This article is an excerpt from the Shortform book guide to "Blitzscaling" by Reid Hoffman and Chris Yeh. Shortform has the world's best summaries and analyses of books you should be reading.
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What are the nine stages of company growth? Why is it so important to change your management style as your company grows?
When a company grows, you must change the management approach because what worked when you had ten employees will cause chaos when you have a thousand employees. The book Blitzscaling details the nine stages of company growth, from starting out to hiring executives.
Keep reading to learn about the nine key stages of company growth.
How to Manage Teams Through Blitzscaling
When a company is growing, it progresses through five orders of magnitude:
- Family: 1-9 employees
- Tribe: 10s of employees
- Village: 100s of employees
- City: 1000s of employees
- Nations: 10000s of employees
The management approach must change with each of these stages of company growth. What used to work at one stage will cause chaos in a bigger stage.
The company founder also has to evolve through each stage of the company.
- Family (1-9): Founder personally pulls levers of hypergrowth
- Tribe (10s): Founder manages people pulling the levers
- Village (100s): Founder designs an organization that pulls the levers
- City (1000s): Founder makes high-level decisions about goals and strategies
- Nations (10000s): Founder figures out how to start blitzscaling new business units
The 9 Key Stages of Company Growth
A company that is growing rapidly needs to transition its approach along 9 different dimensions.
Transition 1: Small Teams to Large Teams
Naturally, as your company grows, the size of the team grows. With larger teams, it becomes harder to communicate, make decisions, and align everyone on the same mission.
In growing organizations, hierarchy is important so people know what the reporting structure is and have clear HR practices. Despite the recent popularity of flat organizations, the authors argue that flat cultures have a poor track record of results. People in flat hierarchies don’t know where to turn for conflict resolution, which slows down decision making.
Transition 2: Generalists to Specialists
At each stage of a company, different types of people are required to provide what the organization needs at that time. An analogy to the military: “the marines take the beach, the army takes the country, and the police govern the country.”
In the beginning up until 100 people, you should tend to hire generalists. They adapt quickly to the rapidly changing needs of the business in its volatile early days.
At Village stage (100s of people), specialists are critical to scale. They perform functions better than generalists can, and you need them sooner than generalists can learn the job. Thus specialists may need to be hired from outside the org.
This can cause resentment from people who have stayed from the beginning, if they expected to be promoted to lead the specialized team. To counter this, set expectations clear from the beginning – just because they’re running engineering now doesn’t guarantee they’ll be VP of engineering at 1000 employees.
Use the “tours of duty” model partly to help explain why they won’t be promoted. The idea is that when someone joins a company, they commit to a stint of 2-3 years. At that point, they’ve advanced their careers and can now do great things elsewhere, without expectation from either side that they should stay.
Hiring generalists is still important at all stages of a company’s growth. These are the undifferentiated stem cells of your organization, better equipped to handle the riskier and undefined problems than specialists are.
Transition 3: Managers to Executives
The types of senior team members you need to hire will change.
Managers manage contributors and execute detailed day-to-day plans. Executive manage managers.
Managers can be trained from within, because individual contributors can learn how to manage from good managers. In contrast, executives are initially harder to train because managers in your organization don’t have model executives to learn from.
Therefore, hire executives from outside, preferably executives who’ve been in similar stage companies before and dealt with similar issues as you’re facing now. Then, as you have a successful executive model for managers in your company to learn from, promote from within.
To decrease your team’s resentment for outside hires, 1) hire someone who’s known to a member of the team so they can vouch for the person, 2) bring an executive in at a lower level than where you ultimately plan she’ll end up, and let her prove herself to the team before promotion.
The exception to hiring from outside is if you have company-specific “secret sauce” responsibilities. These may need to be grown from the inside, if few outside executives have the specialty.
Transition 4: Dialogue to Broadcasting
At some point you can no longer have 1-on-1s with everyone, or even fit everyone into the same room. But you need to continue getting input from smart people, making everyone feel heard, and conveying key messages to people you don’t work with directly.
Have weekly all-hands, transitioning to monthly/quarterly as you get into village (100s of people) stage. A good all-hands meeting is organized, with an agenda provided in advance so a productive discussion can happen. Good meetings also help people get to know each other.
Communicate at scale. Write thoughtful weekly emails about challenges you’re facing. Record videos. Meet weekly with your company’s new hires.
For remote team members, consider 24/7 videoconferencing so people can feel connected to each other’s offices. Use asynchronous communication tools like Slack.
Transition 5: Inspiration to Data
New businesses often need to start with inspiration when building their product. They don’t analytics tools to tell them no one’s using their product, nor do analytics tools tell them what to build. At this stage, the team needs to rely on intuition to build.
But as the company matures, they need plans and goals as guidance. Improvisation becomes less helpful.
Tips:
- Focus on 3-5 metrics that form the core of your business.
- Make the metrics easy to access and provide clear context. A commonly accessible dashboard helps.
- Avoid vanity metrics that are always up and to the right (views, installs). Use cohort metrics instead.
Be careful about the implications of your metrics, since they can have unintended second-order effects.
- On your homepage, you may try to increase the click-through-rate for low performing calls to action (CTAs), say by giving them more prominent placement. However, this may mean that you’re unintentionally stifling higher-performing CTAs, and lowering overall conversions.
- Focusing on a narrow metric, like pages per viewer, might incentivize more confusing and fragmented content.
Therefore, define the ultimate metric to avoid tunnel vision on a narrow metric.
Transition 6: Singlethreading to Multithreading
As an early startup, you must have a laser focus on what you’re doing. This allows you to evade larger rivals who have your product as a #35 priority.
Eventually (around City stage) you need to focus on more things, like:
- New product expansions
- New marketing channels
- New business lines
Think of each thread as a different company with its own incentives, but make sure the thread ties back to the company and the thread doesn’t go rogue.
- Present the opportunity as “building an app on top of a platform” so leaders don’t lean toward building their own company.
Transition 7: Pirate to Navy
You can start by brazenly breaking laws and common rules, but eventually you need to respect the rules.
How do you tell if you’re an ethical pirate? Ask “am I trying to change the rules for everyone, or just trying to get a personal exemption?”
Transition 8: Offense to Defense
Think “how can we lock out the competition? If we were trying to defeat ourselves, what would we do? As a startup? As the large incumbent?”
Consider acquisitions to stifle new competitors who can eventually threaten your business, and to strengthen yourself against competitors.
Consider diversionary attacks to distract competitors, while you focus on your core. They may think you’re exploring a hot new area and follow suit, when really you’re distracting them.
Transition 9: Founder to Leader
You need to step back from fighting fires and day-to-day decisions to the bigger picture.
There are three ways to scale yourself:
- Delegation: people do work you previously did
- A person won’t do as well as you do it now, but they’ll learn over time.
- Picture the hire as a specific person rather than a role. “I don’t know if a product director can do as good a job as me, but Jeff from Airbnb probably could.”
- Amplification: people augment what you continue to do
- Your chief of staff can triage important decisions, brief people meeting with you, and make lower decisions for you.
- Researchers can process information for you.
- Making yourself better
- Talk to other smart people. Other entrepreneurs, domain experts.
- Seek feedback. Get a personal board of directors who can fill in the gaps.
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Here's what you'll find in our full Blitzscaling summary :
- How to build a company that grows to a large size very quickly
- Why you have to ignore efficiency and profit for speed
- How companies like Facebook, Uber, and Airbnb were able to blitzscale
