Relevance of Management leadership in Start-ups
Perhaps, never before in history has entrepreneurship been celebrated as it is now. Start-ups and their founders make it to the limelight more regularly than mega deals by giant corporations. Most of these stories are about product innovation, disruptive technology, funding or the journey from garage to unicorn status.
On the other hand, the narrative about established companies is a lot more about leadership, not to say that innovation, technology or inorganic growth is any less important for them.
At the extreme, some start ups seem to regularly get bad press for culture and the top management’s toxic leadership style. What explains this seeming neglect of the soft power of leadership in the new age companies in favour of hard factors such as tech, product and money?
Partly, the priorities of survival and exponential growth in emerging companies skew the narrative in favour of solving urgent problems vs. the important longer playout ones.
The management agenda set by investors demands delivery of KPIs - customer additions, subscriptions or topline. These are steep in the short term and achieving them provides instant recognition from investors in the never ending rounds of fund raise.
Another reason is that many entrepreneurs see their start-ups as an extension of themselves. Since management bandwidth is narrow, processes are nascent, challenges are unprecedented and the need for speed is paramount, decision making starts to concentrate at the top. The organization gets its leadership by default rather than by design.
Many, if not all, founders dream of making their wealth by selling their stake to a larger investor and exiting the company. It is assumed that the question of leadership will be addressed by the eventual owners of the business.
Lastly, many founders just haven’t experienced scale businesses and therefore do not have an appreciation of the impact of good business leadership.
As someone who has worked at large corporations and also partnering start-ups in their growth efforts, I feel that leadership is important to start-ups as well. But the nature of the leadership question is substantially different.
Let me highlight at least fours areas where start-up leaders can make a big difference:
All levels of management in established companies are involved in annual planning and breaking the plan into shorter goals backed by a series of actions/ programs. The act of decentralized planning has a huge empowerment effect that start-ups can harness. The disruptive nature of their business model may make it difficult to predict, but the fruits of planning are not just in the accuracy of forecasts.
2. Value Clarification
Start-ups are a beehive of activity. Everyone is driven towards deadlines and goals. There is a constant churn of people. Having a well understood Code of Values & Behaviours goes a long way in freeing up management from the bottlenecks in day to day work.
3. Roles, Responsibilities & Organisation Structuring
In the early days, structures get formed often based on the needs of individuals rather than the business. Everyone ends up doing everything. A good leader knows the power of collaboration and accountability that comes from putting together the right organization structure.
New businesses are a roller coaster no matter how deep the investors’ pockets or how disruptive your product offering. It requires an emotional reserviour to sustain and avoid burn outs. A sense of purpose and individual pride in being part of something bigger sets apart the best start-ups.
There is no doubt that emerging enterprises need to maintain a laser sharp focus on the immediate task of building a strong customer franchise and staying ahead of the curve in terms of products and technology. However, investing in organizational leadership can have a sustenance impact that will deliver higher value multiples in the mid to long term.
I would love to know your comments and feedback please.