sub the word “CEO” for “leader” and the word “company” for “team”.
In the tech world, we talk so much about “zero to one”. We spend huge amounts of time talking about, writing blog posts and books about turning something from idea into product and from product into business. And that makes sense. It’s the phase where most start ups fail — they fail to find “product/market fit” or, said differently, to get the kind of traction that gives you permission to build a real company and scale your business.
The phase I love is the one that comes after — the “one to two” phase. You have some traction, something is working, and it’s time to build on top of it. You hire more people and attempt to scale a variety of things that have been working. And then everything falls apart.
The “one to two” phase is the phase where you go from being a team to being a real company. It’s the phase where you go from being the head of product or whatever role you were filling in addition to CEO to actually having to be CEO. It is NOT my favorite phase because it’s fun and easy; it’s my favorite phase because it is one of the hardest phases of building a company. It is a moment when you can do a lot of things right that set you up well for the future and also a moment where you can screw a lot of stuff up that will haunt you for many years to come. It is my favorite phase because we don’t talk enough about how hard it is. It is a phase that always catches founders by surprise, and they are so relieved to hear that it feels like a shit show for everyone, not just them.
I define the beginning of this phase by crossing the 50 employee mark. It typically lasts til about 250 or 500 employees. It is the true company-building phase where you are building habits, norms, culture and process for the first time. There is probably also a revenue number that should accompany this phase but given how different businesses can be, what I’ve found is that the employee count is the strongest signal that you’re in a new phase and everything is about to break.
Ok, so why 50? What happens that makes this moment so significant?
Well, let me first explain that my favorite team size is 30. It’s my favorite because it’s both a real team AND most stuff is effortless. It’s easy to keep people on the same page; everyone knows each other; it's not hard to onboard people and have them feel at home; you don't need a lot of process; it's easy to move fast because coordination is more effortless. Teams of 30, if they are well run, feel like families. In the pre-50 phase, as an employee, it roughly feels like everyone can be involved in everything and you somewhat effortlessly know what is going on.
If you are a first time founder, you may not realize what is effortless about this phase. You’ll be stressing about your product and your business, so everything will feel hard in a different way. That is part of why crossing the 50 employee mark is so jarring: suddenly a whole new set of things is hard.
The simplest explanation for what changes when you cross the 50 employee mark is that you go from being about the size of a team — e.g., you can fit around a lunch table or easily chat in a single slack channel — to being an actual company. Past 50 employees, every team will typically have more than 1 person and suddenly, not everyone knows each other, not everyone knows what is important, not everyone is clear why we’re doing what we’re doing. After 50 employees, not everyone can be involved in everything or effortlessly understand the “why” of decisions, and it causes confusion and insecurity for employees.
As a founder / CEO, this phase feels hard because all of a sudden people start asking questions that they’ve never asked before — “what’s my career path?”; “why are we doing that?”; “why do we need so many people in marketing?”; “why didn’t you tell us about X?” You have to explain things you’ve never had to explain before. All of this will feel incredibly normal to anyone who has operated at any scale, but (a) the change can feel jarring to founders who still feel like they’re fighting for the company to deserve to exist and (b) it can feel very overwhelming for founders who have never experienced scale or managed a larger team.
I think (a) is one of the hardest parts. As a founder or a leader, your head is in the “fight to survive” game, and it can feel like your employees are suddenly not as “in it” with you. It can feel frustrating and lonely.
There are basically five (ok 6) things you can do to make this phase easier as a CEO. Each deserves it’s own blog post, but I’ll list them here:
1) Hire strong, experienced leaders (I wrote a starter post about this on LinkedIn)
2) Build good habits around your leadership team: when you meet, what you talk about, and how you decide what/when to share with the team (Wrote a blog post about this one, finally.)
3) Create strong internal communications habits and systems that will scale with you (I wrote a starter post about this on LinkedIn)
4) Create a clear process for how decisions are made and how they are communicated once they are made (blog post coming someday!)
5) Don't hire too fast. I often talk to founders who quote numbers like “growing from 40 to 200 in 6 months or a year.” Simple advice: try to less than double every year. And realize that if you grow more than 100% in a year even more things will break or fracture. Adding people often does not mean you get more done, particularly if it's done in a short period of time. It usually actually decreases productivity in the short term so growing consciously (and slowly) can make a big difference to the long term health of the culture. (Also wrote a starter post about this one on LinkedIn.)
I'm giving you a bonus 6th: Don’t promise things... to anyone. This is generally a good principle (don’t promise promotions, don’t promise that roles will never change, don’t promise that your company will always do X, Y or Z) but this is one of the biggest things that can bite you in the ass later. If there is one guarantee about the “one to two” phase, it is that if you are successful, almost everything will change. So any promise you make, particularly about stability, you are likely to have to break.
At the highest level, the thing you can do to make this phase easier is really step in to the shoes of being a CEO and make sure your company is well run.
You are in essence building the foundation of your house in this phase. If you are deliberate and ensure that it is well built, it can make a huge difference to having a strong business and company in the future. If you race through it and duct tape a lot of things together, you just accrue debt: you accrue cracks and holes and fractures in your foundation that you are going to have to fix at some point or they will catch up with you and seriously damage your long term trajectory.
So, if your company scaled past 50 employees in the last six months and you are wondering why things feel like such a mess, first of all, take a breath and realize you are not alone. And then start thinking about where you want to invest time and energy to make your foundation strong.