Why Startups Fall Apart at 50

Employees
Coaching your business from its teen phase to
adulthood

Joe Procopio

Mar 19, 2019·

Photo: Luis Alvarez/Getty Images

 A sk anyone who’s worked at more than one startup
and they’ll probably tell you the same thing: Young companies
start to go off the rails once they hit 50 employees. I call this the
“teenager” startup phase, and I’ve been there several times, both
as an employee and an executive.

What does this look like?

Employee one through 10: At a certain point, the original

employees stop learning new people’s names. They won’t come
right out and say it but they start to resent having to show yet
another noob how to do the same simple things. Their tolerance
for mistakes, even for the same mistakes they once made
themselves, goes into the toilet.

Employee 10 through 25: The second tier of employees then

starts to form small, protective cliques. They may occasionally
drop references to the “good old days.” They place a growing
importance on things like titles and status. Discussions might start
to percolate about adopting the title prefix “Senior.”

Employee 26 through 39: This is the group where power plays

start to happen. If the “teens” are going to form tribes, the late-
twenties and thirties are going to start raising hell against the old
guard.
Employees 40 through 49: WTF is going on?

While this scenario may not be true for every employee in every
group, it always happens to at least a few people after a startup
hits 50 employees. Like I said, I’ve been in each group and I’ve
exhibited each of these behaviors, so I’m not judging here.

Well, maybe I’m judging a little. But we need to talk about what to
do when your company feels like it’s going off the rails. We need to
get our teenage startups out of the house and into the world like
functioning adults.

H itting chaos at 50 employees could mean several

positive things. For one, it definitely means a company is growing,
likely faster than planned. And as long as the growth doesn’t get
too far out of hand, that’s a good problem to have.

If growth is indeed happening and it’s organic, your company has

probably already developed an internal culture, lexicon, and set of
operations that may not be documented but are definitely
understood. Communication probably happens more on a face-to-
face and on-demand basis than in memos and meetings, which
means there’s likely not a lot of time wasted getting everyone on
the same page.
Chaos is also a sign that your company’s executives are spending
time building the product, penetrating the market, and satisfying
customers. They’re probably not hung up on the structure of the
company itself. But the chaos is also definitely a sign that it’s time
to start paying attention to this gawky teenager of a company
before it rebels and runs away.

Even if everything goes right, things will go wrong.

As any parent knows, there’s no cure for the teenage years; we just
have to wait it out. There’s an old buzz theme about chaos that I
hate: “Storming, forming, norming, performing.” It applies here,
but I hate it because I don’t think it actually helps us.

We can’t cure chaos. But we can put measures in place to survive

the storm. Here are the measures I’m most familiar with or
intrigued by:

Do nothing
This is a valid option. A lot of companies do this until they start
losing people. And by “do nothing,” I don’t mean doing absolutely
nothing. That’s impossible because issues will come up and we
can’t hide from them. Instead, “doing nothing” means proactively
doing nothing and then solving each issue as it arises.
I don’t recommend this solution.

Think about what happens when we start to hand out titles like
“senior” without rules for how those titles get handed out. Let’s
talk about meetings. We’ll need rules as to when and how they get
created. Otherwise, everyone’s calendar will eventually fill up,
conference rooms will become scarce, and nothing will ever get
done. Even things like working remotely need to be considered. If
we don’t have standards in place, and even if everything goes right,
things will go wrong. I’m not just talking about abuse here; I’m
also talking about how the rest of the team can be effective when
one or more of their co-workers isn’t in the same place.

Startups are usually scared of becoming stale, corporate, or heavy-

handed. And I get it: I hate those things too. But at some point,
structure becomes mandatory and it’s better to be proactive about
it.

What I’d rather do: Centralize and be transparent. At the very

least, create a single truth for rules, processes, guidelines, and
FAQs. Make sure everyone has access to those documents. Then
be transparent about why you’re doing things the way you do
them. This isn’t just about rules; it’s also about the company’s
overall philosophy.

Hire tons of middle managers

This is the polar opposite of the “do nothing” strategy, and I’d
compare it to using a sledgehammer to crack a nut. This strategy
usually happens way too early in a company’s growth cycle. Plus,
hiring more people to manage other people means wasting a lot of
productivity for a little bit of order.

If we’re hiring managers from outside the company because they

have experience leading teams at larger companies, they’ll have to
integrate themselves and learn how we operate before they can be
effective. Often these people will try to bring their older, larger
company’s schema with them, which doesn’t fit.

But if we promote from within, we’re likely burdening our best

people with something we didn’t hire them for. For example, often
a CTO will take the best developer and say: “Here, manage the rest
of your team for 50 percent of your time.” Then the developer’s
productivity bottoms out on the coding side, and the rest of their
team becomes resentful on the management side.

What I’d rather do: Create owners and team leads instead of
bosses. At 50 employees, people usually don’t need management.
However, things and processes do. This includes the product, the
front-end development, the hiring, the invoicing, and whatever
else you can think of. Give various people ownership of those
things or make them team leads of those processes.
Do what that other company did
I’m all for stealing smart ways of doing things and adopting them
as our own. I steal bits of Agile for methodology. I nick stuff from
Amazon all the time for strategy. I really like what Lyft is doing
with UX. But do you remember the trend from about three years
ago when several Silicon Valley companies tried to solve income
disparity by making everyone’s salary public? Yeah. That was a
valid problem but there’s no way you can convince me that making
every salary public was the solution. That strategy may be working
for them (or not), but I don’t have any evidence that it will work
for my company.

Trendy solutions come and go. Open workspaces were all the rage
to promote teamwork, then earbuds happened. Unlimited
vacation is starting to wane as a recruiting tool. On the other side,
parental leave for work-life balance looks like it will stick. My
point is that just because one, some, or even most companies are
adopting a policy, that doesn’t mean it will work for you.

What I’d rather do: Divide and experiment. Take pieces of

policies from different companies and run small experiments to
see if they’ll work in your environment.

Stop hiring and outsource

This strategy says: Once we hit a certain number of employees, we
can stop hiring and outsource everything. This could include some
clean breaks, like outsourcing all of development, all of human
resources, or all of support. It could also mean adding external
resources to internal teams, like consultants and independent
contractors, offshore teams, and third-party service providers.

This strategy will let you run a tight ship. You can expand and
contract on the rocky growth road without cutting headcount. On
the other hand, 50 employees is usually just a stepping stone to
100 employees or 1,000 or sometimes even more than that. There
are huge risks in having all that knowledge and experience out-of-
house.

This strategy is also trickier to implement than it sounds. We’ll

have to make surgical cuts as we grow and once we hit the 49th
employee, what happens next? What happens when we find that
next awesome hire? Do we need to let someone else go, or should
we wait for someone to quit?

What I’d rather do: Lease with the option to buy. A lot of
startups bring on contractors and part-timers who eventually
become employees—but only when there’s enough money, enough
runway, and enough need for that resource. I built two of my
startups that way. Do this on a larger scale as you grow, absorbing
teams when it makes sense. Run each team like an independent
organization within the company.
 If there’s a cure for chaos at 50 employees, it might
have its roots in that last solution. What if a company
organizational chart didn’t flow vertically from top to bottom but
rather looked like a series of pods? Those pods could have their
own pods if needed. Then company leaders would exist as single-
person pod with spokes to the larger pods.

Each pod would be run independently, like its own little company
within the company. Then the outsourced resources could be their
own pods, and they could come, go, and be absorbed as necessary.

I don’t know if this strategy would work. It might be wild, and it’s
certainly hard to put on a sheet of paper. I’m sure it comes with its
own set of problems. But my point is if we want a cure for the
chaos of 50 employees, we need to build a different kind of
company that runs in a unique way from day one.

And until that happens, we need to keep an eye on our teenage

startup until it becomes a functioning adult.