Company growth is something we all pursue and celebrate, but we must also acknowledge that each stage of expansion comes with its own risks and challenges. There are many milestones along the journey. Some require more preparation, planning, and deliberation than others. For Founders outside the U.S., one major milestone that merits considerable thought is expansion into North America.
Many questions come up as an organization begins exploring the possibility of opening a North American office. Will the Founder need to move? How will you attract and build a team in a new market? How do you distribute and successfully manage a leadership team across international sites? How do you keep your company culture intact, thriving and well aligned?
In my previous role as Chief People Officer at Atlassian, I experienced these exact challenges as we grew from our homebase in Australia to six offices (and three partner sites) around in the world. Here’s what I learned from those experiences.
Determining If You’re Ready to Expand
The first question that needs to be answered is about timing: Is this the right time to expand into North America? The first thing I look at when considering this question is the expected pace of growth in the business over a three- to five-year horizon. This is a multi-faceted question that you need to answer from a couple different perspectives.
For instance, how confident are you that you have the required investment to support the expansion? Also, how personally committed are you to driving growth to attain the size and scale required to justify a new location? You need to think about what the company footprint looks like today, and how you want the expansion to change it in terms of customers, team members, and the type of work your team will need to do in each market.
A general rule of thumb is the “100-person gut check,” which says that you shouldn’t open a site unless you believe strongly that it will get to 100 people. There are three reasons for this
The first is purely financial—open a site that’s too small and it will be inefficient to service it. You can’t hire half a person, so your costs for positions like office manager and finance manager start to tip the scales toward the unprofitable side of things.
The second reason is that having 25 to 100 people puts you in a kind of no-man’s land where team members expect all the services, perks, and, most importantly, career opportunities that they would have access to at a say 500-person site. This is just unrealistic at a smaller site. If you think your long-term capacity might be more like twenty people, you’re better off setting up a remote culture or investing in some shared office space.
Finally, it’s also important to acknowledge the personal factor in these decisions. You need to look in the mirror and be really clear about your personal aspirations and willingness to bring major change into your life. A new location requires real time commitment from Founders and a willingness to invest in the community their building in order for it to be truly successful.
Selecting the Right City: Balancing All the Elements
If you’ve done your due diligence on the big picture questions about whether it’s time to expand, now it’s time to move on to selecting an actual location. This is a big deal and requires a lot of careful study and a fair share of reality checks. It’s important to take the process step by step and not get swept up in making the jump before you’re 100% sure you’ve made the right decision.
Here is my list of the most critical considerations:
- Cost Structure: You have to start with the P&L economics that you want as a company. Are you looking to build around high growth/lower margin or lower growth/higher margin? You need to identify the cost equation you can live with and then reverse engineer the profile of a viable city. It’s a tough balance, but you have to look at it holistically and be honest about what’s realistic and what’s not.
- Customer Penetration: When considering customer distribution, you need to look at it through both a sales lens and a support lens. Do you need to be close to the customer to make the sale? How about to support a customer—is yours a service-oriented business that needs a lot of face time time?
- Talent Pipeline: What kinds of roles do you need to fill at the expansion location? You need to consider the bigger question of what kind of goals you hope to achieve in a given market, but then you also need to get down to the nitty gritty about exactly who you need to make that happen and whether or not you’ll be able to find the right candidates (think both quality and quantity) in a particular city.
- Time Overlap: For obvious reasons, it’s very helpful for overall efficiency and productivity to maximize the number of working hours that overlap between an expansion site and your HQ.
- Cultural Elements: While this consideration is often underplayed, it’s actually very important. Admittedly, it’s not as strong a driver as something like customer access; but it can have far-reaching and long-term influence on the location’s overall success. Ask yourself if this location has the cultural elements that align with your organization’s existing culture and values. If not, take this location off the consideration list.
- Personal Preference: Finally, you need to allow for CEO/founder prerogative, especially if relocation is in the plan. Don’t feel like you have to tiptoe around this. Be comfortable owning it. It’s a very valid consideration.
When sizing up a potential location, there are plenty of data sources you can mine for relevant intelligence on things like cost of living, salary wage trends, livability scores, graduation rates, and who the other local top employers are, etc. This is a great place to start, and a great way to narrow down your choices. You might start out researching up to twenty cities, and then narrow things down to five just through reviewing data.
From there, it’s time to hit the road for some in-person visits. You want to experience the place first hand and talk to folks who are part of the community.
Establishing Leadership and Integrating the New Site
Once you’ve chosen a location, the next set of challenges involve critical human resource decisions. For the new office, you need to find the right leadership and staff. At the same time, you need to make sure that the people in your original office–your “homebase” or HQ—feel secure and positive about the expansion.
I’m a big believer in hiring an office leader from the local market. This doesn’t mean that you can’t relocate a founder or some other executive as well, but having a locally based leader is the fastest way to ramp up in terms of initial hiring and also in terms of culture. This worked really well when we brought Atlassian to Austin. We hired someone who had no background in our company, but who had strong local connections. We gave this individual a lot of flexibility to build things up, and then provided support via a great landing team from the company. It worked out really well. In fact, we surpassed 100 people in the first 12 months!
When looking for a local leader, you can take a traditional approach to the initial search—working with recruiters, targeting other employers, etc.—but the rest of the process needs to be a founder-led endeavor. Founders need to be much more hands on with this particular recruitment not only because they will have a key relationship with the individual, but also because the leader of the new office will be taking on a founder-like role. The original founder is the best person to assess if a candidate has the right mentality and will be a good fit. This hire is as much (if not more) about personal chemistry than it is about standard qualifications.
While all this new, exciting activity is going on around the new site, it’s important not to neglect the people who are left behind. It’s not unusual for the original team to develop a kind of new-office envy that can erode morale. There are a couple of things you can do to successfully manage the integration of a new site. For one, make sure that each site has a specific purpose and mission. You need to give each team a role to play, something they can own.
It’s also important to expose people to the new location. This will help them feel more a part of the new site. You can rotate people between locations, including the initial landing party, but also people on shorter-term (three, six, or twelve month) assignments. It’s often a good idea to give these individuals specific missions to accomplish while at the new site. This might be around helping their counterpart ramp up or sharing the core company culture or doing some assessment that they can bring back to HQ. The main idea is to create not only a connection between the offices, but a sense of collaboration and partnership.
Finally, be intentional about developing a consistent rhythm around visits from leaders. This should go in both directions—HQ to the new site, and the new site to HQ.
In the End
Expanding into a new country is a big step for any growing organization, but if you approach the process with a commitment to thinking things through from multiple angles, you can greatly reduce the risks that come with any new venture. It’s always worth it to take the extra time to make sure you’re making the right choices because it’s true that once you put an office on the board, it almost never comes off, and if it does, it’s always painful.