The Keys to Scaling: It’s More Than Just an Experienced CEO

November 21, 2023 – Scaling a company is a significant milestone that many businesses aspire to achieve. However, the common misconception is that it takes an experienced CEO at the helm to successfully navigate this crucial phase. In reality, scaling has more to do with readiness, purpose, and a specific set of required leadership traits and skills that often shift as the company changes stage. Understanding the evolving competencies required for scaling and ensuring the right leadership and skill sets are in place are what truly determines a company’s success in scaling. Jon Barney and John McFarland, partners at Odgers Berndtson, explain the key qualities for a successful leader and how to put these changes into practice in order to successfully evolve a company.

Attributes Crucial for Small Companies Leaders

In the early stages of a company’s growth, everyone tends to have broader roles as resources are limited, so usually leaders will wear a lot of hats. Nevertheless, there are three main attributes crucial to a small company’s leadership: “Agility, or the ability to move fast and pivot, is crucial for an early-stage leader, because these companies are dynamic and growing,” said Mr. Barney. “A hands-on leadership style is often a necessary attribute. So, if someone were a CFO, for example, they are initially doing all those finance related roles, at least at an early stage. Then, finally, results orientation is very important. Any senior executive has to drive results, but there are more immediate results often in small companies since you have to maintain cash flow and keep the company going. So that ability to drive results quickly is critical,” he noted.

“Typically, when you look at a smaller company, and especially one recently founded and growing quickly, you see being entrepreneurial and a problem solver as key to success,” Mr. McFarland added. “However, as the company begins to scale, many of these earlier traits give way to different abilities in order to successfully move a company to the next stage. Specialization and being able to delegate becomes essential as well as building culture and developing operational excellence. This shift requires leaders who can adapt their roles and exercise and promote different skill sets that were likely not needed or prevalent during the initial stages.”

Talent Evolution: Adapting Roles as Companies Grow

Often, the leader who succeeded in fostering a company from idea to early stage might not have the same qualities needed to drive growth. “There are some fundamental dynamics that happen when a company gets to a certain stage. You need to start to reinvent things a bit and think differently about how you run the company,” Mr. Barney explained.

Jon Barney is a partner and head of U.S. Industrial practice at Odgers Berndtson. He has more than 20 years of executive search, leadership development and management consulting experience. Mr. Barney is based in the firm’s Washington, D.C. office. Before joining Odgers Berndtson, he was a senior partner at another global executive search firm where he advised aerospace and defense clients. 

While it’s okay, and often a good quality for a leader to be very hands on at an early-stage company in order to learn all the details, that changes with a larger company. “That micromanager may be great at a series A company but when going from Series B to C to a series D, it’s no longer good, because they’re focusing on all the minutia, and they’re not focusing on the strategy for the business or thinking through where the business needs to go,” Mr. Barney said.

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“There’s a stage in which the leaders can do everything themselves and know everything that’s going on with the day-to-day business operations. But there has to be a transition where, at some point, a leader needs to be able to delegate and rely on the talent working for them as the business gets bigger. That can be hard emotionally for founders and early employees at a company,” Mr. Barney explained of the challenges leadership faces when preparing to scale.

Leaning On Board / Advisor Expertise

Many organizations recognize the need for change, but bridging the gap between understanding and execution can be a challenge. Taking concrete steps towards implementing leadership change requires a strategic approach and clear communication. It’s crucial to align the vision, engage stakeholders, and provide the necessary resources for successful execution.

Key to executing this transition is not just the support of an executive search firm, but the expertise of board members and company advisors. “Board directors have the expertise and that experience, and they can provide that wisdom, and experience having been there and done that, to understand when leadership needs to evolve for growth,” said Mr. Barney.

But this is a difficult situation to navigate; the company is a founder’s baby and often it’s hard for them to let go or understand that their qualities are no longer best suited for the company’s next stage. “Some founders recognize their strengths and limitations, and some don’t want to go and move on to something else,” said Mr. Barney. “This can be to the detriment of a company, even if it’s been successful for some time. So, the board becomes a critical piece of this. Not only do board members understand when this change needs to happen, but they can step in and tell the founder that it is in the best interest of the company to make that shift.”

Leadership Assessments

Key to this successful shift is being able to assess the current leadership and the broader team. “This can help you understand where the gaps and capabilities are, and, if there are any gaps, the knowledge you need to fill in those gaps and capabilities so that the company is ready and willing to recruit for those leadership skills,” explained Mr. McFarland.

John McFarland is a partner and head of the U.S. Healthcare practice at Odgers Berndtson. In this role, he uses his deep experiences, expertise, and relationships to help clients (public, private and not-for-profit) across the healthcare ecosystem find executive talent. Prior to joining Odgers Berndtson, he spent nearly a decade in executive search and worked at Ernst & Young, where he consulted with healthcare organizations.

Odgers Berndtson has some helpful assessment tools to understand strengths and attributes and how they operate in the broader picture of the organization. “But it’s still a nuanced situation,” Mr. McFarland notes. “Sometimes, there’s not just one profile that can work, but understanding that and having the self-awareness to know what works, and what doesn’t work is important.”

Talent Unlocking Value

At the end of the day, talent is key to the success of any organization, but understanding the shifting leadership demands based on the stage of a company is how you unlock that value. Organizations need to be honest about where their leaders are and where they’re expected to be along the evolution of the growth cycle.

“In fact, with many private equity companies, the first hire firms make to their portfolio companies, once they know the CEO, is the CHRO,” said Mr. Barney. “Because they know that in order to scale, the organization will have to execute all of these hires, so it’s important to get the culture piece right and set up the right processes for talent.”

Scaling a company goes beyond just appointing an experienced CEO. It requires readiness, purpose, and careful consideration of the evolving leadership competencies needed at each stage of growth. By recognizing the importance of talent evolution, understanding the three key groups of competencies (leadership agility, organizational leadership, leading others), and making strategic decisions when selecting leaders at different stages, companies can position themselves for successful scaling.

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Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Executive Editor; Lily Fauver, Senior Editor – Hunt Scanlon Media