Why founders must stay humble or risk failure

Triin Kask, co-founder and CMO/CFO of Estonian based Greenhouse CI, profiled earlier on Nordic Startup Bits, took the stage at infoShare 2016 to share her experience in handling organizational crisis in different growth stages and how founders must stay humble in the face of exponential growth, which creates crisis and turbulence for a company.

 Triin’s talk was based on Larry Greiner’s famous growth model, who observed that companies go through 5 fundamental phases.

Once you get yourself through the death valley, Kask noted, that’s when the real work starts. But according to her a crisis isn’t necessarily a bad thing. A crisis indicates that it’s time for the organization to change and much like humans are constantly changing, so must companies. For example, the management practices that worked yesterday might not work in the next phase of organizational evolution. But what exactly are the phases of evolution and the crisis associated with each one of them?

The 5 phases of organizational evolution

Kask divides the organizational evolution into five phases; creativity, direction, delegation, coordination, and collaboration.

During the creative phase, the companies are building their first MVP and figuring out their produce-market fit. At this point they hit the leadership crisis. These might be a bunch of friends who decided to build a company together and now they need to figure out who’s going to take on the responsibility of being CEO.

This may lead to conflict between the founders or result in them choosing an ill-fitting CEO just because someone had to do it. During this phase it’s important to decide who is going to lead the company to the next stage.

Next is the direction phase, where the company is focused on big vision, KPI’s, and leading people and processes. This is the time of purpose, autonomy, and mastery crisis. People start feeling like decisions are too centralized and this becomes the moment of truth for the CEO and other C-suites. Will they be able to let go of control for the better of the team and the company or are they going to micro manage their team and stall growth?

After this comes the delegation phase where conflicts start arising between company divisions as they have the autonomy to make decisions and the managers struggle for control of the company. The coordination phase is a direct result of delegation, says Kask, where the red tape crisis arises as the organization is now made up of many separate units who don’t talk to each other, which can be very demotivating and halter innovation.

This is where collaboration, which is the fifth and final phase, becomes extremely important. During this phase the organizations should organize teams based on objectives and outcomes rather than function and leaders must recognize that they are not there to lead decision making, but to remove obstacles for their teams. This can result in the growth crisis where the company needs to grow but doesn’t have the capacity and resources to do so. The way out of this crisis, Kask says, is to create strategic alliances that enable growth.

Don’t try to do everything yourself

Kask adds that the quicker a company grows, the more dramatic the phases and crisis become. Leaders must be self aware and let their egos aside. During a conversation I had with Kask after her talk, she added that many entrepreneurs fall into the pit of expecting the worst of people, not knowing how to trust or let go and so they try to do everything themselves. This can diminish the likelihood of them getting funding as investors are very adamant about every team member contributing and having a purpose, and eventually this way of managing a company will most likely result in burnout.

Kask emphasized the importance of prioritizing and delegating and helping ones team reach its full potential, which ultimately will increase the likelihood of growth and success.

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