Scaling Smart

A Strategic Approach to Growing Your Company Successfully

Identifying problems worth solving and creating a viable product that meets customers needs is what all start-up companies must accomplish. In so doing, they must identify how to accelerate growth with limited resources.

A Kapta eBook

Identifying problems worth solving and creating a viable Operating Leverage product that meets customers needs is what all start-up companies must accomplish. In so doing, they Communication must identify how to accelerate growth with limited resources. There are a variety of effective steps a company can take to mitigate the growing pains associated with accelerated Network Influence business growth. Its no coincidence that the best venture-backed companies in history did a great job scaling. Its how you turn small amounts of invested capital into Transparency extremely valuable equity in a short period of time.

When companies scale, many startup CEOs are worried about losing or diluting their culture as they grow. With the right building blocks in place however, a company can actually maintain and reinforce its values as they scale. Over the course of 100+ interviews with CEOs, a very clear pattern of scaling-up practices and organizational behaviors has emerged.

Alignment

Accountability

Scaling up from a good company to a great company requires decisive strategic execution that supports sustained operating leverage with a healthy dose of corporate alignment to support company culture and innovation. Our ndings show that those organizations that are effectively scaling-up consistently demonstrate the following organizational behaviors and processes. Those that perform best have proper systems in place to ensure these behaviors and processes are properly embedded and not left to chance:

Speed

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Operating Leverage

If you add operating costs at the same rate you grow revenue, then your business does not scale.

Businesses that scale are businesses with operating leverage. In laymans terms, if you add operating costs (sales, marketing, administrators, R&D, etc.) at the same rate you grow revenue, then your business does not scale. On the ip side, if additional revenue requires relatively smaller and smaller additions to operating costs, then your business scales. Its a simple formula that is fundamental to building and maintaining nancial health in a company, but far too often, it is overlooked or ignored.

Operating the business at scale means allocating and optimizing resources to drive the greatest results and volume across market segments. Often times CEOs are leveraging their time on innovation, on hiring too quickly or keeping up with market demand with the product or service they offer. Basic assessment of the companys balance sheet needs to work in tandem with other company departments on a regular basis. Encouraging cross-enterprise collaboration creates more value in aggregate and all participants have an opportunity to gain more than they had before. When all departments are privy to the corporate balance sheet, it gives incentives for setting and realizing goals at both a department and company wide level. It also fosters corporate transparency and leverages trust intra-company.

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In the past, executives have tended to be wary of cross-enterprise collaboration out of disagreements over the distribution of rewards or concerns over privacy, says author and consultant John Hagle. However, these concerns are largely shaped by a zero-sum view of the world -- if one party gains, the other parties must inevitably lose. Working in tandem produces real results.

A B C

Marketing and sales must work together cohesively to generate demand and close business. Closed deals need to be transitioned to services/support to be nurtured. Partners need to be leveraged to multiply the companys marketing, sales and services efforts to reach new customers and displace the competition. Make sure every employee knows how they t into the organization and how they contribute to the companys success to leverage talent.
How to know if your business will scale
[additional reading]

Operating the business at scale is about optimization, not duplication, of efforts. Once a company can optimize resources with a scalable business model, cross-enterprise collaboration can create more value to secure bottom line growth and generate nancial success.

The Strategic Advantage of Global Process

[additional reading]

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Communication

Traditional corporate communication must make room for a process that

The command-and-control approach to management has in is more dynamic and recent years become less attractive. Globalization, ever-changing technologies, and new approaches to how companies create more sophisticated. Most value have sharply reduced the efficacy of a purely directive, important, that process top-down model of leadership. What new patterning will then take the place from the old corporate model? Part of the must be conversational. answer lies in how leaders manage communication within their organizationsthat is, how they handle the ow of information to, from, and among their employees, says Boris Groysberg, a professor of business administration at Harvard Business School. Traditional corporate communication must make room for a process that is more dynamic and more sophisticated. Most important, that process must be conversational. Groysberg and Michael Slind a writer, editor, and communication consultant, co-authored a book Talk, Inc.: How Trusted Leaders Use Conversation to Power Their Organizations believe that the patterns and processes by which people communicate with each other are unmistakably in ux. The old corporate communication is giving way to a model that they call organizational conversation. In 2012, they surveyed a group of leaders from organizations that range from computer-networking giant Cisco Systems to Hindustan Petroleum, a large India-based oil supplier, to use the power of organizational conversation to drive their company forward. For these leaders, internal communication isnt just a process of Human Resources. Its a fundamental cornerstone that boosts employee engagement and improves strategic alignment.

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Groysberg and Slind have found that there are four steps that a company can take to make their approach to leadership more conversational.

Close the gap between you and your employees.

In Groysberg and Slinds survey, they asked respondents to name the biggest employee communication challenge at their company. In response, one participant cited the need to move away from top-down communication. Another highlighted a disparity between the senior management team and middle management due to low transparency. Trusted and effective leaders overcome such challenges by speaking with employees in ways that are direct, personal, open, and authentic.

Promote two-way dialogue within your company.

One survey respondent lamented, a lack of understanding in management of the need for communication, adding that the traditional practice of communication at his or her company has been one-way. Leaders can show that they appreciate the value of real communication by adopting channels that allow ideas to move in multiple directions across their organization, and by working to create a truly conversational culture within that organization.

Leaders can show that they appreciate the value of real communication by adopting channels that allow ideas to move in multiple directions across their organization

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Engage employees in the work of telling the company story.

The need to get more participation from employees, according to one respondent, is a pressing challenge at his or her company. People in that company tend to shy away from speaking openly. The practice of organizational conversation alters that dynamic. Where that practice has taken hold, leaders encourage broad-based employee involvement in a wide array of communication efforts.

Pursue a clear agenda.

One participant expressed concern about a lack of consistency in communication. Another mentioned a tendency among top leaders to generate too much communication. Yet another voiced this complaint: The strategy is only discussed at the management level and is never cascaded to all staff. To deal with such challenges to prevent the communication process from becoming diffuse and ad hoc effective leaders take steps to ensure that their conversation with employees unfolds according to a clear strategic plan. They also seek to align Changing the that conversation with organizational objectives. Conversation in Your Company
[additional reading]

Leadership Is a Conversation
[additional reading]

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Network Influence
Inuence Marketing Dened
Inuence plays an important role in business. At some point or another, we are all inuenced by someone or something. Students are inuenced by teachers. Friends inuence one another. Entrepreneurs are inuenced by their respective mentors. However, we are only inuenced to the point that we can trust another person. Building trusting relationships takes time. Chances are that theres already a group of people out there who have earned the respect of many of your potential customers. Thats where inuence marketing comes into play. Inuence marketing is a strategy that targets key individuals who have inuence and trust over your key target market. It is the next generation of marketing and public relations where you target the people your prospects turn to for information. These inuencers help generate awareness and sway the purchasing decisions of those who seek out and value their expertise.

It is the next generation of marketing and public relations where you target the people your prospects turn to for information. These influencers help generate awareness and sway the purchasing decisions of those who seek out and value their expertise.

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If theyre interested in your message, they will begin talking about your company, its leaders, and/ or products and services. Influence marketing builds credibility for you in the eyes of your prospects because influencers are often trusted resources.

If key inuences are interested in your message, they will begin talking about your company, its leaders, and/or products and services. Key inuencers are found in social media, on blogging networks, at conferences and in online discussion forums to name a few. These inuencers are respected in many networks and they help build credibility for you in the eyes of your prospects because inuencers are often trusted resources. Below are ve benets to incorporating network inuence into your corporate DNA from OpenView Partners.

Raise awareness of your brand within your industry/space.

When you build relationships with key inuencers, sooner or later you will probably benet from getting some kindof ink. Perhaps they will share one of your customer success stories, review one of your products, mention your company in a case study, or write a company overview. These mentions essentially create another mark of your company on the Internet, acting as free advertising for your business. Your prospects will see this information and become introduced to or reacquainted with your companys brand.

Increase your Web traffic.

When an inuencer mentions your company, it may cause his or her audience to seek out more information, usually by going to your website.

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Test your messaging and value proposition.

More often than not, your inuencers are on the pulse of trends within your industry. If you cant sell them on your companys competitive advantage and offerings, you may experience the same friction when selling to your prospects. Inuence marketing provides a feedback loop with people who live and breathe within your space.

Generate inbound leads or inquiries about your company.

Inuence marketing gives you the opportunity to communicate your value proposition, offerings, and company back- ground to prospects you may not otherwise have engaged with. Doing so will result in more people visiting your website, participating in webinars, reading your blog, etc. some of whom will eventually turn into qualied leads.

Build credibility/overcome objections/close more sales faster.

When an inuencer has given your company his or her seal of approval, the people who look to the inuencer trust that persons word. Your salespeople wont have to spend as much time selling your value proposition when the inuencer has already helped communicate your message. The Value of Influence: The Ultimate Guide to Influence Marketing
[additional reading]

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Transparency

Qualtrics wanted to take a different route so the company decided to take a leap of faith to make all employees performance data available to everyone in the company.

Ryan Smith and Golnaz Tabibnias recent article, Why Radical Transparency Is Good Business in the Harvard Business Review Blog, attests that Radical transparency, the idea of everyone knowing everything, could actually be a major driver of increased organizational performance. Private research software rm Qualtrics believes that the biggest reason companies fail is because people lose focus. Young, fast-growing companies driving to satisfy investors get off track in order to meet revenue goals. Qualtrics wanted to take a different route so the company decided to take a leap of faith to make all employees performance data available to everyone in the company. By doing so, Qualtrics removes the distractions, fears, and negativity that sap concentration. The entire workforce has access to a host of information about the performance and practice of each employee that includes:

1 2 3 4 5

Quarterly objectives and results in detail including revenue and satisfaction targets Weekly snippets of each individuals goals for the week Up to the minute performance reviews, ratings, and bonus structures Noted successes and failures, with notes for everyone to learn from Career history at Qualtrics

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Insights from neuroscience underscore that our brains work best when we no longer feel the need to hide, cover up our mistakes, or dwell on errors, says Smith. We do better when we arent mentally bogged down in threat response worrying about which of our colleagues is the boss avor of the month, getting a hasty promotion, or bad-mouthing our work.

The principles of radical transparency improve business performance in terms of focus, engagement, and growing and recruiting talent. Heres a preview of how they work: Focus:
At the beginning of each quarter, every Qualtrics employee sets measurable and visible objectives and key results (aka OKRs). Each individuals progress and priorities are clear. This helps reduce the noise and clutter that can overload our prefrontal cortex with a sense of being overwhelmed about what our goals are.

Engagement:
Radical transparency increases commitment and motivation to the corporate mission because employee data are explicitly linked to performance, ensuring high levels of fairness. A sense of real fairness turns out to be deeply rewarding to the brain, especially compared to a sense of unfairness that pervades many employees darker thoughts, which activates a strong threat response. Everyone is benchmarked, all data are available for inspection and analysis, and all employees are treated accordingly. The reward response leads to increased engagement, from the strong sense of autonomy the approach brings about, dened as a sense of control over ones destiny.

Growing Talent:
By making the successes of top performers accessible and easy to compare against the department or company as a whole, newer employees at Qualtrics are motivated to excel through mirroring the best practices of high-performing employees. This mirroring is extremely powerful in encouraging positive work performance. Another a big plus is that the right people get the promotions, meaning the people who are really consistently performing are rewarded, not the people just good at getting others to think they perform well.

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How long do you feel its appropriate to lie to your employees about their future?

Qualtrics knows that the transparency process creates winners and losers, and that environment can be tough for someone who is not an A player. As Marc Effron of the Talent Strategy Group reports from his global consulting work, theres a pervasive, irrational fear of transparency in corporations worldwide when it comes to talent issues. Many leaders seem concerned that engagement will be compromised when everyone is told the truth about their potential to advance. While there may be some rough moments, Effron tells clients, heres the fundamental question: How long do you feel its appropriate to lie to your employees about their future?

Effron holds that many executives are far more ready for stronger transparency measures than their HR colleagues believe. If that rings true, they should adopt radical transparency.

Why Radical Transparency Is Good Business

[additional reading]

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Alignment

If your company is like many other high growth businesses, your employees represent both your organizations biggest line item expense, and your most valuable asset. This means your companys productivity-and ultimately, its protability depend on making sure all of your workers perform up to their full potential. Studies show a dramatic increase in both worker and business performance when an organization effectively sets and closely ties individual employee goals to the companys overall strategy, says Robert S. Kaplan and David P. Norton. Yet amazingly, a mere 7% of employees today fully understand their companys business goals and strategies and whats expected of them in order to help achieve company business goals.

7%

of employees

today fully understand their companys business goals and strategies and whats expected of them.

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What are the benefits of clearly aligning strategy with action?

You will drive better business results, your employees will feel more engaged, and you will move faster.

In a recent study, researchers found a strong correlation between a companys nancial performance and a goal setting process. Their results illustrated that companies that more closely aligned goals across their organization enjoyed much higher levels of nancial success. The study also found that employees in the weakestperforming companies did not clearly understand the connection between their individual efforts and the overall goals of their employers. These same people also reported feeling confused as to their roles at the company, which naturally resulted in unfocused-and therefore less productive-work activity. These ndings underscore the critical importance of effectively setting and closely aligning employee and business goals to drive the success of your company. In addition to feeling fairly compensated for their efforts, your employees must clearly understand how their work connects to and serves both the short- and long-term goals of your business.

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Accountability

The most common reason a plan fails is lack of ownership. If people dont have a stake and responsibility in the plan, the plan wont prosper. People need to have a strong and positive relationship with their direct manager and an inherent trust in the organization in order to feel accountable for their results. The relationship between an employee and their employer needs to be reciprocal for the building the blocks of accountability to fall into place. Mihnea C. Moldoveanu writes much more about this in his Harvard Business Review Article, The Promise: The Basic Building Blocks of Accountability. Some guidelines on how to promote accountability and responsibility in your organization:

Leaders must model accountability.

Leaders must take stock and accountability for their own mistakes and give credit where credit is due.

Do not create silly policies in your organization.

Most of the people do the right thing most of the time.

Communicate and share information.

It hard for people to feel accountable if they do not understand what is happening in the organization.

Create a safe learning environment.

People need to not be afraid to give feedback and share mistakes or missteps. This is how people learn.

Focus on the relationship managers have with their teams.

Create systems, tools and training that help managers develop better relationships. This is the foundation for driving accountability in the organization.

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While managers generally agree on the importance of managing and understanding an organizations culture, there is far less agreement on how to manage one.

After interviewing 75 high-ranking executives in 14 of Fortunes largest

1,000 firms, they found two distinct In their paper, In Managing Corporate Culture Through Reward Systems John Slocum and reward systems, each linked to a Jeffrey Kerr suggest that the managerial reward very different culture. is a powerful means of inuencing corporate culture. After interviewing 75 high-ranking executives in 14 of Fortunes largest 1,000 rms, they found two distinct reward systems, each linked to a very different culture. In the hierarchy-based system, performance was dened in qualitative terms and evaluated subjectively, and subordinates were dependent on their superiors for evaluations and rewards. This system is associated with the clan culture, characterized by long socialization, high commitment, peer pressure to conform, and the importance of superiors as mentors. In the performance-based system, performance was dened In the hierarchy-based system, performance quantitatively and evaluated objectively, rewards were was defined in qualitative terms and evaluated based on formulas (ROI, subjectively, and subordinates were dependent ROE) connected to results, on their superiors for evaluations and rewards. and subordinates were far less dependent on the opinions of superiors for guidance.

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Kerr and Slocum realized that significant strategic or structural realignment couldnt occur if it is not

This system is associated with the market culture, characterized by shortterm commitment, independence from peers, little socialization, and superiors as resource allocators. The authors nd the rst system (the clan culture and hierarchy-based reward system) to be useful for rms pursuing single-product, capital-intensive strategies, while the second (the market culture and performance-based system) is useful in rms pursuing acquisitive, high-diversication strategies.

Kerr and Slocum realized that signicant strategic or structural realignment supported by the couldnt occur if it is not supported by the organizations values and behavioral norms. The reward system represents a powerful means for organizations values inuencing an organizations culture. The reward system denes the and behavioral relationship between the organization and the norms. individual member by specifying the means The Promise: of the exchange. The Basic Two major issues, Building Block of performance and Accountability rewards dene reward [additional reading] systems, performance Managing includes dening and evaluating performance and providing employees corporate culture with feedback. Rewards include bonus, salary increases, promotions, through reward stock awards and perquisites. systems
[additional reading]

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Speed

Companies that embraced initiatives and chose speed to try to gain an edge ended up with depressed sales and operating profits than those that paused at key moments to make sure they were on the right track.

In business, theres always an issue of speed and how quickly a company can get to market. The notion goes, if you can win the race by bringing your product or service to market before anyone else, you win. But there is a speed gap: Its the difference between how important a rms leaders say speed is to their competitive strategy and how fast the company actually moves. That gap is signicant regardless of region, industry, company size, or strategic emphasis. Organizations fearful of losing their competitive advantage spend much time and many resources looking for ways to pick up the pace, says Jocelyn Davis and Tom Atkinson. Paradoxically, they should try slowing down instead. In their study of 343 businesses (conducted with the Economist Intelligence Unit), the companies that embraced initiatives and chose speed to try to gain an edge ended up with depressed sales and operating prots than those that paused at key moments to make sure they were on the right track. In addition, the rms that slowed down to speed up improved their top and bottom lines, averaging 40% higher sales and 52% higher operating prots over a three-year period.

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They became more open to ideas and discussion. They encouraged innovative thinking. And they allowed time to reflect and learn.

How did they defy the laws of business physics, taking more time than competitors yet performing better? They reframed what slower and faster meant. Firms sometimes confuse operational speed (moving quickly) with strategic speed (reducing the time it takes to deliver value)and the two concepts are quite different. Simply increasing the pace of production, for example, may be one way to try to close the speed gap. But that often leads to decreased value over time, in the form of lower-quality products and services. Likewise, new initiatives that move fast may not deliver any value if time isnt taken to identify and adjust the true value proposition.

In their study, higher-performing companies with strategic speed made alignment a priority. They became more open to ideas and discussion. They encouraged innovative thinking. And they allowed time to reect and learn. By contrast, performance suffered at rms that moved fast all the time, focused too much on maximizing efficiency, stuck to tested methods, didnt foster employee collaboration, and werent overly concerned about alignment. Ultimately, strategic speed is a function of leadership. Teams that become condent in taking time to get things right, rather than recklessly move forward for speeds sake, are more Need Speed? successful in meeting their business objectives. That kind of assurance must Slow Down come from the top.
[additional reading]

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Because of the extreme challenges facing those who are scaling new business models, a blueprint for success is in order.

Our case for scaling companies strategically with clearly dened goals and objectives in place paints a clear picture: growth capital alone will not unlock the problems and caveats associated with scaling high growth companies successfully. Because of the extreme challenges facing those who are scaling new business models, a blueprint for success is in order. The Blueprint model provides opportunities for Business Executives to stimulate the creation of promising inclusive business models. Our ndings show that those organizations that are effectively scaling-up consistently demonstrate success in: achieving operating leverage, in implementing a company-wide communication that is conversational, identify network inuencers to enhance brand image, open up the performance history of each employee for all to see through transparency, establish company-wide alignment and accountability and ultimately they all slow down to speed up. Those companies that have historically scaled successfully have had these systems and organizational behaviors in place, which provided them the blueprint that enabled their companies to scale with success.

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About Kapta Kapta provides executives with a cloud-based system to clearly communicate company goals, track every employees expected contribution and review overall status through a real-time dashboard. Headquartered in Boulder, Colorado, and founded in 2011, Kapta gives executives a clear line of sight into each team members performance and the systems easy-to-use alignment tools keep employees on track in less than ve minutes each week. Kaptas intuitive input process virtually eliminates work about work and instead provides employee alignment and executive feedback to successfully scale your business. For more information, please visit kaptasystems.com