Many start-ups having excellent business ideas as well as infrastructure and funds, have struggled to survive for want of management competency. Management of an organization is a different ball game requiring experience and maturity in the leader and the management team. Any lack of foresight and guidance leads to a scenario of young entrepreneurs knowingly or unknowingly compromising the organization’s long term growth to alleviate the short term pains. There are many well managed companies without being visibly led. Please note managing a company is very different from leading it.

What Got You Here, Won’t Get You There.’
– Marshall Goldsmith

Following are some of the imperatives for establishing a company turning into an institution:

1. A Competent Leader to lead the new organization. (It is not necessary that idea owner or a relative of the biggest investor should lead the journey), and
2. A Competent Management team with trust in the leader and covering various aspects of HR, finance, legal, admin etc.

Who is a competent leader and what are the required qualities?

A leader should be proactive, leading the change with competency to evolve and execute all of the following and more.

• A Belief System for the organization - A framework or a common language to judge right from wrong, and to help differentiate good behavior from bad. It provides the dos and don'ts for the organization, thereby aligning the behavior of the employees towards organizational belief and thus its success.
• A Blue Print for long-term journey that sketches out a destination with focus on experience during the journey, laying out the fundamentals for painting:
  • a journey of its potential customers, starting from as to why they should be buying its services to how to measure their satisfaction level, happiness and delight
  • A journey for an employee starting from merely a job in the company, and moving to developing and taking risk to invest their career with the organization. The leader must invest in development of employees through all three known currencies: Material Wealth i.e. Laxmi, Intellectual Wealth i.e. Saraswati, and Emotional Wealth i.e. Durga. Employees should feel and have confidence in meeting their own needs and aspirations during the journey.
  • An organizational culture wherein employees feel part of the organization, a sense of ownership leading them to display ‘MY company’ behavior.
• Proactively compliant where expense compliance culture is considered as an investment rather than avoidable expense.
• Choice of external accreditations and benchmarks to compare with the best, as appropriate for the size of the organization

With a competent leadership team at the helm and adequate resources, it is more than likely that the organization will do well and start growing in size.

The leader must invest in development of employees through all
three known currencies: Material Wealth i.e. Laxmi, Intellectual Wealth i.e.
Saraswati, and Emotional Wealth i.e. Durga.

Growth and expansion journey

Successful organizations go through distinct phases during its expansion and growth journey. Each phase has its own characteristics and associated challenges. Thus, for each phase to succeed, it requires a different set of competencies in the top management in general and in the leader at the helm in particular.

Managing growth and associated challenges requires experience, foresight, patience and perseverance. While some of the phase-shifts may require an external support and guidance, sometimes it may even lead to need for change in leadership. The existing leader needs to take proactive initiatives for timely readiness and smooth transition and avoid a need for change in leadership. The initiatives includes assessing the needs for next phase, identifying the gaps and then setting up internal programs and projects for bridging these gaps ahead of actual challenges emerging on the scene.

Each of the expansion phases and its sub- phases are associated with a distinct management challenge. Generally, it begins as an evolutionary phase and is subsequently followed by a revolutionary phase. An evolutionary phase refers to an extended duration of expansion enjoyed by the organization with no significant disruptions, whereas, a revolutionary phase refers to a period of considerable disturbance within an organization.

1. Creative Expansion → Leadership Crisis 

Initially, the organization enjoys expansion through the creativity and proactive nature of its founders. However, creative expansion (evolutionary phase) leads to a leadership crisis (revolutionary phase), as a more structured form of management is required. The founding members must either assume this role, or empower a competent manager to fulfill this if they are unable to manage it.

2. Directional Expansion → Autonomy Crisis 

As the organization experiences expansion through directive leadership, a more structured and functional management system gets adopted. However, Directional expansion (evolutionary phase) leads to an autonomy crisis (revolutionary phase). Greater delegation of authority to managers of lower levels is required, although at the reluctance of top-tier managers who do not wish to have their authority diluted.

3. Expansion through Delegation → Control Crisis

As the organization expands from delegating more responsibilities to lower level managers, top-tier management starts to lessen their involvement in the routine operations, reducing the communication between both levels. This Expansion through delegation (evolutionary phase) eventually leads to a control crisis (revolutionary phase), as lower level managers become accustomed to working without the intrusion of top-level management. This may lead to a conflict of interest with the directors, who feel that they are losing control of the expanded organization.

4. Expansion through Coordination → Red Tape Crisis

As the organization expands further, a coordination mechanism through committees is put in place to gain control but curtailing the speed of decision making and execution. Expansion through coordination (evolutionary phase) leads to a crisis of red tape (revolutionary phase), where many administrative obstacles reduce efficiency and innovation.

5. Expansion through Collaboration

At this stage, the organization seeks to overcome the barrier of red tape through adopting a more flexible and versatile matrix structure (matrix management). Training courses are arranged for managers, to equip them with the skills for solving team disputes and to foster greater teamwork. Complex and formal systems are made simpler, and there is an increased emphasis on the communication between managers, to solve crucial problems. The Collaboration phase needs to balance speed and agility and possibly, over a period, proactively embrace the revolutionary phase of Creative Expansion to make the lifecycle of expansion virtuous!

Many idea owners have a notion that they can lead their own organizations and by the time they realize the challenges involved, it might be a bit too late.

A pragmatic approach could be 20-80 principle, 20% weightage to idea and 80% to execution. The start-up owner should assess the business case, balancing the cost of employing a competent leader and management team in line with the organization’s growth. He should assess needs vs. enhanced risk of failure. Based on business case viability, it might be prudent for the idea owner to employ a full time competent leader or seek services of a consultant or at minimum seek regular expert advice. A regular health check assessment enabling timely corrective steps is highly recommended.

ABOUT THE AUTHOR

Rakesh Kumar Gupta is currently engaged in writing Vedic management practices, as deployment of these Vedic practices resulted in significantly higher performance and growth during his journey at Allianz. Alumni of IIM Ahmedabad, he was MD of ACIS, a company of Allianz at Trivandrum, a highly successful venture which he started as a captive for Allianz-UK in 2003, and is now part of global shared service for Allianz Group; grown from nothing to over 3000 employees delivering 60% more value annually over and above the cost arbitrage.

His other areas of interest include Vedic maths and aura sciences. He has been recognised among the ‘Great Peoples Leaders’ by the Allianz holding board, in 2014 and ‘Pioneering Business leader’ by the Shared Services Forum, India, in 2015.