Why everything breaks when you reach 25 employees

Company Growth: Ben Horowitz "Perhaps the CEO’s most important operational responsibility is designing and implementing the communication architecture for her company. Absent a well-designed communication architecture, information and ideas will stagnate and your company will degenerate into a bad place to work."

Congratulations! Your company is growing and you’ve hired a great team. They’ve helped take your fledgling idea and make it more than just a reality, but a bonafide business with revenue that requires commas, an office, and passionate, happy customers.  Unfortunately, the hard work is just beginning.  As a wise friend once told me, “every year is hard; just the challenges are different.”

I’ve spoken to hundreds of leaders and managers as we’ve started Lighthouse and one common pattern we’ve found is somewhere around 25 employees, everything breaks.  If you’re a particularly skilled founder, you may not see this until almost 40 employees, or if you’re a first timer, some of these challenges could strike as early as 10-15 employees.

Regardless of when these problems strike your business, the key is to realize that it’s all about how you handle them.  Even the best companies have problems, and with small, incremental progress to make things better, your company’s engine (your people) will continue humming.

The first step to fixing a problem is to identify it and its causes, so let’s look at why this happens at this stage of company growth.

Why Everything Breaks at 25 Employees

Company Growth: Why everything breaks when you hit 25 employees

You can’t manage everyone yourself anymore.

Even with a co-founder or two evenly dividing the team, you still all have 10-15 people to manage. That’s too much for someone in a larger organization, let alone someone balancing founder responsibilities.  And if your departments are unbalanced, you may have a single person trying to manage as many as 20 of those people. The dream of a totally flat organization is over as it’s impossible to give people the attention they deserve at this stage of company growth.

Unfortunately, that lack of attention comes back to bite you. Problems start to fester and grow and you often start finding out about them when they’re at a point you have to triage.

This can lead to employee turnover (which you can’t afford at this stage), a drop in morale, and resentment by team members as they watch the problems grow with no one doing anything about them. The only way to start getting in front of all these problems is to get help from your people to identify and address these issues without you being the bottleneck. That usually necessitates promoting your first set of people to management roles.

Everyone doesn’t know what’s going on anymore.

When you all fit around a single table (or a single Google Hangout) it’s easy for everyone to feel like they know what’s going on. Most people were probably wearing multiple hats and in constant communication as you focused on a single, core thing your business tries to do well.

But now things, have changed. Not only do people wear fewer hats, you probably even have multiple people to do many of the jobs.

Gone are the days when you can have a team wide standup and someone can monitor your wiki and a project management tool to understand what everyone is doing. Now people have to learn to focus on what they need to do, learn when and whom to reach out to, and trust that everyone else will do the same.  This can be especially difficult for your earliest team members who may fondly remember the early days when they were involved in everything.

People start caring about their careers.

When you start out, the people that work for you are often passionate believers who are just trying to help the business succeed. Their career is the success of your business.

Yet, something funny happens around employee 25; both the people that are joining, and often some of the people that have been with the company for quite some time, start asking about their career paths at your company. They want to know both what opportunities for growth there are and the possibilities for promotion. They want to understand the steps it will take to get there.

You have to pay attention. As Jason Lemkin, VC and former CEO of EchoSign writes:

“It’s your job to understand the career path for at least your first 50 employees.  Know it.  And do whatever you can, within the boundaries of reality, to help them achieve it….Because there’s absolutely, positively, nothing worse in the pre-Scale days than losing a rockstar employee that you could have kept.  It just kills you.”

If you’re not asking, you won’t know.

Culture starts to solidify.

What are the habits everyone follows? How do you celebrate wins? (Do you?) How are failures handled? What does the team do to find joy in their work? How do you communicate? Are problems resolved or swept under the rug?

By the time you hit 25 employees, like concrete, culture starts to set. Those behaviors are now routines and new employees will start to follow the norms they see, following the “when in Rome…” philosophy (“…do as the Romans do.”) and here about how certain things are “that way” here.

If you’re not intentional about it, a culture will develop anyways. It just won’t be a good one. As Marc Andreesen of A16Z writes:

“It takes time for the culture of any company to become “set” — for the team of people who have come together for the first time to decide collectively what they’re all about, what they value — and how they look at challenge and adversity.

In the best case, you get an amazing dynamic of people really pulling together, supporting one another, and working their collective tails off in pursuit of a dream.

In the worst case, you end up with widespread, self-reinforcing bitterness, disillusionment, cynicism, bad morale, contempt for management, and depression.”

It takes hard work to build a company people want to work for and that functions at a high level. You have to invest in it, and it’s a lot more than perks like free lunches and beers on Fridays.

So what do you do?!? A few things can help:

Ensure everyone has one-on-ones.

You need to keep a pulse on your company, so checking in with everyone at least once a quarter as you grow can really help. Unfortunately, even checking in that infrequently eventually becomes untenable.  As your company grows, your people need more attention than you can give them, which is why developing leaders in your organization is so important.

Your leaders, your first layers of managers, need to emerge at this time so they can start taking care of your people working so hard to make the company succeed. And the single best tool for any leader is the one-on-one. As former Intel CEO Andy Grove says,

“Ninety minutes of your time can enhance the quality of your subordinate’s work for two weeks, or for some eighty-plus hours.”

That’s a pretty good ROI, right?

Now, if you’re making this investment in one-on-ones for the first time, realize they may start out awkward. I’ve seen it over and over again with managers with their teams; to suddenly be asked what’s important to them and what’s bothering them can initially be met with distrust. However, if you and your leaders show you care and follow through on what’s discussed, they only get better and better.

If you’re promoting from within, this often means having first time managers leading. Give them the tools they need to lead well (like Lighthouse) and be sure you’re setting the right example, because remember, culture starts with the example you set.

Over-communicate, Over-communicate, Over-communicate.

You have to repeat yourself a lot more than you think so ideas sink in. Remember, even if you say something 25 times, it might be everyone else has only heard it once.  You’ll know you’ve said it enough when they finally start saying it without your prompting.

In an interview with Business Insider, Linkedin CEO Jeff Weiner put it best:

“You invest very heavily and thoughtfully in deciding what kind of company you want to be. And then you repeat it, over and over and over again.

A friend of mine once paraphrased David Gergen, saying on the subject of repetition, “If you want to get your point across, especially to a broader audience, you need to repeat yourself so often, you get sick of hearing yourself say it. And only then will people begin to internalize what you’re saying.”

And the research shows the results are there as well; research written in the Harvard Business Review found that, “managers who were deliberately redundant moved their projects forward faster and more smoothly.”  Maybe that follow up email to reinforce what you said is a good idea after all!

You also have to look how you can keep people feeling connected to the big vision. The bigger your company grows, the easier it is to feel like your work doesn’t have the impact it once did.  If you can still help everyone feel like they’re contributing something important, they’ll follow you to the ends of the earth.

Find and Recognize Small Wins.

The more your company grows, the easier it will become for individual contributions to be overlooked. It’s also easier for people to feel like a cog in the machine and that their work doesn’t matter.  To fight this, look for small wins and regular progress they can make that matters.

As researcher Teresa Amabile reported on Harvard Business Review:

“Of all the things that can boost emotions, motivation, and perceptions during a workday, the single most important is making progress in meaningful work.

And the more frequently people experience that sense of progress, the more likely they are to be creatively productive in the long run.”

Who doesn’t want that?

For both you and your leaders in the company, look for wins to recognize for people so they do still feel their work matters. Help them feel progress on their work. When they come to you with problems, find a quick win so they know things are getting better.

Change is scary. And the bigger your company grows, the harder it can be to bring about change. However, if you embrace it and look at it as a series of small opportunities to fix problems, you will build momentum towards building the company you want yours to be.

 

Have you been through the roller coaster of building a startup and hitting the 25 employee mark? What advice would you have for founders hitting this wall?

  • Dilip

    Great insights.

  • Alon Sabi

    If you are a leader in a company (any company), read “The Metronome Effect” by Shannon Byrne Susko. We grew from 7 to 34 in the past few years, and we could not have done it without addressing all of the areas covered in the article. This book will give you step by step on how to get there. We’ve been following the Habbits in this book for a few years now , and it’s what drives our company (the book is new, but Shannon has been teaching it for some time now). It is an easy read, and it does not take very long. It will transform your thinking about your business.

    • Alon,

      Thanks so much for sharing this! I’ll have to check out the book.

      Was there anything we didn’t cover in the post that you’d add based on what you read and experienced?

      Thanks,
      Jason

      • Alon Sabi

        I think that the article covers all of the points we experienced. It is really about building a team with alignment around the company’s vision, goals and core values (of course you need to define those), with a strong culture that strives for excellence through trust and accountability (this is done with lots of communication and touch points).

        • Wow. Thanks for the thoughtful answer, Alon.

          Sounds like you’re building something special and those efforts are paying off. I hope you continue to enjoy our posts.

  • An insightful read. Thank you for sharing. I’m a big believer in repetition = retention! What do you think about 15Five as a way of solving this complex conundrum? Especially between one-on-ones.

    • Priscilla, I’m so glad you brought this up, because that’s exactly what we created Lighthouse to do! By having regular, face-to-face discussions managers can tackle problems and discuss feedback & ideas with their team members in real time. This ensures people are known and feel they’re heard as part of the company.

      Thanks so much for commenting. I hope your team continues to enjoy our blog!

      • Awesome love it! That’s what it’s all about. Thanks so much for replying. It means a lot. I’ll keep up with the blog for sure! I like what I read.

  • Shawna Moser

    This is a great article and is everything you need to be cognisant of once you hit 20 people, because the tipping point is right around the corner. I had some very similar thoughts about culture and leadership too because we’ve also reached the 25 people mark and are finding ways to lead too.

    http://zurb.com/article/1375/stuff-isn-t-culture


    Would love more insights on how people make sure their culture is preserved.

    • Shawna,

      Thanks so much for sharing. That’s an amazing post on culture and it really resonates; no one ever stayed at a company for the free lunches.

      How do you and other leaders at Zurb resist the temptation to focus on short term business tasks and opportunities over investing in long term values and culture? The pressure to compromise seems so high.

      Thanks,
      Jason

      • Shawna Moser

        Hey Jason,
        Sorry for the late reply! That’s a great question and it’s easy to fall into a task list, right? You got to know your (businesses’) priorities and stay aware of what’s going on. Complacency kills.

        At ZURB we’ve had to learn these concepts and the learning isn’t always easy or fun. The key is to not get discouraged. Your leadership isn’t going to be perfect all of a sudden. And as a leader know that you’ll have to do 10x’s more work to move the needle just a little bit. Know that that’s ok, keep moving forward.

        We agree, things break down after so many people. How can you (as 1 manager/business owner) invest 100% into 25 people. You can’t, but you can and should invest into your leadership team, let’s say 5 people. Invest in the smaller team and teach, build trust with them. Eventually your leads will adopt these practices and will begin practicing them with the team they support. There will be a trickle down effect to the rest of the team. As a manager or business owner that is your win.

  • Alex Lassar

    I love the quote! a bonafide business with revenue that requires commas, an office, and passionate, happy customers. The office component to productivity and effective management should not be overlooked, but I have a biased opinion. I’m consistently surprised by how such a big decision as to how and where to set up an official first space plays second fiddle to some of the other concerns once a company reaches the 20+ employee scale.

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