Process: Not a Dirty Word in Scaling

By Hunter Craig

Scaling involves more of everything – capital, customers, employees, etc. – and just as these elements create value, so too can greater organizational structure (a.k.a. “process”).  In a startup’s initial stages, the team is small and work streams are fluid.  As a result, lean (read: non-existent) organizational structures create more value than they consume.  However, as the company matures, demands on the firm increase in size and complexity. At this point, the lack of guideposts creates inefficiency, eventually undermining performance as the company expands.  While structural changes can create friction for a team, process need not be lethal to culture – as with any implementation, success depends on scope, sequencing, and communication. The key understanding is that scaling brings new pressure on all sides, and entrepreneurs should incorporate organizational structure accordingly to maintain a venture’s trajectory.

As we have discussed in class, there is value in “chaos” during the initial stages of a company.  Constant iteration and shifting enables an organization to identify customer pain points, craft solutions, and derive product-market fit.  A small founding team, which enjoys a shared vision and efficient communication, can effectively manage these work streams.  This approach often holds through early product traction and the filling out of key roles.

However, when the company raises meaningful capital to pursue scaling, the absence of organizational structure begins to create problems.  We identified several such challenges in our CloudFlare discussion, including vetting employee candidates, on-boarding new hires, defining roles/communication channels and evolving the culture.  These issues can have negative employee implications in the form of unhappy or underutilized team members, at best and early (and potentially expensive) fires, at worst.  The missteps can also undermine progress elsewhere, impeding product development and customer acquisition.  These challenges are not unique to Cloudflare – they are simply byproducts of a growing organization, and they will only worsen if left unaddressed.

Although greater organizational structure is necessary as the company scales, entrepreneurs must pace implementation and carefully consider the impact on culture.  At a high level, this means only incorporating processes to the extent they improve the venture’s probability of success.  In practice, this involves formalizing certain matters – for example, hiring, training, responsibilities, and feedback channels – to direct people’s focus, creativity and energy on the business’s key drivers.  As long as entrepreneurs respect the organization’s core culture and encourage feedback, greater organizational structure should contribute value for a scaling venture.

Scaling is a demanding period for startups, but process solutions can alleviate pressure and streamline work streams to maximize organizational growth.  As we have frequently seen in class and the real world, failure to match scale and structure eventually creates damaging internal and external issues.  Teams that recognize an organization’s progress, pace structural changes accordingly, and commit to preserving cultural tenets will most successfully guide a firm through its evolution.