Managing early stage employees as you scale up

How can founders help their early employees grow with the start-up? And how can the original crew avoid a premature departure?

I was recently speaking to an acquaintance who had been the number 5 employee in a start-up that was rapidly scaling up. This person was feeling very frustrated and sad. He felt that as new hires were coming on board, he was getting side lined from major decisions. The founder had become less accessible and was no longer openly communicating with him. The informal ways of working were getting chipped away by systems and processes. This person was wondering if he had a future with the company that he had helped build and if he had it in him to adapt to the new reality.

As a start-up scales, there are significant shifts in the roles and expectations from the team members. There is a higher need of specialists versus generalists, people who can handle increasing complexity and members who can lead and motivate teams versus being individual contributors.

One of the hardest things for a founder is to figure out how to manage early-stage employees during this stage – helping them grow into new roles or navigating the emotional angst of separating from them.

Meanwhile, employees who are associated with the company from the early days face this challenge from the other side. In order to stay on, they must find ways to adapt and keep up with the evolving needs of the business.

This week,?my message focuses on both these aspects. How can founders support early-stage employees as the company scales? And how can employees ensure they remain relevant in the business they helped get off the ground?

Founders and early hires share a deep connection, both professionally and emotionally. Working together as a small team while the company is in survival mode forges incredibly close bonds: team members generally stay connected 24/7 and are clued into all aspects of the business.

Growth and complexity inevitably alters this setup. The arrival of external managers creates a new distance, while business functions become more compartmentalized. There is less intimacy, less knowledge-sharing, less time spent together.

Additionally, a scaling business calls for significantly different skills. Leading a department in a 50-person company is a world apart from doing so in a 500-employee company. Aspects like discipline, time management and people management become crucial. Both founders and employees must learn to be more systematic and make more deliberate choices.

Some early stage hires will be able to keep pace with these changes, while others will get frustrated and fall behind. The way in which both founder and employees approach this crossroad will play a key role in the outcome.

As Elad Gil explains in his High Growth Handbook:

While many early employees may lack deep functional or industry expertise, the trust of the CEO allows them to hire, manage, and learn from more experienced industry executives. Early employees who are humble enough to realize they can learn from fresh blood can grow with the company and use it as a personal platform for their own learning and impact. Some early employees will stick with a breakout company for decades and their personal story arc mirrors that of the company.

When your role outgrows you

Steve Blank, the prolific entrepreneur who was part of eight Silicon Valley start-ups, has shared a remarkably frank account of his painful journey as an early-stage employee. As VP of Marketing and Sales for MIPS Computers, Blank did an exemplary job in the first year of the company’s life, relentlessly pursuing opportunities and working overtime to find product-market fit.

Which is why, when he was told that he may not be the right person for the next chapter in the company’s growth story, the news felt like a punch in the gut. The CEO agreed to let him be candidate for the job – he even hired a coach to help him get to the next level. Unfortunately, as Blank recounts:?

The problem was I had shut down… I was obsessively thinking about the change in my role, my title and my status. “I don’t get it, I did all this work, and everything was great. Why does anything have to change?”

To do this day I am really embarrassed to admit that I have no idea what my coach tried to teach me over multiple lunches and weeks… In my righteous anger I was unreachable.

I shouldn’t have been surprised, but yet again I was, when a month later the CEO said, that the report from the coach said, “I had a long way to go.” The company was going to hire a VP of Marketing. I was devastated.?

As a start-up grows, early employees face the prospect of losing several things – community, status, autonomy. No more working in a small tight-knit team, no more taking key unilateral decisions and no more being in the know on all company matters.

As Blank says:

What I wish I knew was that if you’re an early company employee, it’s not likely that the skills you have on day one are the skills needed as the company scales to the next level.

Suggestions for founders

There are several steps founders can take, some right from Day 1, to ease the transitions that will become necessary as the start-up scales. While you will certainly lose some early employees along the way, these seven recommendations will help you better navigate scaling up:

1. Rethink titles.

It can feel great to assign formal designations like CFO, CTO and VP of Sales to your original team. However, do consider the fallout of later taking these titles away (which will almost certainly happen). Using informal, fluid titles in the early days can soften the blow of future shake-ups in roles and responsibilities.

2. Prepare for change.

Have an open discussion about the changes that will come as the company starts to scale. Honour your relationship by being honest – and ask for honesty in return. If your early-stage employees have equity, gently remind them that creating value is in their own best interest.

3. Provide upskilling support.

It’s not enough to say that change is coming. Which new skills will employees need as the company grows? How can they go about cultivating these abilities? Work together to assess choices and create a roadmap for each team member, then offer relevant coaching and training support.

4. Manage expectations.

As the business grows, early employees are likely to feel separation anxiety and feel less “part of the action”. It’s important for founders to address this head on. Ask what your team needs to make the shift easier and try to plug the gaps – but be clear that some changes are inevitable. For instance, having restricted access to financials or board-level discussions.

5. Prioritise cultural contributions.

Legacy employees personify a company’s original culture. Make them your cultural ambassadors and assign them the vital task of building cultural alignment among new hires. Celebrating these valuable contributions will help you retain your early hires despite role changes.

6. Hire wisely.

When hiring external managers, be transparent. Get inputs from your original team and involve them in a robust interviewing process. This will act as an antidote to their natural wariness and ensure that they feel the newcomers are truly qualified to take over.

7. Let go.

Reality check: there will be those who are unwilling – or unable – to keep pace with the changes. Some people are great at creating new things but not at growing them – for them, the start-up stage is the sweet spot. Others may keep pining for “the way things were” or actively become a hindrance in executing your current plans. As a founder, you will need to find a way to say goodbye to these employees with respect and dignity – a tough but necessary part of your journey.

Suggestions for early stage employees?

As an early-stage employee, there are several things you can do to safeguard your future at the company as it scales. Here are four suggested approaches:?

1. Get ready for change.

Mentally prepare yourself for the seismic shift to come. Blank offers a stark reality check:

If you’re an early employee at a start-up, one day you will wake up to find that what you worked on 24/7 for the last year is no longer the most important thing – you’re no longer the most important employee, and process, meetings, paperwork and managers and bosses have shown up.

One of the most important shifts you will need to make is from individual contributor to manager. Think of specific ways in which you can evolve through this transition.?

2. Orient for growth.

In order to scale yourself alongside the company growth curve, you’ll have to work incredibly and, more importantly, learn really hard! Besides coaching and training opportunities that may be provided by the company, it’s important to take charge of your own reinvention. Talk to other professionals in your industry, especially those who have been on a similar journey and made a success of it. Read books and blogs, watch videos, listen to podcasts – there is so much helpful advice and valuable knowledge out there.?

3. Regulate emotions.

Alex Kracov, co-founder and CEO of Dock, emphasizes how crucial it is for early employees to be self-aware and manage their emotions:?

Start-ups are an emotional rollercoaster. There’s a lot of literature about how founders deal with the ups and downs of a start-up, but the same goes for early employees. Early employees are working really hard and the payoff can feel like it doesn’t match, especially if you’re not making a high-salary or not getting the title that you feel that you deserve. It’s important for early-stage employees to be honest with themselves about the reasons why they joined a start-up (hopefully to learn!), so that they don’t get frustrated and focus on positive ways to move their career forward.

4. Manage upwards.

As the company scales, Kracov advises early employees to keep the leadership team apprised of their own self-growth strategies. It’s important for your founder/CEO to know you’re being thoughtful and intentional about the process. Many an original hire has found themselves out of a job because of their perceived resistance to change.

Working with a start-up from inception through scale-up is a long game, meant for those with persistence and an open mind. Early employees who can scale themselves with the company growth curve are likely to find themselves well-rewarded in the long run. It is also in the founder’s interest to set up their original team for continued success – after all, these are the people who helped get the business off the ground and, as such, are valuable repositories of company knowledge and culture.