Latest / The Start, Scale & Succeed Podcast / Should You Really Scale Your Organization with Scott Ritzheimer (stages 3,4) - Ep. 411

Transcript

Should You Really Scale Your Organization with Scott Ritzheimer (stages 3,4) - Ep. 411 · The Start, Scale & Succeed Podcast

• 0:01
  Scott Ritzheimer: Scott, hello, hello, and welcome, welcome once
• 0:04
  again to the Start Scale and Succeed podcast, the only
• 0:06
  podcast that grows with you through all seven levels of your
• 0:10
  journey as a founder. I'm your host, Scott Ritzheimer, and
• 0:14
  today we are taking on three of what I believe are the most
• 0:18
  dangerous words for founders, and they together make up one
• 0:23
  belief, and that is bigger is better. That's right, three most
• 0:28
  dangerous words: bigger is better, bigger is bigger. That
• 0:33
  is true, but is it better? That's the question for today's
• 0:36
  episode, because what happens for founders in level three of
• 0:40
  the founders' evolution. If that doesn't make sense to you, go
• 0:43
  back a couple episodes to part one of this should you really
• 0:46
  series, where we talk through what the different levels are.
• 0:50
  This episode is for those of you who are in level three and
• 0:54
  trying to figure out if level four is right for you, or if
• 0:58
  there's another way, and so we're going to assume that you
• 1:03
  know what level three is. It's the reluctant manager stage.
• 1:06
  It's really tough. It's where you're wondering what's wrong
• 1:09
  with these people, and when you start to tackle that problem,
• 1:16
  when you pick up a couple of the right skills and abilities to
• 1:20
  manage your team effectively. You move from being a reluctant
• 1:25
  manager to being an effective manager or a skillful manager,
• 1:30
  and that doesn't mean that you know a manager is the highest
• 1:34
  aspiration that you have to be in life. That's not true for
• 1:37
  pretty much any founder. It doesn't mean that's all that you
• 1:39
  do, but it does mean you've learned this skill to succeed in
• 1:42
  this stage, and this is one of those areas where it's not so
• 1:47
  much the challenge of level three that reluctance as a
• 1:50
  manager, although that can be part of it, but the temptation
• 1:55
  to think that you figured it out that causes problems for folks
• 1:59
  between levels three and four, because level three is generally
• 2:04
  not folks' favorite. Some of you, it might be ideal, and
• 2:07
  we'll talk about that here in a moment, but for a lot of
• 2:09
  founders, they're, they're, they want to move beyond the
• 2:12
  management stage, and for obvious reasons, they, they
• 2:15
  don't want to spend the majority of their energy managing people.
• 2:18
  But here's where we have to stop, and this has been one of
• 2:21
  the biggest revelations for several of my clients recently,
• 2:24
  and that is, once you reach level three, you never actually
• 2:28
  graduate from management. It's not like you move from being a
• 2:33
  manager to being a leader, and you don't have to manage
• 2:36
  anymore. No, all leadership is built on and predicated by sound
• 2:44
  management. It's a really fancy way of saying, no matter how big
• 2:48
  you get, you will always have to manage. Now, you won't have to
• 2:53
  manage everyone in the company, but you will have to manage your
• 2:57
  leadership team. You will have to manage your executive team
• 3:01
  all the way through the end of the process, you'll have to
• 3:03
  manage your wealth team in level six. You'll have to, there's
• 3:07
  there's management and the skill of management more so than the
• 3:11
  identity that sticks with you from here on. You don't get to
• 3:14
  graduate from it. So, if you're trying to get from level three
• 3:19
  to level four, so you don't have to manage anymore, you're in for
• 3:22
  a rude awakening, because not only do you have to keep
• 3:24
  managing, but now you also have to lead managers, which is a
• 3:27
  challenge in and of itself. So, you're not going to graduate
• 3:33
  from management, but that's that's not the issue here. The
• 3:35
  issue is when we start to crack that code and we find out, hey,
• 3:38
  we can add people in, and it works pretty well, then the
• 3:42
  recipe for a little while, even for a few years, is add a person
• 3:47
  organization grows, add a person organization grows. I remember
• 3:51
  for me when we were in this stage, we would add a sales rep
• 3:57
  that would bring us in a million dollars, we'd add one type of
• 3:59
  consultant, we'd add another type of consultant, and we'd add
• 4:02
  an admin, and those were all in balance, and we'd make a bunch
• 4:05
  of money, and that was our growth strategy. Just add
• 4:07
  another sales rep each year, and we'd add a million dollars to
• 4:09
  our top line, and our bottom line would follow accordingly.
• 4:13
  And so I thought, like you would imagine that most people would,
• 4:21
  that bigger was better because I had a whole track record from a
• 4:25
  couple of employees to 15, closer to 20 employees, that
• 4:30
  said when you add another person things get better, because I'd
• 4:34
  figured out that level, I'd figured out how to manage these
• 4:37
  folks effectively, and then we added people and I couldn't
• 4:43
  manage all of them anymore, and so now to add more people I had
• 4:47
  to add a layer of management to help me lead it. That's
• 4:51
  expensive. It results in a huge loss of control because you're
• 4:57
  not the one doing it anymore. What. Folks don't recognize for
• 5:01
  a long time, is it's a huge loss in data, and not data in the
• 5:07
  like spreadsheet sense, but data in the intuition sense, because
• 5:12
  when you're managing everybody, you're kind of in it with them
• 5:16
  all the time, your brain is constantly consuming the
• 5:19
  information and filing it away for later decisions that you'll
• 5:22
  make, and this is where founders that are succeeding in level
• 5:26
  three kind of develop this golden gut of like, hey, I know
• 5:29
  what it takes and what we need to do, because they're getting
• 5:31
  all this great information in. Well, once you add a manager
• 5:35
  between you and all those people, you might be able to
• 5:38
  effectively delegate down their responsibility, but most folks
• 5:43
  miss the opportunity to elevate up the information that they
• 5:48
  need that they're not getting anymore by not being part of it.
• 5:51
  So you lose control, you lose information, which ultimately
• 5:55
  ends up making you make worse decisions in the long run, which
• 5:58
  is a scary thing. You lose the ability to influence culture
• 6:05
  just by who you are. In level three, you get to be the vision
• 6:10
  and values of the organization. In level four, you have to start
• 6:14
  to structure that so that your managers can be the vision and
• 6:19
  values for you, and that's a very different approach and a
• 6:23
  very different skill set, and so it's not linear, you don't just
• 6:30
  keep adding people and, and things get better, you add
• 6:35
  people and they get better, but then the S curve starts to round
• 6:39
  off, and the more people you add, the less benefit you get
• 6:43
  from each new person that you add, to the point where it was
• 6:47
  for me, we were adding people and adding people to try and
• 6:51
  solve the problem to grow, and we added so many people that we
• 6:54
  ended up losing profit, not just a reduction in profit margin,
• 6:59
  which was staggering. We lost actual profit. We sold a million
• 7:05
  dollars more one year than the year before, and we had less
• 7:08
  profit at the end of the day, again, not a lower profit
• 7:11
  margin, not a percentage basis. We had less dollars the next
• 7:14
  year, even though we had more revenue, and that's the problem
• 7:18
  with bigger is better, is that we think it's linear and it's
• 7:20
  not. It's a series of S curves. What are those S curves for
• 7:23
  founders? They are these different levels, and how we
• 7:26
  need to behave and lead in each of those levels. And so, when we
• 7:30
  think bigger is better, then eventually we reach a point
• 7:34
  where we can't manage everybody anymore, and we have to start
• 7:38
  adding people. Well, once you start adding people, that forces
• 7:41
  you into level four, if you never really wanted to or needed
• 7:46
  to be in level four, then even if you succeed there, you're
• 7:50
  going to succeed at the wrong game, you're going to succeed at
• 7:53
  something that you were never desiring to do or wanting to do,
• 7:57
  and that's even worse than failing there, because you feel
• 8:00
  trapped and stuck, and so we want to really think critically
• 8:03
  about this idea of, is bigger actually better, or have you
• 8:07
  already found your sweet spot? So, let's look at that a little
• 8:10
  bit more closely. Let's look at what some of the reasons are
• 8:13
  that you would stay in level three. Now, before that, just
• 8:18
  quickly, we talked about this in the first episode, but level
• 8:21
  three is usually gonna be somewhere between five and 15,
• 8:23
  maybe up to 2020-five, people at the most, but it's enough for
• 8:27
  you to mostly manage yourself. You might have a couple people
• 8:32
  who kind of help, but like you're really the one leading
• 8:35
  the whole thing.
• 8:37
  It's where, where Where your activities start to refine a
• 8:45
  little bit in the sense that you can't do it all anymore, so you
• 8:48
  have to start handing things off. So most level three
• 8:51
  founders will start to find themselves spending more of
• 8:54
  their time managing and less of their time doing some
• 8:59
  combination of sales ops or admin, and for most founders
• 9:03
  that means focusing on sales and starting to build out a sales
• 9:07
  team sometimes, and managing the rest of the folks, including
• 9:12
  generally some kind of operational leader, like a head
• 9:16
  of ops or an office manager, or someone to kind of keep the
• 9:20
  trains on time, and, and so, that's that's where we're at
• 9:25
  here. So, you've got more than a handful of people, enough that
• 9:28
  you can manage by yourself. One way of describing is you can all
• 9:31
  fit around a table, right, like one big dining room table,
• 9:35
  everyone can still fit. And I remember, for us, we used to
• 9:40
  have all our staff meetings at a Panera Bread, and we could all
• 9:43
  fit in this one little tiny room. And then there was one one
• 9:47
  day we were like 25 people, and we tried to fit in there, and it
• 9:50
  was literally a game of sardines. It was so
• 9:52
  embarrassing, it didn't work at all, because we had, we didn't
• 9:55
  realize how much we had grown, and that was that helped us
• 9:57
  realize it. So, anyway. You can largely manage them yourself
• 10:02
  now. Again, this isn't the right place for a lot of founders. I
• 10:06
  have found I actually started this process thinking that
• 10:09
  nobody should stay in level three, that the only right thing
• 10:11
  to do was to go back or go forward and not stay here. I've
• 10:15
  since had several of my clients prove me wrong on that, and
• 10:20
  here's why. There's an opportunity for some markets and
• 10:26
  some services where you can fulfill the needs of your
• 10:30
  market, where you can achieve your vision with a team that you
• 10:34
  can run largely by yourself, right? Maybe the help of someone
• 10:37
  else, and you, you like that boutique feel, you know.
• 10:44
  Everybody, everybody knows you, everybody knows everyone, and
• 10:48
  you, you can, you can really thrive in that environment. Your
• 10:53
  model doesn't require a whole bunch of middle management
• 10:56
  layers or departments or sophisticated interconnected
• 11:00
  systems to run well again. Your market is right sized. You're,
• 11:07
  you're not trying to be like a global phenomenon. You're,
• 11:11
  you're just trying to serve your clients well. You can make
• 11:15
  enough revenue to be comfortable and happy in your not work life,
• 11:21
  your home life, you, which you can usually make great money in
• 11:25
  an optimized level three. You are willing to manage that many
• 11:31
  people, one especially once you get to the high side of that
• 11:33
  level, like managing 1213, 1415, people's a lot of work, and and
• 11:39
  sometimes that's just way too much, so some folks have to get
• 11:42
  through level three to level four, where they can bring in
• 11:44
  some other managers to help, but if you're okay with learning and
• 11:48
  building those skills, then it's not a bad gig. You, you're okay
• 11:54
  with the diversity of double duty. What I mean by that is
• 11:59
  this is kind of like being a captain on the field, right? If
• 12:02
  you were to take, like, a football team or a hockey hockey
• 12:06
  team, the captain is part of the game, they have their job to do,
• 12:11
  but they're also helping lead and excite and and direct
• 12:17
  everyone else, and and so you have this kind of dual nature of
• 12:24
  player coach that are both happening at the exact same time
• 12:29
  and and you can, you can create enough success through others,
• 12:36
  this this this can be a challenge for folks in this
• 12:38
  stage, they're really good at what they do, and they're really
• 12:42
  bad at getting other people to do that thing well. So, if
• 12:46
  that's the case, you probably shouldn't have gotten here in
• 12:48
  the first place. But that's going to get even worse if you
• 12:52
  keep going to level four, because now not only do you have
• 12:54
  to do through others, you have to lead through others, and
• 12:59
  while that might sound like a relief, it's actually a bigger
• 13:02
  problem, because the accumulation of the inadequacy
• 13:06
  starts to grow, and that's not pleasant.
• 13:09
  So you can stay there, if you again, if you like that boutique
• 13:12
  size, if you can achieve the vision that you have for your
• 13:15
  organization, you can do great work for great people, and you
• 13:20
  can do it in a relatively small market, and you don't mind that
• 13:27
  dual nature player coach. You can ride here for a really long
• 13:31
  time. You can make a lot of money here. You can find some
• 13:36
  freedom with your time. You can go away for a couple weeks, and
• 13:39
  the organization still moves. You can find a lot of
• 13:42
  specialization in what you do. This is particularly true if you
• 13:47
  enjoy the more human side of whatever your operation is. If
• 13:49
  you like the sales networking approach, most of my folks who
• 13:54
  pick level three do so because they really like the sales
• 13:57
  process, and they're able to effectively hand off kind of
• 14:01
  everything else and just manage an ops leader, and then that
• 14:06
  allows them to manage a sales and networking process that they
• 14:09
  really enjoy. So those are all signs that level three might be
• 14:12
  good for you. Now, what are some signs that you should move to
• 14:17
  level four? The first one, broken record here, if you've
• 14:22
  been listening to all of these, but really the first and kind of
• 14:25
  only reason that you would do it is because your vision demands a
• 14:29
  bigger, a team that's bigger than what you can manage on your
• 14:31
  own. You have to have more than this number of people, and
• 14:37
  that's not a decision to take lightly. Level four, I really
• 14:42
  think is the hardest of all levels for most founders, and
• 14:46
  that doesn't mean it's bad. It might actually be the perfect
• 14:49
  level for you, but it's pretty normal for, especially the
• 14:54
  beginning of level four, to be quite difficult. It can, it can
• 14:58
  literally be existential, uh. For you as a founder, so this
• 15:02
  this idea of, hey, bigger is better. It's not if you're going
• 15:06
  to get just a little bit bigger and it's going to tip you into
• 15:09
  level four, it's going to get a lot worse before it gets better,
• 15:14
  and that little bit of better might not be worth it,
• 15:18
  especially if you can achieve the same thing by just
• 15:21
  optimizing a little bit better and going better is better in
• 15:25
  level three, however, if your vision demands it, if you've
• 15:29
  got, if you need to grow beyond what you can manage, then level
• 15:33
  four is going to be a necessary part of that, if you are okay
• 15:39
  not playing an instrumental role in, in the actual selling, or
• 15:43
  doing so. What happens in level four is that we leave the field
• 15:48
  of play. Level three, captain on the field, level four, coach on
• 15:52
  the sideline, and you are sidelined like that. That phrase
• 15:59
  actually means something here, you in level three. If something
• 16:04
  goes wrong, you can jump in and save the day pretty effectively,
• 16:08
  because you're close enough to it. It's, it's matched to you,
• 16:13
  because you've, you're the one who's been doing it, and it's
• 16:16
  relatively easy, although sometimes quite exhausting, to
• 16:19
  kind of jump in and save the day, but it's possible in level
• 16:24
  four. It, it's not really possible to jump in and save the
• 16:26
  day, not reliably and consistently over time. You,
• 16:31
  you, you get pretty tired running up and down the
• 16:34
  sideline, and then realize that it didn't do anything. You like,
• 16:37
  it doesn't matter how fast you run anymore, it matters how fast
• 16:40
  the people you coach can run, and so level four requires you
• 16:46
  to be okay with not being on the field, maybe even for the
• 16:50
  biggest place. It requires you to, rather than leading those
• 16:55
  who do, I'm sorry, rather than doing it all yourself, you have
• 16:59
  to lead those who lead those who do? Right, you're not just
• 17:03
  leading those who do, you are leading those who lead those who
• 17:06
  do. And again, it's a different skill set. You might be ready if
• 17:17
  you're willing to embrace that coach on the sideline role,
• 17:22
  right?
• 17:22
  Sometimes when you've been doing something for a while, even if
• 17:25
  you love it, you're just tired, like you know, you, you coach or
• 17:32
  mow lawns or cut hair or do architectural designs when you
• 17:36
  do the thing that it is that you do for 510, 1520, years, that in
• 17:42
  and of itself can take it out of you, and it just might be, hey,
• 17:45
  I don't have the energy to literally do the thing that we
• 17:48
  do anymore. This is why literal players move out of being
• 17:52
  players in sports. Some of them become coaches. It's actually
• 17:55
  quite rare, and there's a reason for that, and that is a great
• 17:58
  players very seldom make great coaches, and the same is true of
• 18:01
  founders. Those who really succeed in that level two
• 18:05
  player, really, even those who succeed in level three, are
• 18:08
  often those who struggle the most in level four, because
• 18:12
  their skills are suited to being on the field, and so if you're
• 18:17
  ready to, or desirous of being a coach on the sideline, not
• 18:23
  having to run up and down, and being willing to put the ball in
• 18:26
  someone else's hands. Level four might be for you. Last one here
• 18:32
  is, if you're okay being a coach on the sideline and not having
• 18:38
  to run, or like being a coach in a hockey game, and standing on
• 18:43
  the bench, instead of getting blasted in game three of the
• 18:46
  Stanley Cup finals by a 250 pound guy who wants to take your
• 18:50
  head off when you're already injured to start, like the life
• 18:53
  of a player or a captain, it's got its perks. It's like you
• 18:58
  might take a straight puck every once in a while, on a hockey
• 19:01
  bench, but you're not going to get checked. You might have to
• 19:04
  stand in some pretty nasty weather in a football game, but
• 19:08
  you don't have a 300 pound lineman trying to take your head
• 19:12
  off, and so there's some, there's some obvious draws to
• 19:16
  that position until you realize you don't get to touch the ball
• 19:21
  or the puck, or whatever it is that you're playing with in the
• 19:25
  game, and that is a tension to be managed, right. We've used
• 19:30
  this language throughout, but every level comes with tensions
• 19:33
  to be managed, and the tension in level four is that you are
• 19:36
  still right there at the game, but you don't get to touch the
• 19:39
  ball, you don't get to be the one who jumps in and saves the
• 19:44
  day, not with any degree of regularity, and as you grow
• 19:47
  through level four, in terms of size, not necessarily skill, but
• 19:51
  size, you'll find that you become even less capable of
• 19:55
  jumping in and saving the day, and that's a scary place to be,
• 19:59
  you are now responsible. Responsible for something that
• 20:01
  you can't do on your own, and, and that can happen in level two
• 20:06
  or level three, but it's kind of incidental and on the side. In
• 20:09
  level four, it's almost everything, because even the
• 20:13
  things that you were really good at, you haven't done in five
• 20:15
  years, you haven't followed the processes that the company has
• 20:18
  in five years, they've all changed and developed and grown
• 20:22
  without you, and that can be really daunting. So, really,
• 20:26
  what we're doing, we're looking at, hey, can you achieve what
• 20:29
  you want in that boutique single team feel, where your team and
• 20:34
  your company are the same thing, you know everyone, everyone
• 20:37
  knows everyone, and you all fit around a dining room table,
• 20:42
  there's something really special about that. If you've done that,
• 20:46
  you've enjoyed it, but your vision just demands more. Then,
• 20:50
  sure, you might have to move forward to level four, and only
• 20:56
  then, when you've succeeded in level three, and it's not enough
• 21:01
  to achieve your vision, that's when it might be time to
• 21:05
  consider level four. So, do you just the moment you hit
• 21:10
  challenges in level three, throw up your hands and say, I need
• 21:12
  someone else to manage all these people? No, it's not going to
• 21:15
  work. You have to learn to manage yourself. You have to
• 21:19
  thrive in level three before you get to level four, and just
• 21:23
  because you learn to thrive in level three doesn't mean that
• 21:29
  you're going to be able to keep doing that same thing in a
• 21:32
  linear way over and over.
• 21:33
  You're going to have to relearn how to thrive in level four as a
• 21:38
  coach on the sideline. So, hopefully, for those of you that
• 21:42
  have been wrestling with this, that's that's helpful. It's a,
• 21:46
  it's a complex decision. It's, it's not the easiest decision in
• 21:50
  the world to make. There's so much pressure to grow and to
• 21:54
  scale and to be something else. What I'd really encourage you to
• 21:58
  do is just stop and think, hey, what would it look like to be
• 22:02
  content with a better version of what I'm experiencing today, not
• 22:07
  a bigger one? And that question can really, really unlock some
• 22:11
  clarity for you in level three, and you might find, yes, level
• 22:15
  four is next, let's take the bull by the horns and ride it
• 22:19
  until we win, or you might find, hey, that level four was never
• 22:24
  actually necessary. I'm going to lock into level three, and I'm
• 22:28
  going to crush it. And if you do, you can find deep
• 22:31
  fulfillment in level three. You can have a lot of fun with it
• 22:36
  and with your team, and it can be a really, really special time
• 22:40
  and season, so I want to wrap up with just a little bit of a
• 22:44
  teaser, so those of you who are listening through, and maybe
• 22:48
  you've been through this before, you've already made this
• 22:52
  decision, and you're, you're either in level four, you've
• 22:56
  been to level four, you're curious about what happens here.
• 23:00
  Level four is an interesting one, because we are going to
• 23:04
  talk about in our Should You Really series, we're going to
• 23:08
  talk about the most common mistake that founders make when
• 23:12
  they try to solve for level four, and that is to go out and
• 23:16
  hire or try to hire a professional CEO, and so that's
• 23:19
  the question we're going to answer in the next one. Should
• 23:23
  you go out and hire yourself a professional CEO? And it's gonna
• 23:27
  be a really interesting conversation. I can't wait for
• 23:31
  it. For now, for those of you in level three, make sure that you
• 23:36
  thrive in level three, even if you're on your way to level
• 23:39
  four. Every bit of gain in level three is going to just be an
• 23:44
  advantage to you in level four. For those of you who never need
• 23:48
  to get to level four, enjoy the heck out of level three. For
• 23:52
  those of you who are going to level four, it's a tough stage,
• 23:56
  but man, is it a good one. It's a hard one, but a good one. And
• 24:00
  I'm excited to talk about that with you next time. So, with
• 24:04
  that, you know your time and attention mean the world to us,
• 24:09
  to me, really. And I hope you got just a little bit more
• 24:12
  clarity out of this episode than you had before. And cannot wait
• 24:17
  to see you in the next episode. Take care. Hey everyone, Scott
• 24:21
  Retheimer here. Thank you so much for listening to the Start
• 24:25
  Scale and Succeed podcast. I hope this episode gave you
• 24:29
  exactly what you need for the level you're in right now. If
• 24:33
  you want to discover what level you're in, take our 10 question
• 24:37
  founders evolution quiz for free@foundersquiz.com That's
• 24:41
  foundersquiz.com it'll pinpoint exactly where you are and give
• 24:45
  you tailored tips to move forward and reach that next
• 24:49
  level in your journey as a founder. If you got something
• 24:53
  out of today's episode, don't forget to subscribe, rate, or
• 24:57
  review. It helps us reach more founders like you, and let's be
• 25:01
  honest, it means a ton to me, my team, and all our incredible
• 25:05
  guests. So keep starting scaling and succeeding, and I'll see you
• 25:09
  in the next episode.