Leadership at the Expansion Stage: Dos and Don’ts

Please do not read this as a pedantic piece of presumptuous exhortations that are typically seen in “leadership” and “self-improvement” articles and books. I do not presume to have the last word on the right form of leadership for expansion stage software company executives.

Instead, what I’d like to do is put the nuanced challenges of leadership at this particular stage in the context of well-known principles and commonly accepted leadership dos and don’ts. Indeed, in our work with software companies, we have seen both great examples of leadership and bad cases of failures, which only serve to humble us because we learn so much from both. And yet we also know how difficult it is to be an effective leader.

A commonly cited trait of a great leader is the ability to ascertain the situation, and listen to the wants and needs of the people (employees or customers). Another commonly seen mark of an effective leader is the willingness to take risks, especially in challenging the status quo to take the company from good to great (to borrow Jim Collins’ phrase).

How could this be demonstrated in the small, fast-growing environment of expansion stage software companies?

The key defining attribute of expansion stage organizations is that they are expanding rapidly to capture a market opportunity and capitalize on their product or distribution advantage. It then behooves the leader to be even more aware of the rapidly changing circumstances, especially when it comes to how they affect the wants and needs of his or her constituencies (customers, partners and employees).

Being generally resource-constrained, younger companies typically try to stretch their people, encouraging them to wear many hats and multi-task, and of course no one is more overloaded than the CEO and his or her management team. In such a situation, it is very easy to focus on hard KPIs such as sales, marketing return, net promoter score, etc., and rely on those numbers and trends alone to manage the company. Yes, those numbers are good indicators to help one “manage” a business — planning projects, organizing people to execute according to a plan, controlling the pace of the project and ensuring its output. But that is not leading! It’s just supervising the execution of a plan. To really assess the situation, numbers alone are not enough because they do not tell the whole story — especially the human dimension — and it requires the leader to be extremely perceptive and responsive to changing circumstances in order to push the company ahead.

The second key manifestation of good leadership is the ability to affect major changes. Again, the fast growth of  expansion stage companies can be an impediment to their continuous improvement process, because time and again, resources and time are reallocated to support growth, and people become reluctant to make major changes. This is why good leaders at this stage need to be extremely adept at identifying key questions, and answer them with major changes.

So what are the donts?

There are many, but I would like to cite a few that I find most interesting:

– Refusal to let go of absolute control of organization. No one can control every function of a growing organization, and yet, it is very tempting for founders and executives of small companies to try to exert the same granular level of control in their organizations. To be a great leader of a growing team, one has to inspire trust and confidence in others, and the best way is to start trusting in others.

– Being overly agile — reacting to every single change in the market, or every competitor’s move. This comes when one becomes too tuned to the situation, and lets go of one’s own sense of direction. This is especially common in very young companies, as they pivot through a series of business models/ product offering to get to the right business. Sometimes, the pivoting becomes the raison d’etre, and continual changes overwhelm the nascent organization.

– Discounting your own leadership ability. As I have mentioned above, management skills and leadership abilities are often confused, and so when many people describe a lack of leadership qualities in others, the real problem is usually a lack of management abilities. But it is easy for a young entrepreneur to start to listen too much and feel inadequate because they lack the “management experience” required for the job. Sometimes such experiences help, bringing out the innate leadership skills that help a founder. However, the founders have to believe in themselves first and let it happen.