Authors: Richard Gibson, Katy Tuncer, Jo Roberts
The good news is that successful scale-up leaders can stop these trends from trashing results.
The bad news is that there are five important trends that will challenge scale-up leaders like never before in 2023, putting business outcomes at risk.
We worked with 56 businesses in 2022*, and have pooled our experiences across the Horizon37 coaching team to identify the top themes, as well as some possible solutions..
*We have a good sample size and perspective, but it’s worth noting that we have a systematic bias – our customers have opted in and chosen to invest in leadership. As a result, our outlook will be more optimistic than if we had insight into the businesses stuck and inactive in dealing with these themes.
The fundraising process is slower and tougher as investors try to mitigate risk.
- Some investors also take advantage of the weaker position of scale-ups to introduce new demands or change terms late in the process. Regardless of investor tactics, across the board we see the fundraising process taking the founder/CEO/other leaders away from the business even more than usual, and the pitching and stakeholder engagement work is also very stressful.
- Creative alternatives are being dreamed up by founders in lieu of standard simple funding rounds (“private placement”, loans, agencies).
- Businesses are looking to mitigate against investment gaps by increasing emphasis on commercial success – either tangible revenue or proof of traction to facilitate better investor confidence. This can be at the expense of achieving technical milestones and long-term value creation.
- On the cost side, there is a focus on strong cash management, even this can be challenging to execute if CFO-level capability is lacking. Furthermore, excessive caution, procrastination and delay can arise whenever committing to anything new – and sometimes wasted effort on “feasibility study” type work – whereas agility and pace used to (and need to) rein in the scale-up world.
People half in
In the face of the cost of living crisis and general volatility everywhere in the world, many individuals are privately considering their job security, career options and future. With this in the background, fewer people are jumping two feet into the roles and business leadership.
- Some people constantly doubt whether they will stay, and for how long. Others know they need to stay, and become cautious and protective rather than value-focussed. There are many other forms of quiet quitting in play as well.
- People trust increasingly smaller groups of (similar to them) work mates and are suspicious of others. The generational divide and lack of understanding is becoming more and more stark, and even the 30 somethings struggle to relate with 20 somethings. This leads to more caution, some cynicism about inclusion and diversity (ie “stick with your own”). At all levels there is a tendency for closing ranks, and closing minds. A lot of this seems to be about staying safe and protecting security.
- All the generational groups in the workplace are attempting to set and assert boundaries, but the expectations of the Gen X, Millennials and Gen Z are divergent. They struggle to relate with each other.
All these things mutually reinforce a tendency for people to only go half in, which is quite different from what the typical gung-ho start-up culture has been… and arguably needs to be.
The normal (and always needed) proliferation of leadership beyond the CEO, is disrupted or delayed. Instinctively everyone wants to avoid risk by double checking upwards.
- Depending how you view it the CEO is “dragged into” or “interferes in the details” and is less able to be strategic.
- In more and more cases, responsibility also falls in a gully between exec and senior management. The age-old problem of ‘too many bosses’, is being superseded by the 2023 version: ‘not enough bosses’ It can be unclear who is responsible for aligning direction, making decisions, communicating expectations, firing, or delivering targets.
- There can be standoffs in the worst case and blame and gossip resulting from a lack of clear responsibility at the relevant levels for the right things. (We’ve heard it said that “culture belongs to HR” for example).
- One of the biggest warning signs is when people at all levels in the business are experiencing a lack of a single unified message from the top. This can be about all sorts of important things ranging from objectives, roles, performance management, OKRs and roadmap, to values.
- Boards – especially investors, with their own challenges in the current environment – are giving more prolific feedback and advice to the exec and staff. More often now, this is, erring on telling.
- Board members are making more demands for information (often uncoordinated requests from individuals as well) and justification by the exec team.
- How the relationship develops between board and exec in the face of these challenges is variable, but typically we see less partnership and more “stakeholder management” in the exec team approach and attitude.
- As businesses scale, some degree of process – i.e. learning from standard methods and implementing risk management etc – is needed. It’s always been hard to strike the balance between getting the needed process and infrastructure in place whilst staying nimble and pacey during scale-up. But now, having a larger number of “fresh people” joining, can mean a critical mass kick against this, and risk reinventing the wheel.
- => This can waste a lot of time. Risk management and process are not fashionable.!
- Process aversion can be part of a wider culture challenge which is: understanding and respecting differences. This plays a part in theme 2 “half in” as well. The “newbies” can add a lot if they have high regard for AND from the “experienced people”. But that goes beyond process aversion which is what we see as the top challenge.
On the sunny side…There are at least three levers of positive impact, and the winners are using them:
- Widespread, there is an uplift in self awareness and openness to change in exec leaders, and a clear belief that they need to develop new “A-game leadership” to address the challenges at hand. As a result, senior leaders make rapid personal gains in their impact and influence, through mindsets and small but significant personal choices and actions day to day such as refreshing how they approach key stakeholders and conversations, careful deployment of energy, acknowledging the status of decisions, role-modeling of resilience and revamping communication etc.
- The small gains can have a huge impact on their own outstanding performance in winning buy-in, alignment and motivation, but also they act as role-models, for others to invest in building their resilience and stepping up their leadership performance.
- Performance (and performance management) – In tougher times, there is often greater clarity around the core priorities for the business – what REALLY needs to get done and WHO is able to do it (preferably meeting deadlines and within allocated costs). This often elevates the high performers and exposes underperformers.
- This moment in time presents an opportunity to remove under-performers / toxic influencers. With the volatility in the talent market and cost of living crisis, a lot of movement in people is expected. Senior leaders need to get in the driving seat to avoid the wrong people leaving while the value destroyers stay. They also need to communicate why decisions were made and how this reinforces the desired culture and performance – respect and compassion are MUST haves.
- Reclarifiction – The new year, a new funding round, key hires or people leaving… or any other excuse (!) can and should be used to re-set how senior leadership teams will work together and perform. This can apply to both the board and the SLT. Together they can define purpose, priorities, and plans. They might develop balanced scorecards and OKRs, list and make top priority decisions, or prioritise other areas in which they need to build clarity and alignment together. To ensure buy-in, they must also create single messages to cascade consistently.
- Psychological safety is vital and both within the team and with stakeholders, they must set up feedback conversations and listen carefully, to build trust and mutual understanding of the challenges faced on different sides of the issues.
Committing to take one personal action that will shift something in YOUR unique business will make all the difference right now. This is your moment! You can go away and think this article was interesting and fun, or you can make a real positive difference. What impact will you make?
At Horizon37, we transform the leadership in scale-ups to achieve business outcomes – to deliver the mission, to succeed financially and achieve a positive exit for investors.
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