Stages of Growth - The Law of 3

In 2012, I was a recently funded CEO of CustomMade; one of our venture partners was First Round Capital, and they did an awesome annual summit of Founder/CEO in San Francisco.??If memory serves me correctly, the first year we went was the year I head?Phil Lubin?speak about his law (or someone else’s law of 3). The idea is this…?

Organizations change dramatically every time they multiply by three.?

So a 1 person company is different than a 3 person, which is different than 9, 27, 81, 243…..??I have found this advice to be accurate and helpful as I’ve grown ButcherBox.??But I’ve also found that there are little to no resources online on what to expect in each stage.. So, I asked my COO, Tom Burke, to help me with this list. ???Have things to add? Leave a comment below and I’ll compile and do a follow up!?

Here it is: our advice for each stage of company growth:

1 Person:???Do not recommend. It would not work for me. The problem with this stage is, if you are like me, you are not good at everything and you might be unmotivated.??When I started ButcherBox, I knew if left to my own devices, I was likely going to just hang out on the couch… so I hired an summer undergraduate intern?,?@bobbyquirk to help me from day1.??When Bobby showed up asking “what are we doing today”, I had to make something up… and so, we began.??I find that too many solopreneurs think that they have to do everything to be successful.??I’d much prefer you figure out how to bring in a $12 an hour intern to work with, be motivated from, and grow.?

3 People:?Much better team size for starting. The most important thing to do at this stage is establishing who is the leader (I believe there can only be one CEO/leader), what expectations are around working and work styles, and what to do in the case of a dispute. We all want to create a company, especially early on where we are in it together. But without one leader who can make the final call you can get caught in endless discussions, analysis, indecision, instead of moving. Ultimately to get from point A to B you need to move.

?For work styles, it’s great for people to start early with their boundaries (“I don’t want to work on Fridays because I’ll be with my young kids” or “no calls after 5PM ever”, or “It’s important for me to workout between 8-9 every morning so nothing then”, etc).??And disputes, how are you going to handle them.??If you are at an impasse, does the CEO/Leader decide???Do you bring in another resource? What do you do?????Some of the best advice I’ve heard on this is you establish a “card” and give it to one person at the beginning of the game.??They can play that card at any point, but then the other person gets the card to be able to play later…??something like that.

?It does not have to be perfect. You learn from your mistakes and will need to do so quickly. Everyone will wear multiple hats. It is important to have set weekly meetings where everyone can come together and talk about everything and not feel judged. You need an environment of open honest dialogue. You want to make sure everyone is running, and you are all running in the same direction.?

There will be time needed to invest in the relationships you are building so when the shit hits the fan you know you can rely on each other. Being social at this point and purposefully devoting time is the beginning of building an environment that can weather storms and also provide an honest environment.

9 People:?Now you are starting to see some traction with your product and scaling up is moving a bit faster. 9 People!???For one, they can’t all report to you. That’s too many.??I believe that 7 people is the max a really good manager can have under them, so you need to start tucking resources under your direct reports. If you are new to this, target less. But you do not want to create too much structure. You need to be able to sense what is going on, like a spider feels the slightest vibration on their web. So you can react. That does not mean you do everything or control everything, in fact now is the time for you to start giving up control.?

-You are still at a size where you want to hear from everyone. Remember you are not sure what will happen with the company, so people are here out of passion and belief and giving them their share of the floor is important. Plus, by now they know maybe more then you in some areas. To this point I think it is really important, in early stages, and to some extent later stages that you do not assume you know everything. You are growing a company, which is unique. Every company develops their own personality and vibe so early on you are still watching it take shape. Like a new baby you are taking care of it until it can begin its self journey.?

-Also, this is when goal setting really comes into play. We do a process of having a Vivid Vision of what 3 years from now looks like, 5ish annual goals, and then quarterly rocks that roll up to those goals.??(See?Rockefeller Habits,?Traction, and/or?OKR frameworks).? Every meeting should have some form of check in. also as noted earlier in setting the goals you are still at a size where everyone needs and should be a part of it. Do not change your goals. If you change them because you are not going to make them, and change to things you will make, you will hide lessons you could be learning about the business and your goal setting. Also set your goals for each year in Q4 so you enter the year working on the current year goals, not still working on them. You waste time in the year you are trying to do things. Also, have fun dreaming of your goals. It is not life or death.

-In addition to goals, you want to write down your Core Values. To establish our values (Member Obsessed, Authentic, Humble, Relentless Improvement, Accountable) we pulled together a group, not led by me, and asked them to put forth the characteristics of the best performing ButcherBoxers, and what made them great.??We then compiled these into themes, and named them accordingly.??It is critical to get to this level of clarity because when you get out of the 27 stage, its very possible you wont even interview the person coming into your organization.???So you need to give your team very clear guidance on the types of hires they will be making.?

-And one note on interviewing.??Hire with caution. These people set the mood/tone/and tenor of the organization for a very long time. Make sure you hire superstars that are humble and kind. You need everyone to be involved in hiring in stage 3 and 9. It is to small to get it wrong. Also think outside the box on hiring. In our world today there are some very experienced people who are towards the end of their career that would love to be part of a company they believe in to share their experience etc. This was one of the special thinsg about ButcherBox that we tripped into and then leaned into.?

27 People:??Things are getting interesting. If you don’t watch yourself, your time can get gobbled up in this stage. You can no longer meet with everyone all the time, and you need to start to separate yourself from all of the day to day decisions.???You must have hierarchy in place. You also need to be growing the people below you to be good managers as well, or hire for this skill.??You will need to be focused on scaling your systems, and doing things right.???Gone are the days of half-assing payroll, or missing a document. Focusing on HR being a service for the org, and culture being a must is incredibly important. You also will want to start to figure out a very basic first version of professional development and management training. As you transition from this stage people who may have never managed or been at the next level of a company’s growth will be asked to step up. Giving them some support and training can set them on a good path and be there to support their growing organization. It starts to set the foundation for 81.

-If you haven’t already, start working on yourself with vigor.??Join an organization such as EO, or if youre big enough, YPO. These are places where you can explore how you show up has a lot to do with your past, and you can start working on that…?

-You will need to move out of generalists that you hired into some experts. Experts know the lay of the land, and can help you get unstuck quickly. Figure out places where experts can come in and help you save money (or make money). This will take you far. You might find this is also a time that it is not just bringing in an expert to run things but could be connecting some of your key people who you believe can continue to grow with mentors and experts to gain leverage. The trick is the people in key positions need to be people who see this as a benefit, look at it as critical and lean into it.??

-This is also a good time to tell you be on the look for “lip service” people that tell you what you want to hear or tell you “yeah we are on it” but then they are not doing it. For example they tell you they are going to reach out to the mentor and they do but only have one meeting and disregard advice etc. But they tell you they are talking to the mentor and doing things. I have learned that “trust but verify” is important as you grow.. It is not a form of micromanaging. You come up with a plan and people say they are on it but you need to have a way to verify their word. This is a form of building trust. Over time the verify could slip away because you know they are getting it done. But many times have I had a meeting, agreed on a plan, moved on to the next project or fire assuming the plan was being worked on only to find it has not moved or someone decided to change the plan etc. without circling back on things.?

81 People:??The much anticipated 81-243.??This is actually the end of my experience level, so I have a few thoughts on what I wish I knew in this stage, but I’ve been in this stage for 2 years, and I will be in this stage for about another 9-12 months. Here is what I know thusfar.??

-As CEO, one of your jobs is to give clear and simple guardrails to the team.??When we were sub 81 people, I just focused on hiring awesome people and telling them to do what’s best. This stopped working at 81. At 81, you need coordination across teams and departments, and YOU need to decide what you think priorities should be, and make sure there is a process in place to uphold those priorities.?

-If you haven’t already, make Diversity Equity and Inclusion a priority. This sometimes gets overlooked early on, but can’t be by 81 people.??If you don’t focus on this, you will end up with an almost entirely homogeneous staff, who all look and act like you because they grew up like you and had similar life experiences.??I’ve seen this show up as an all-white mostly male staff in a company led by a white male, and have seen it show up as an all women staff in a company led by a woman… this can happen to anyone of any background.??A more diverse company is a competitive advantage, so do the work.??Sign the?CEO pledge, change?hiring practices, and get your company on the journey, you will be much more robust.?

-Watch out for the generalists getting antsy.??Right around this stage, the people who have helped you get here, who have been used to wearing many hats will start to feel conflicted; excited about the company growing, but unsure how to process and manage through things being taken away or not being in every meeting. You will need to spend time on this and figuring out how this changes communication patterns to keep people on the same page. You will also see the start of people saying I was here at the beginning and feeling the company is their baby and pushing against people who are not as tenured at the company taking on more and in some ways taking over aspects of their baby

-You will also start to have to be very honest with yourself about reflecting on do you still have people in the right seat as you face new challenges in the company. This is not being unfair to the people that helped get the company to where it is but it is more your repsosibility to take care of the company. You also must look at yourself and ask the same questions.?

-In this stage you will also begin to have to start to pay off your debt, your “Decision Debt” from earlier in the Company’s growth. Decision debt is a concept that you had to make decisions early on to get the business going that was the most efficient way or thing to do but as you get to a big scale those decisions start to weigh you down. You now need to pay for them. It could be the oft-talked about tech debt, but it is also maybe leaving people in positions a little to long or not adding skills needed to scale the business sooner. It could also be you do not have robust reporting on your business and at times are flying blind or having to wait until the end of the month to get the results from the prior month to help inform business decisions. This means you do not have valid data at times when you are making real decisions.

-You will begin to add to your senior team. You should be prepared that know matter how experienced or talented a senior person is, especially a C-level, it will take them 6-12 months to really spread their wings. I believe someone takes this much time because a good culture demands it. If you think about it, if your culture is strong and one of tea work, open communication and working together, someone coming in and blowing things up or being a bull in a china store can cause great damage to the thing you have been nourishing for years, your culture.?

-As you push to 241 you will also start to feel the pull of hopefully running a big company that is growing. The company works to the yearly goals for the company but the company is also running the day to ay business. You need to start to give your team the ability to balance working to the goals, which are pushing the business forward , while also managing the current business and improving operations.?

-At this stage, work starts to become siloed, you need to fight against this. Don’t have people focused on individual goals or tasks, strive to have the organization working on the same projects.??Otherwise, you get a lot of infighting about what work is going to get done.?

-Recognize that the start up days are over or coming to an end. You need systems and structure to keep scaling; sometimes this leads to hard conversations with your original team, the people who got you where you are. Sometimes this means people leave because they prefer the smaller feel.??All of this is OK and to be expected, try not to take it personally (see?on abandonment)?

-Choose to spend your time on things that give you energy, and find people who get energy from the things that don’t.??If you are bad at paying bills, or you really don’t like looking at spreadsheets, find people who can do that. Strive to live as much of your work day in your “Zone of Genius”… if that’s mentoring your staff, awesome, how can you do more of that???Build you days around getting high energy and maintaining it.?

-Adhere to another law, the “Law of 8”… (or the even more precise “one thing”) which is that you can only be working on a minimal number of things at any given time, and as CEO you need to be super selective on what those can and should be. My COO?Tom?and I work with this threshold, and it helps to get clear on what’s most important.

Finally, -I think it is critical, hopefully, in the earliest stage possible, at least by around 27, that you have found at least one person you can have open honest confidential conversations with that will not be a “yes “ person but you now will only give you their honest feedback. Someitmes as a CEO, growing a company, insulates you from maybe what is really happening or from??the reality that some of your ideas stink or that you are being stupid. You need to find someone that has the skills to maybe balance you a bit but will just be honest with you because it is the right thing.?

Have other thoughts about these stages or advice for me as we prepare to hit 243???I’d love to hear them. I’m new to this!?