Thoughts on Leadership in a Start-Up

As I sat down to write this article, I was wondering where I should begin. The topic of leadership in a start-up is so interesting and has so many facets that, for a moment, I was undecided about which aspect I should start with.

Then, I realized that, in some respects, the dilemma I was facing while thinking about commencing the article was the same that a leader faces in a start-up. There is one critical question that needs to be answered: Where do I start?

However, if you were expecting me to give you an answer to this question; I am sorry that I am going to disappoint you. The answer is that there is no single place to start. And that is what makes the job of starting up a new company or business unit such an exciting and challenging assignment. There is a whole bunch of moving parts that need to be dealt with and managed, and sequential processing is either not possible or undesirable.  Let me explain why.

Most start-ups, whether entrepreneurial in nature or as subsidiaries of a large (multinational or Indian) corporation have specific timelines within which the operation has to be established, a high quality team recruited, systems and processes put in place, strategies put together and executed, and, most importantly, revenues to be generated in order to meet a predefined profit or loss target. If these activities are undertaken on a sequential basis and managed piecemeal, two outcomes are possible.

First, at best, the start-up will be delayed vis-à-vis plans and targets, which will be achieved much later than timelines normally set for such operations. Whether it is a venture capitalist or private equity fund or a large parent corporation that is funding the operation, the investing entity expects the start up to take off and begin generating revenues as soon as possible. A reasonable amount of time is normally accepted as a gestation period, during which critical activities such as recruitment and engagement of a team, implementing processes and putting together strategies can be done. However, my experience is that this gestation period is almost always desperately short of what should be the ideal situation. There is always time pressure; which is understandable.

Second, at worst, the start-up may fail to take off at all.

So, the biggest challenge for a leader in a start-up is to confront these circumstances and make the best of them. There is no point complaining about time constraints. They will not go away. So how does one tackle them?

The critical competence that supports a leader in this situation is the ability to manage chaos and build a structure out of nothing. Being able to multi-task is very important, as is the ability to run multiple projects simultaneously without taking the eye off any one of the individual projects. And since the environment is dynamic and things are constantly developing, it is a bit like a hunter trying to focus simultaneously on several moving targets and trying to hit each one of them all the time.

Sounds impossible? Actually, it’s not. But if you’re accustomed to working in a large organization, with established systems and processes and a comfortable support system to fall back on (in terms of HR, finance, operations and administration, etc), then it becomes very difficult to adjust to a fluid environment where nothing is certain and anything can happen. I know. I’ve been through this when I worked in my first start-up, straight out of a large multinational company where I had an assistant, a large operations team, an established sales team and a strong HR and finance support system at the home office.  From this comfortable and safe environment I jumped straight into a start-up where there was nothing to help me. No office, no assistant, and no team. Even financial and HR systems needed to be established.

It wasn’t easy. But it wasn’t impossible either, and since then I’ve done it many times over again. The key is to be adaptable and be prepared to change your mind set. If you are able to let go of the cushy perks of working in an established organizational structure, it becomes rather simple. Actually, it is extremely enjoyable and very satisfying once you get down to putting the start-up together. You may well ask why? Because, instead of inheriting something that you may or may not like (as most managers do, and I’ve done on many occasions), you start with a clean slate in a start-up. You can build the organization the way you want to. You can recruit the people you want. There is no inherited baggage of any kind. Who could ask for more?

So much for the challenge of starting up. The other key competence a leader needs in a start-up is the ability to lead people. Notice that I didn’t say manage people. True leadership, of the transformational kind, is required. To begin with, the team in a start-up is so small that it is extremely critical that everyone works together and at the same pace. Due to cost constraints, it is often possible that the start-up begins by recruiting less people than it actually needs to run at an optimal level. Which means that, same as the leader, others in the team must be willing and able to multi-task. There is no room for development of silos or reluctance to go beyond the official job description. In some sense, the job description only provides a guide to the primary responsibilities of the team member. It does not describe the boundaries or limits to what may be required of the team member. What does this mean for leadership?

First, the leader cannot afford to stay aloof of the operations and expect to delegate everything. The leader must lead by example and be willing to roll up his/her sleeves and get down to brass tacks. Others will follow. Second, the ability to build strong relationships based on mutual trust and respect is extremely important. In a start-up, more than instruction is, leadership and guidance are required. If the relationships are strong, people will follow the leader. Third, communication is critical. The leader should be able to articulate and communicate the broad vision to the team, which they will then implement. If a single member of a small team is out of synch with the broad vision and strategy or does not understand or agree with a direction or the need for an action, it becomes extremely difficult to build the business with any degree of success. This does not mean that unanimity is a pre-requisite. It simply means that everyone has to be on the same page where strategic direction is concerned. Getting all team members on board regardless of their personal opinions is the responsibility of the leader. And communication plays a crucial role in this process.

This competence has important implications for motivation and satisfaction. In many cases, especially in start-ups funded by venture capitalists, employees are often hired at lower than market levels of remuneration and compensated through stock options or share of profits. Even if employees are hired at normal levels of remunerations, the time pressures and challenges of putting together a start-up are so immense that it is easy for people to get frustrated and for morale to suffer and motivation to decrease. This is especially true when the start-up is a smaller part of a much larger organization. There could be any number of challenges in dealing with the parent organization. Bureaucracy in decision making and financial or other approvals, political issues in dealing with different hierarchies in the parent organization, clashes of culture between the start-up and the parent organization (yes, this can happen, especially when the leader consciously cultivates a culture in the start-up that is different, because he/she feels that culture is better suited to achieve the objectives of the start-up) – these are just some of the issues that can stymie the efforts of team members in the start-up and lead to dissatisfaction and can affect employee morale.

In such situations, the leader has to be able to handle the issues with the parent organization in a non-antagonistic manner, while simultaneously managing the motivation levels of his/her own team to ensure that they are buffered against any negative signals that may emanate as a result of the issues with the parent organization. This can be quite a tightrope to walk and the leader’s personal credibility and relationships with his/her team members play a very important role in keeping the team morale high.

There is more to leading in a start-up, and one could write a book on this, but for the purposes of this article I hope I have been able to provide a glimpse of what leadership in a start-up is all about. It is exciting, fulfilling and challenging to build a business from scratch, but the issues that I have highlighted need to be kept in mind in order to succeed.

Copyright © 2010 Christopher Doyle