How to spot leadership team issues, and how to address leadership transitions head-on to set your company on the path to success.

Having founded, worked with and/or invested in over 60 scaling businesses since 1998, I have seen a few scale up successes and failures. One key reflection (which is not that original, sorry!) is that management is key to success. 

Another reflection is that the scale up team that takes the company to exit often looks very different from the original team. As the company scales, many of the original leaders fall by the wayside. Not everyone will scale at the same rate as the company is scaling. Leadership transitions are necessary as you scale your business. 

The best companies bring in (or train up) ‘professional’ management as the company grows and retain the entrepreneurial spirit and culture i.e. the ‘founder identity’. Resulting in the best of both worlds – continual innovation with great execution. 

There is no one playbook for choosing the right team for each stage of growth – it’s complex, it’s situational. But what is clear is that the success of your company will be closely correlated to you figuring out who is the right person in the right seat at the right time. 

To help you to ensure your leadership team is fit for purpose this essay will, firstly, dig into the signs that your team is creaking and, secondly, look at how you can mitigate these leadership issues and keep reinventing your leadership team as you scale. 

Signs Your Leadership Team Members Aren’t Scaling

There is no steady state in a scale up. If it feels comfortable then you should probably get uncomfortable. You need to be constantly on the lookout for how to improve and develop your leadership team. You should always be recruiting in the sense you keep the pipeline of talent warm whether or not you are hiring. 

I know sports analogies are not everyone’s cup of tea but when I think of leadership reinvention, Pep Guardiola, the current Manchester City men’s football manager, immediately comes to mind. At the end of each season, he sells players who you think are at the peak of their powers. He buys in new players with relatively low price tags (and yes he does buy players with high price tags too). The next season you then see why. He has created a new way of winning. A different way of playing which the competition takes time to figure out and by then his team has won a bunch of new trophies. 

Alex Ferguson, the legendary Manchester United manager, once said, “Recycle your squad, or before you know it you’ll find they have recycled you.”

Here are seven ways to identify your team is not fit for purpose.

1. When Your Gut Senses It

Leaders are often sensing there’s a problem with the team for a while before they speak about it. Leaders sit with the problem for too long without doing anything, silently seething at the lack of progress. Maybe what’s holding them back is that they don’t know what good looks like in a scale up team. Or they don’t have the courage of their convictions (or gut). Or, they don’t want to face a difficult conversation with a loyal team member who has been there from the beginning. 

If you are waking up in the middle of the night and asking yourself whether this is the right person or not, it’s probably time to do something about it. Where there’s smoke, very often there’s fire!

2. Team Members Are Frustrated With Their Boss

Dev Ittycheria, the CEO of MongoDB, says people can often fool the people above them, sometimes the people around them but never the people below them. The best way to find out if a leader is not scaling accordingly is to discover how frustrated or not team members are with the leader. 

So if:

  • You lose a key team member who’s one of your key leader’s direct reports
  • Staff turnover is high within a team
  • The quality of the new recruits within the team is low
  • Frustration is high because ideas are being blocked

It’s time to investigate whether leadership changes are needed – to find out if the leader is being a hindrance or an asset to their team.

3. Lack of Adaptability

You know the saying: what got you here, won’t get you there. Many leaders are blinded by their past victories. They become set in their ways and unable to objectively evaluate their behaviour. “Why should I change? I’ve done pretty well to get to where I am.”

The business environment today whether or not you are in a small or large company requires adaptability. And if you throw in fast growth too, this ability to adapt is even more critical. 

So if you are expanding rapidly and your fellow leaders appear stuck in their ways, it could signal an issue. If your team member is resistant to feedback (e.g. defensiveness, aggressiveness or passive-aggressiveness), personal growth, new ideas, technologies or approaches, it may be time to consider a replacement.

4. Consistent Underperformance

This is an obvious one – if a leader in your team is continually missing targets or they keep making the same mistakes or their decision-making processes are flawed, they may need to be replaced.

But just because it’s obvious doesn’t mean it’s acted upon. Why not? 

Firstly, you may not have set clear targets for them to hit and so it’s more subjective than objective as to whether it’s underperformance.

Secondly, you are putting your head in the sand, you don’t want to have the tricky conversation and you are hoping the problem will magically resolve itself.

Thirdly, you tell yourself you have higher priorities right now again avoiding the discomfort of facing up to the issue. 

5. You Find Yourself Spending Too Much Time …

When you find that you are spending too much time doing the functional team leader’s job you probably need to do something about it. You are overwhelmed with doing the CEO role let alone doing other people’s jobs too. 

A sign that you might need to hire your first Chief Marketing Officer:

  • You find yourself spending time doing aspects of marketing because your current marketing leader isn’t experienced across all of the marketing sub-disciplines 

A sign that you might need to hire your first Chief People Officer:

  • You are spending too much time interviewing candidates who are not right for the job

A sign that you might need to hire your first Chief Revenue Officer:

  • You are spending too much time on sales calls and managing pricing

6. Self or Functional Team Prioritised Over Greater Good

Patrick Lencioni talks about ‘Team Number One’. He believes the leadership team members should prioritise making sure the top team is working as effectively as possible. And not prioritise their functional teams.

Why? Because the leadership team’s primary role is to do what is right for the organisation. And if a team leader prioritises their functional team they will be focusing on lobbying for this team’s interest over the greater good of the organisation. This can result in squabbles between the various functional team members because it feels like a fight between them and us rather than we are all in this together for the benefit of the company. 

So you need your team leaders to solve for company value first, then their team and then themselves. When leaders struggle it’s often because they have got the hierarchy of needs the wrong way round – they are either prioritising their team or themselves over the company.

But also you may find yourself making decisions to protect a relationship rather than what is best for the company. If you see yourself doing that, it’s time to wake up.

7. Stress or Burnout

Your once cheerful, and energetic co-worker has become stressed out, tired and overwhelmed. A scaleup is never easy and hard work is always going to be necessary. But equally, it’s not for everyone. Performance in simple terms is Ability x Motivation. If someone is struggling it may be because they don’t have the ability or the motivation or both. 

Time is of the essence in a scaleup. You can coach/mentor someone to improve their knowledge or skills and to help them understand their intrinsic motivations or drivers. But sometimes it’s simply the case that this person is not right for the next stage of growth and it is in their (and the company’s) best interest they take on another role or leave the company 

How To Prevent Leadership Issues and Skillfully Reinvent Your Leadership Team As You Scale

So now you have spotted the signs that your leadership team may be the bottleneck, the reason why the company’s growth has stalled, what are you going to do about it? What are the proactive steps you can take to ensure you have the right leadership team in place for the next stage of growth?

Here are eight key tips to prevent or minimise any issues and make leadership reinvention work effectively as you scale.

1. Develop A Positive Mindset About Professionalisation

One limiting belief that some leaders have (and usually not the successful ones) is they don’t want to hire people better than themselves. Most of us have (the poorly named) imposter syndrome (it’s not a syndrome!). We’re convinced someone is one day going to find out the truth about us i.e. we haven’t got a clue about what we are doing. And if we bring on board the experts we are more likely to get found out sooner rather than later. So let’s stay in the comfort zone of having a team of less talented people around me.

Trust me what I have just described happens more than you think – consciously or unconsciously. You need to get past this. Get a coach or a mentor to help. 

Also, many leaders believe that bringing in the ‘professionals’ and the ‘grown-ups’ will result in bureaucracy, a loss of speed and control, less fun, and a lack of innovation. They may be right to some degree but processes and discipline are necessary for a successful scale up. 

As I said in the introduction the nirvana is to find a new ‘professional’ way of operating whilst retaining the founder/entrepreneurial spirit.

So if the business is creaking, ask yourself what are my beliefs, thoughts and feelings about bringing on new talent? What am I contributing to this situation? 

2. Articulate a Clear Vision including an Organisational Structure

As Tony Robbins says, “If you don’t know what you want, the chances that you’ll get it are extremely low.”

Before making any changes to your leadership team make sure you have articulated a clear vision of what the next stage of growth looks like for your company including the creation of an organisational structure. 

The organisational structure falls out of your company’s purpose and strategy. Your roles should focus the organisation on the capabilities that are critical for delivering on your value proposition.  You want to connect it up to what needs doing for the next stage of growth, not what you think a good organisational structure should look like. 

For example, if AI is to become a central part of your winning strategy maybe you need to create a Chief AI Officer! 

The more your top-team roles are aligned with the outcomes necessary for future success, the better. 

3. Create A Scorecard For Each Role

As part of this exercise of creating a future organisational structure (not too far ahead – 12 months is enough as the most important measure is someone’s ability to do the job for the next 12 months), I recommend you create a Scorecard (a concept created by Geoff Smart in his book Who: The A Method for Hiring) for each role where you state what outcomes need to be achieved and what competencies and skills are necessary to succeed in this role. NB To get some clarity on roles you are not familiar with you should discuss the key factors and criteria with others who ‘have been there done it’.

It’s only at this stage that you start to put names in the boxes. 

I would look around your existing organisation and see who is the best fit for each future role. I like the concept of re-hiring someone for the role i.e. the internal candidate goes through a hiring process for their future role. 

Seeing who is the best fit includes an analysis of your current leadership team’s strengths and weaknesses, skills and capabilities. 

Having identified what skills, competencies and qualities you currently have and what will be required in the future role (i.e. a gap analysis), will inform you about the development requirements of existing team members and hiring requirements. 

To help answer this question of development or hiring, Ben Horowitz encourages us to ask two questions: 

  1. For this company at this exact point in time (NB he thinks it’s a mistake to pre-judge someone’s ability to scale), does there exist an executive who I can hire who will be better?
  2. If my biggest competitor hires that person, how will that impact our ability to win?

4. Continuous Evaluation

a) Monitoring Of #1 Metric 

You need to get the right people on the bus. That is the most important thing you can do according to Jim Collins in his book, Beyond Entrepreneurship 2.0. It’s even more important than the right business idea. Ed Catmull, co-founder of Pixar, believed you can even start with a bad idea and end up with a great outcome if you have the right people. 

So if this is true you need to track the #1 metric (NB stolen from Jim Collins):

The percentage of key seats on the bus filled with the right people on those seats.

If it’s less than 90%, then you have identified something you need to prioritise. You should be reflecting on this metric frequently (I recommend every quarter) because it’s likely that some seats will be unfilled and some will have outgrown the incumbent. 

Is it a skill problem, a motivational problem or a cultural issue? Do you develop or replace?

b) Measure Your Leader’s Scalability

Are your leaders scaling? How do you know? You need measures to give you evidence and information about how your leadership team members are performing

At HubSpot, they use Employee Net Promoter Scores (“eNPS”) to gauge how their employees feel about the workplace. By asking employees if they would refer HubSpot as a place to work and why, they gain valuable insights into their leadership effectiveness. 

When a particular division’s eNPS score declines, they investigate and present the data to the leader, asking them to create an improvement plan. Interestingly, replacing a leader often results in the score bouncing back to its usual level. This pattern has taught Hubspot several lessons:

  • Once a team loses confidence in its leader, it’s challenging to regain trust.
  • Replacing the leader with someone capable leads to a rapid morale rebound.
  • Leaders have their sweet spots where they excel, and these spots can change as the company grows.
  • Management experience becomes increasingly important during the scale-up phase

c) Regular Performance Reviews and Feedback 

One of your key jobs as CEO is to optimise the capacity and capabilities of your leadership team. You need to know how they are performing as do they. Evaluation of talent needs to be a constant. 

You need to set up an appropriate performance review process. 

In his book ‘The Hard Things about Hard Things’, Ben Horowitz is very clear. At 25 people and growing fast, a company is not in danger of suddenly feeling like a ‘big company’ if it takes employee performance and feedback seriously. ‘People rarely improve weakness they are unaware of’, Horowitz says.

5. Develop Talent

No matter how skilled your team members are, you still need to help them grow. 

Generic training doesn’t work. Your goal should be to create personalised training. Your regular one-on-one meetings are an opportunity to ask what skills they would like to develop. You and other team members will also have a view about what they need to improve. 

On-the-job learning is a much more effective way to learn than in the classroom or at a team offsite. According to Ebbinhhaus, the German psychologist, we forget 50% of all new information within a day and 90% within a week. 

As Anne Scoular and Herminia Ibarra note in their excellent HBR article, The Leader as Coach, one way to develop talent is to become a coach. This means becoming skilled at giving critical feedback, having tricky conversations and addressing poor performance

6. Hire Right First-Time Round

If you are a scale up, one of the first processes you should bring in is the hiring process. Great decisions get rid of problems permanently (i.e. solve the root cause not just a symptom) and/or make the most of opportunities. A great hire will make all the difference. A bad hire will cost you months if not years of headspace, fixing issues and wasted time. 

There is no such thing as a perfect hiring process but over time you want to aim to create a process which adds rigour, discipline, objectivity and data to your and your team member’s subjectivity and biases. 

And remember diverse leadership teams (varied experiences, educational and economic backgrounds and voices which reflect your total ecosystem) are more likely to succeed as long as there is a culture of psychological safety.

7. Learn To Fire

Firing people is a necessary evil if your company is going to succeed. Even if you have a great hiring process, not everyone will work out and different people will be required for different stages of the company’s growth. 

Don’t start hiring until you have learned to fire! Sounds harsh but you have to keep making decisions which are best for the company and the greater good. Most often the time you get around to firing you’re probably months too late. 

The key to a great firing process is to handle it with respect, clarity, and dignity, ensuring both the departing employees and the remaining team understand the reasons and are supported throughout the process.

8. Create A Culture Of Psychological Safety and Accountability

Some may think psychological safety means everyone is being nice to each other and avoiding challenges or difficult conversations. The opposite is true. As Amy Edmondson will tell you, the safer people feel the more likely they are to admit mistakes and/or to challenge leaders when they think they are about to make a mistake. 

Why should we care about psychological safety in relation to leadership reinvention? Because as the company grows you are more likely to get isolated and further away from the source of the information i.e. to get filtered or no information. Dangerous place to be. 

You need to ask yourself if you are hearing about problems with your leadership team early or too late. Psychological safety can help you spot issues early allowing you to get ahead of the game.

You need to celebrate the messenger whether or not they are talking about their own underperformance or someone else’s. If you don’t, issues will not be brought forward. 

But along with promoting psychological safety, you need a culture of accountability too. Psychological safety plus accountability is more likely to lead to good outcomes.

Continual Reinvention Of Your Leadership Team

The journey of scaling your business requires a laser-like focus on the quality and effectiveness of your leadership team. Recognising the signs of leadership team issues and addressing these challenges head-on can set your organisation on a path to success.

Throughout this essay, we’ve explored the critical signs that your leadership team may be hindering your company’s growth. It’s essential to take these signs seriously and act promptly. As Tim Ferris said, “The more voluntary suffering you build into your life, the less involuntary suffering will affect your life.”

To mitigate leadership issues and reinvent your team as you scale, consider these eight key strategies:

  1. Develop a Positive Mindset About Professionalization: Embrace the idea of bringing in professionals who can enhance your team’s capabilities.
  2. Articulate a Clear Vision and Organizational Structure: Define your company’s future vision and the roles necessary to achieve it.
  3. Create a Scorecard for Each Role: Establish clear expectations and outcomes for each leadership role.
  4. Continuous Evaluation: Regularly assess your leadership team’s performance and adjust as needed by monitoring of #1 metric, measuring your leader’s scalability and  regular performance reviews and feedback
  5. Develop Talent: Foster on-the-job learning and coach team members to improve their skills.
  6. Hire Right First-Time Round: Implement a rigorous hiring process to make successful hires from the start.
  7. Learn to Fire: Be prepared to make tough decisions and let go of team members when necessary.
  8. Create a Culture of Psychological Safety and Accountability: Encourage open communication and accountability within your organization.

By following these strategies and staying proactive, you can ensure that your leadership team is equipped to lead your company through its next stage of growth.

If you would like help on how to keep reinventing your leadership team please email me at mark@fittolead.net or contact me via Fit to Lead website.