Life after 25

No, this isn’t about getting older! We’re talking about the number of employees. Because after 25, a company suddenly, magically and irrevocably changes in character. It becomes more administrative – a different beast to the startup. And not everyone will cope with the change. Here’s Mike’s advice.

We’re not huge fans of numerology in business, though I did once meet someone who claimed to outperform the stock market by drawing up horoscopes of companies, based on their place and date of incorporation. But some numbers do seem to have magic qualities – particularly when it comes to numbers of people in an organization. Regular readers of this column will already know of our enthusiasm for the number five: the entrepreneur plus four cornerstones. An odd number, in case things go to a vote. Five is enough people for debate: three is too much like an unhappy marriage, while seven is getting too diffuse to make quick, effective decisions.

Beyond that, lies another magic number. It’s vaguer, between 20 and 30 people, and it’s the point at which the small, growing business ceases being like a tribe or a sports’ team and begins to turn into a mini-corporate. It must be to do with the psychology of how many individuals we can really get to know, like and trust. I guess our ancestors must have roamed the African savannah in groups of about 25 adults.

Grow beyond 25 people, and strange things start happening to your business. You walk in one day, and there’s someone at a desk whom you don’t recognize. When you were once delighted to be copied on everyone’s emails, suddenly this has become a chore. Your people start complaining they’re not being listened to: you feel you’re still trying your best, but there’s just not enough time.

The solution, sadly, is to accept the change and introduce more structure. Your people should be having regular, formal assessments every six months. Are they? Have you got a full-time HR person? Maybe you don’t need one at 25 people, but when it gets to 40 or 50… Are you still trying to get by on Word, Excel and the brilliant memory of your CFO’s assistant? Time to give in to those people who have been trying to sell you an IT system for the last three years…

For many entrepreneurs this change can be heartbreaking. Things just aren’t such fun any longer! But it must be made.

So can the fun be preserved? We think it can – up to a point. It’ll never be quite the same again, but you don’t all have to rush off and buy suits and white shirts.

If the company was a good place to work, that will be because it had a good corporate culture. This culture undoubtedly grew naturally, from a string of particularly good evenings down the pub, or from the wisecracks of one particularly funny team member, or from any of a hundred sources of that wonderfully indefinable and human thing called culture. It needs formalizing now. If everyone went to the pub on Fridays, make sure that still goes on. Remind yourself of the mythology that has grown up in the business, and ensure it is passed on to new arrivals.

The Instruction Set (Mike’s company back in the 1980’s), had monthly awards, some serious, some silly, all of them hugely important for fostering team spirit. These kept going even when the headcount got beyond 100.

Keep recruitment a tribal thing for as long as possible. Potential employees of The Instruction Set met as many team members as possible as part of the interview process – and if any of the team got a bad feeling about them, the person did not join. Draconian? Ponderous? It was wonderfully effective: we lost a handful of people in our entire history. The spirit remained in the company to the end (‘the end’ being a trade sale to one of our biggest rivals).

An alternative strategy to all the above is to keep splitting any business unit when it gets too big – say at 30 people. We have met a very successful entrepreneur who does this (so it’s not just us who have spotted the magical properties that lurk between 20 and 30!).

What is not possible is to pretend nothing has changed: the ‘Peter Pan’ strategy. It can be disastrous. If you need a mental model to put you off the ‘Peter Pan’ approach, think of those embarrassing people in their forties who still pretend to be teenagers.

Is there a magic number beyond 30? 150 people seems to be another point to stop and reflect. It was the point at which The Instruction Set was sold, and we have met other entrepreneurs who say this is another milestone.

So if you are growing your company fast, don’t be surprised if things suddenly seem less fun. Adapt to the change, and you can keep that start-up spirit alive in your workplace. Up to a point.


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