Expansion Stage CEOs: Understand the Power of 3!
June 13, 2011
Expansion stage companies are constantly building their staff, expanding their expertise, and adding additional capabilities to get to best practices and create competitive advantage. I believe that you need three capable people in a unit, plus a capable manager to truly have a working and robust operating capability that can withstand absences and turnover expanding the unit more easily. This post offers the whys and hows of the Power of 3.
As examples of building capabilities for execution, you might want to build a capable unit for the following:
- executing a content marketing strategy
- building a lead nurturing program
- continuously improving against conversion optimization
- developing an outbound prospecting program
- putting strategic consulting services in place
- developing indirect sales approaches
- improving the capabilities in product and development (e.g. continuous integration, automated testing, UX, etc.)
From my vantage point investing in expansion stage companies for over a decade as part of a growth venture capital firm, I have seen many capabilities added to companies, but every successful company has also had failures along the way. Some operating capabilities had never been built. Others had been built and then fell apart because the management team never built the capability to a point that it had three capable people plus a manager executing against the capability.
One of the (pretty simple) points that I make to all CEOs is that if they really want to successfully add a capability to their organization, then they should have at least three people executing against the capability (ideally full time). It’s the fastest way to get to a best practice and have the redundancy necessary to allow for vacations and overcome issues like poor performers or attrition.
This is what I call the Power of 3: get three capable people that can execute in the operating unit plus a capable manager, and you should have a unit that can execute, expand and manage through employee absences and turnover.
Why three people?
Three people are important for several reasons:
– If you assign only one, there is a good chance you will not be successful. This is true for several reasons. First, since you don’t have the capability, there is a good chance that you don’t now what skills are the right skills to create and execute your program. Second, when the person is sick or goes on vacation, you don’t have coverage of that capability. Third, if the person ever leaves your organization, that capability walks out the door with them (even if you have your capability fully codified). Finally, you don’t have anyone to compare this person’s execution against and the individual doesn’t have anyone to “compare notes” with or learn from.
– If you assign two, there is a better chance of success and you will improve against the points above, but there is still a reasonable chance that one of the people will be good enough to do the job, but not good enough to replicate the capability in case the better person leaves the organization. In addition, if one of the people do leave the organization, you fall back to the issues of having only one person.
– If you assign three people, you essentially triple your chances of success, double your redundancy, and double the number of people that each person can “compare notes” with and learn from. If you assign somewhat different types of people, you triple your odds of figuring out what type of person is best suited for the activities involved. Finally, you triple the odds of two of the people really connecting and forming the neucleous of a team that you can build from.
What if you can’t afford 3 people?
Most early and early expansion stage companies can’t afford assigning three people to a capability, particularly if you want to just test out an idea or get started quickly, so here are a few ideas to get you as close as possible:
– Put one of your most gifted and trusted people on building the capability. You will be able to test whether the capability is useful and will have a starting point to build from.
– Start by hiring a manager for the unit that will “role up her sleeves” to execute and build the methodology before hiring the three people in the unit.
– Cross-train one or two other people to be able to perform the work and step in during absences and/or during a gap in staffing caused by turnover.
While these approaches could help you to test your ideas and get a unit started, you will still want to try to get to the point that you have three capable people plus a capable manager as you grow your company.
In Summary — You Need 3!
If you really want to add a long-term robust capability in your organization, you need to get to the point that you have assigned at least 3 people to perform the activity.