Managing the Transition from Startup to Organization

Managing the Transition from Startup to Organization         

By Richard Milecki

Startups. What is so special about them and what do they need from organizational consultants but do not necessarily know how to ask?

I live in the land of startups. Israel is number two per capita in the world – after Silicon Valley – for the number of startups operating and established each year. Everyone seems to be involved in them; universities, the government, big business, venture capitalists, local government, crowd funding, meet-ups, parents of young engineers and of course the main initial investors that go by the initials F.F.F. (Friends, Family and Fools).

Startups are organizations that set out to disrupt a field or sector in a dramatic way. Unlike other new businesses (for example in the retail sector) the level of risk and uncertainty is huge. Even the product or service is often not absolutely defined and may change many times, even in the short term. There is no end of external and internal forces at work that influence outcomes and overall the atmosphere is that of survival. At any moment the money may run out or the product may fail and everyone could  be sent home. The founders are visionaries whose motivations are either driven by the excitement, the potential rewards, the technology or simply the desire to make the world a better place.

Most startups fail in the initial stages. The reasons are many: the product was not right, the money ran out or never came in, the partners were not suited or they had a fall out with investors. Even the founders themselves (or their families) just might have enough of the tension, the absence, the worry and the uncertainty. The motivators are strong and the few extraordinary success stories so dazzling, explaining why, in spite of the tough failure statistic, that so many are established each year. The reasons for the spectacular number of startups in Israel have been documented in the book “Startup Nation”, even if some of the author’s assumptions are challenged. The fact is that in Israel startups are on the sights of every young ambitious person (and quite a few older ones) and an adventure that should be embarked on at least once in your career. In Israel the startup phenomenon appears to be here to stay – and everyone wants a piece of the action.

Many startups fairly quickly move to the stage where they must set up an organization that is lean, flexible and can do much more than the combined skills and experience of the growing team. In general the leaders have to know how to adapt and change according to each developmental phase. The pressure is enormous and nothing ever goes to plan.

Startups by nature demand a whole range of experts and consultants: legal, patent, financial, accounts, technical, marketing and more. In general founders are attracted to people similar to themselves and loath all the technocrats that they must take on board as well. In my experience the last person that a founder wants to meet is an organizational consultant – a profession linked to the concepts of order, planning, systems, organization, definition and long processes. Order, planning and systems are seen as the antithesis to creativity and startups must be careful of extinguishing the very creative flame that fuels the rocket. One entrepreneur tells the story of a company that had reached 50 employees and decided it was time for some external consulting. The consultant worked professionally, presented the analysis to the management and staff and from that moment on “the workers hated the management and the atmosphere was destroyed forever.” Not a great ad for consulting services. In hindsight the founders knew that it was time for some OD work but were not prepared for the organizational noise or the conclusions that it presented.

Start Up Sign

So what can organizational consultants do to help startups?

As part of a recent conference organized by the Herzliya InterdisciplinaryCenter, IPPA (Israeli Organizational Consultants Association) and S2R Consulting, together with my own experience, here are a number of key points of entry and potential added value:

  1. Being a founder is a lonely task. Everyone who is involved has an interest, often a conflicting one. An oft heard message is that “I had no one to talk to”. An organizational consultant’s wide view together with personal consulting skills can fill this gap.
  2. Communication with Investors. The most important interface that a founder faces is not with his team or his clients, but rather with the investors. It may be a VC, an accelerator, a big company or even his own family. The success of this relationship is the lifeline of the emerging company. A professional external player in the form of a consultant is often needed to mediate, open channels of communication and assist in making crucial decisions.
  3. The First Employee. Choosing the first 10 employees can affect the chances of ongoing success. Ill-informed decisions can doom the outcome. The role of the consultant is to ensure diversity (bringing in qualities and abilities the founder lacks) and to ensure that the initial chosen few can take the company to where it needs to go.
  4. Directing the founder to the right expert. We do not like to admit it, but organizational consultants do not know everything. We do, however, know a lot of people. Often, as the responsible adult, our role is simply to direct the founder in the right direction.
  5. Team facilitation. Getting this bunch of highly talented and driven people to work well together is our expertise. Short and sharp interventions can stop the bus from driving into a wall.

Four tips and one observation for consultants…

  1. Be the 911 line. There is no need here for complicated models and long term interventions. The best thing you can do for an entrepreneur is to be there when he needs you. Be there for a reality check. Be there only when he sees value from you.
  2. Maintain the “can do” atmosphere. Don’t be the one who kills the party with doom and gloom. Keep pace with the leaders and just make sure that while they are hurtling along that they do not fall into an organizational ditch. Help him see the things that his life-long professional training may hide.
  3. Give strong advice. The usual consultant language of “it might be a good idea”, “I suggest that” or “I wonder if…” will not work with founding management. An OD consultant must give strong recommendations – no different from that which is given by the accountant or the legal advisor.
  4. Participate in the risk. Startups have no spare cash – consultants who want a piece of the action must consider being paid in other ways than the regular billing.

In retrospect, over the years all of the founders who initiated team development interventions and worked with us at Tuval have been ex-executives-turned-startupists who knew from hard experience that one neglects building a good organizational and interpersonal foundation at ones own risk.

In a future post I will share some case studies as well as my own personal experience.