The one thing scaling companies don’t pay enough attention to
Scaling is about growing your brand reach, your happy customers and your year on year sales, without growing an overhead to match. To see that increase in profits, successfully scaling businesses need clear focus, more reliable systems and processes, a high performing team able to make good decisions autonomously, a willingness to take risks, and effective leaders less dependent on their founders.
Scaling companies have found a proven model and should start to see profits accelerate away with the increase in sales you achieve year on year. The aim isn’t just growth (you can grow by continuing to spend almost as much as you sell), it’s scale and you’ll know you’re scaling when your sales continue to grow exponentially, but your costs do not.
“…remember, culture counts. And if you ignore it, culture always costs.”
Paul Brewerton, YC Founder
Sounds good. And relatively easy. Do most businesses make the transition successfully?
A lot of promising businesses fail when they attempt to scale. There are all sorts of reasons why. Poor planning, lack of focus, unwillingness to evolve an offer that customers don’t love, holding on to poor performers too long, being too inward focused (not listening to customers or finding enough partners), and over-control from the founders.
But there’s one risk in scaling that most business commentators and advisers don’t talk about nearly enough. The crucial role of your company culture and how it can boost, stifle or even derail your business from scaling
What do you mean culture and why’s it so important?
Your culture is “the way things get done round here” (McHale, 2020). It’s the unstated, deeply held beliefs about what is ok and not ok in terms of working practices and behaviours within your business. And when you’re transitioning into scale-up, you ignore it at your peril. But so many business leaders do. And that may be the reason why some many start-ups never get to scale.
The reason culture is so important is that as a business develops, the way that the founders and early leaders communicate the culture that they want is via role modelling, observation and storytelling. This often happens unknowingly and invisibly, but all the same, ways of behaving and the way that things get done are quickly established.
Many business leaders don’t know the kind of culture that they have. And if you can’t put a finger on your culture, then you won’t know which elements of it will need to be kept, which will need to evolve, and which will need to be left behind, in order for scale to be possible. And that will inevitably lead to business failure, often after a series of false starts. You need to get your culture right if you’re going to accelerate your business’s growth.
What are the steps I need to take to get my culture right for scale?
There will be many aspects of your culture that you will want to keep as you scale because they set your business apart and create the ‘magic’ that customers keep coming back to. And there will be other aspects that you just won’t need any more. So here is our 5-step plan to setting your culture right for scale.
The elements of your company’s culture that you will want to keep, evolve or leave behind will come from a detailed analysis of the kind of culture you need to scale up, followed by establishing the culture you have right now.
Steps 1 and 2 in evolving your culture to scale are to create a map of your future culture, and then to run a gap analysis to show you how far away you are from that future picture.
Once you know what needs to change, step 3 is to make a plan to narrow the gaps. This is where the real work begins as you will need to shift deeply-held beliefs and assumptions about what’s brought your business success up to now. These beliefs and assumptions will exist both within your leadership team and within the wider workforce.
Step 4 involves putting the plan into action and actually shifting people’s mindsets, mental models and behavioural patterns to enable a successful transition from start-up to scale-up. In our experience, this step requires expertise and support initially, but will soon become an actionable plan that you can work through without external help.
Finally, step 5, measuring progress towards the future culture that you need will become a reportable KPI, sitting alongside other metrics such as sales, profit, product development, customer experience and staff engagement.
Taking this final step enables you to measurably evolve your culture, protecting the parts that created the magic from day one, and leaving behind the elements that if left unchallenged, will hold you back from long-term growth.
Good luck on your scaling journey. But remember, culture counts. And if you ignore it, culture always costs.
McHale, S. (2020). The insider’s guide to culture change: creating a workplace that delivers, grows and adapts. HarperCollins Leadership.