This is one post/chapter in a serialized book called Startup 101. For the introduction and table of contents, please click here.
If you have kids, you will often hear (or use) the phrase, “That is not age-appropriate behavior.” Young ventures need age-appropriate systems and processes, too. Too little process, and the venture descends into chaos. Too much process, and the venture becomes a slow-moving bureaucracy, and that is equally deadly. For example, having an accounts receivable process that was designed for a company with billions of dollars in sales is pointless when your venture is just starting out. So, how do you build age-appropriate systems and processes?
- List all of your processes that need to be managed.
- Hire senior managers who have expertise that is age-appropriate.
- Understand all of the processes yourself, hands-on.
- Understand the Conscious-Competent expertise matrix.
- Understand the Capability Maturity model. Look at every process as a process.
List All of Your Processes That Need to Be Managed
Begin with broad categories:
- Product: the process of building and improving the site.
- Sales and marketing: how you make money.
- Administration: finance, HR, operations.
List all of the processes that you currently do. Describe them in simple but clear terms:
- What is the output or result?
- Who is responsible?
- How long does the process typically take?
- What are your metrics for judging success and failure?
- What often goes wrong?
If you know your processes, this will not take long. If you don’t know them, well… you should.
Hire Senior Managers Who Have Expertise That Is Age-Appropriate
Hire for 12 months out. Look for someone who can manage what you hope the business will be in 12 months and someone who has already managed at that scale.
Why not hire someone who has experience at much larger companies? Because the processes they design for yours will tend to be too heavyweight, designed for companies with more operational depth. They will expect to be able to hire more people and spend more with vendors than your budget allows.
If you hire by A-Team rules, you will be hiring for innate smarts and energy. So, people who fit that bill may be able to drive growth well beyond what their experience qualifies them for.
Understand All of the Processes Yourself, Hands-On
Large companies like getting their senior managers to work across multiple divisions, departments, and regions so that they understand what they are managing when they move into that corner office. Swiss hotel owners make sure they have performed all of the jobs in the company, no matter how menial; they cannot effectively manage the people who change bedsheets unless they have done it themselves.
This is also how bootstrapped ventures work. The CEO/founder has to do everything at some stage, which better equips them to hire people to take over those jobs when the time comes.
That is how almost all businesses work. But venture-funded companies are different. The infusion of external capital allows you to hire quickly, before you have had hands-on experience. This is why having a balanced founding team is critical, with two to three founding partners who between them understand all of the processes hands-on.
Understand the Conscious-Competent Expertise Matrix
Use this graph to evaluate yourself, anyone who works for you, or any process you have to manage. It is a quadrant with two axes:
- Competent to Incompetent on one axis
- Conscious to Unconscious on the other.
Unconscious-Competent is things you do so well that you can do them in your sleep. You may code like a demon, or know how to sell ice cream to Inuit. Perhaps you can optimize AdWords better than anyone on the planet. Whatever it is, you excel at it.
The big danger with Unconscious-Competent is that the world changes, possibly devaluing your skills, without your even noticing. In 1939, Poland’s cavalry was the best in the world, but that did not help them when the German tanks and dive bombers arrived.
Conscious-Incompetent is fine, too. That comes into play, for example, when you, the world’s greatest coder, have to pitch to a prospective investor. You know you’re lousy at it, and you know you have to learn just enough to get by and then hire someone later to do it better. Or if you’re the fellow who can sell ice cream to Inuit, you know you will have to get someone to write the code for what you are selling.
Ideally, everyone on your team would be Conscious-Competent. You may be the best in world, but you still always look for ways to improve, and you acknowledge that macro-scale changes can devalue your skills.
The one area you want to avoid like the plague is Unconscious-Incompetent. This is the person who thinks they know what they’re doing but really doesn’t.
Understand the Capability Maturity Model
The concept of age-appropriate processes has been defined in the Capability Maturity model (CMM). The model was designed specifically for software engineering but could be applied to any process. These days, when online marketing is so data-intensive, CMM is just as applicable to marketing.
The model identifies five levels of maturity for an organization’s processes:
- Initial (chaotic, ad hoc, heroic): the starting point for using a new process.
- Repeatable (project management, process discipline): the process is used repeatedly.
- Defined (institutionalized): the process is defined or confirmed as a standard business process.
- Managed (quantified): process management and measurement takes place.
- Optimizing (process improvement): process management includes deliberate process optimization and improvement.
To apply this model, you have to understand the difference between mission critical and core. For example, accounts receivable is mission critical: if you don’t get paid on time, you will go out of business. But it is not core, unless of course your product or service is to improve accounts receivable. Core is that one thing — and it really can be only one thing — that you do better than anyone else on the planet.
Any process that is mission critical to your venture should be at least at Level 2 and should, as you grow, steadily progress to Level 5.
If the process is core to your venture, you had better get it to Level 5 really fast.