Signs Your Company Is Headed Off Course
The more a company grows in headcount and revenue, the more likely it is to become a breeding ground for intrigues and struggles for power within the organization. This isn’t unusual and in many cases just how groups of people tend to organize in large numbers.
We are by nature competitive, not just in the market, battling for market share against other companies, but also within the organization itself. It is a constant race for resources, credibility and competitive edge over others. This tension can become destructive, however, when leadership isn’t aligned on certain issues and starts to fragment into different camps. When all goes well, these conflicts become less pronounced. But when things go south, the key drivers of the downfall tend to become more and more obvious.
The beauty is that each failed company contains a lesson, or material for a fascinating TV Show (aka "WeCrashed"). I’ve identified some red flags for any one to look out for when working in a company that could be a telling sign to jump ship:
Leadership is Focused on Vanity Metrics
This is a big one. An example of inexperience and poor leadership is a lack of numerical literacy and an inability to prioritize which metrics are truly indicative of success and which aren’t. Numbers, taken out of context, can tell a story that might point to a rosy future when the reality is much bleaker. When founders don’t acknowledge the severity of a situation and continue to manipulate data to propagate their own narrative, this is a sign that deep down things are not headed where they are supposed to. Intellectual honesty is so important and a culture of transparency can allow leadership and the company to hold each other accountable to the highest standards.
Frequent Changes in Direction
A constant adjusting of pricing and product strategy reveals insecurity and lack of thoughtfulness in the upper ranks that can be detrimental to the company’s rise. Not only does it cost a lot of mental energy to get behind a new strategy too often, but it exudes unprofessionalism to the outside world. When a company changes its pricing on a monthly basis, it gives the impression of disorder and can cause confusion among existing customers and prospects. Some times „velocity“ is mistaken for this phenomenon. Constantly re-adjusting your pricing has nothing to do with velocity. It means you are failing faster but also more often. It is better to fail, take time to draw the right conclusions and get closer to PMF sooner.
High Turnover
Good people coming and going. A startup shouldn’t just be a revolving door for talent to jump in and out. The best startups take a long time to hire their talent and find ways to retain them. They create a culture of top-performers that allow for a lean organization of a few A-players. Startups that have a toxic culture hire dozens of B-players and fire those who turn out to be C-players. A-players want nothing to do with a team that constantly switches out its employees and fails to attract the right people in the top-ranks.
The startup world has already experienced a consolidation period in the past two years, especially in the EMEA region, but things are starting to heat up again. M&A activity continues to increase and organizations are adopting SaaS and AI to stay competitive and lean and projected to form a SaaS market that grows 19% annually until 2029.
The winners will win big and the losers will die before having the chance to cash out. For those sellers looking to be on the winning side, watch out for the red flags!
Happy Sunday!