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Leadership
Scaling a startup: Why you must focus on the ‘who’ as well as the ‘what’
Passion for the product is vital to launch a startup, but it’s not enough to lead a scaling enterprise. David Sluss, Katie Badura, and Yufei Zhong share a two-step approach to move from passion for building your product to inspiring your people to grow your organization successfully
Passion for the “what” – the product, the technology, or the market – is a critical asset for aspiring entrepreneurial leaders. Yet, during times of hyper-growth or scaling, this focus may become a serious liability. Take Derek Sivers, the founder of CD Baby. He told an interviewer that he set up the company to scratch an itch and to sell his own music CD because “there was just nowhere else to do it”. His passion turned CD Baby, at one point, into the largest online independent seller of music. Yet, this same passion and singular focus on the platform led Sivers to ignore growing “people” problems as the company scaled. “I let the culture get corrupted,” he said later. CD Baby survived, but Sivers did not. He stepped down as CEO and eventually sold the company. He was unable to transform his passion for the “what” into a focus on the “who”, which would have enabled him to scale up the business sustainably.
Entrepreneurs attempting to scale up their businesses must focus on the “who” because of the need to harness the collective wisdom of a rapidly growing C-suite and workforce. They must learn how to “scale up” their relationships as well as their products, which doesn’t always come easily to people who have had to relentlessly focus on their products to even reach this point.
In a 2022 Journal of Management and Organization study, David Sluss (with Danielle Cooper, Daniel Morrell, and Bryant Thompson) found that leaders approached their work relationships with one of two mindsets: exchange-based or belonging-based. In the former, the leader provides resources, and the follower (i.e., the employee) shows effort and commitment to their work. This simple and effective exchange drives a high-quality relationship – the follower knows where they stand with their leader. In the latter, the leader creates a shared sense of belonging and identity by getting to know the employee. As a result – as Sluss (with Rob Ployhart, Glenn Cobb, and Blake Ashforth) found in a 2012 Academy of Management Journal study – an employee’s work identity is largely formed by the relationship with the leader which, in turn, determines how much they connect and feel aligned with the organization. It guides their choice of performance goals and their persistence in striving to reach them. Entrepreneurs tend to focus – dare we say, over-focus – on being more exchange-based or transactional than belonging-based. For example, a 2020 study in Frontiers in Psychology by Yixu Tong found that entrepreneurs tend to engage in transactional leadership behaviors at the expense of transformational leadership behaviors. This is especially true of entrepreneurs with multiple startups under their belt. Given this tendency, we argue that focusing on fostering belonging-based relationships, not just exchange, is crucial for leaders as their organizations scale.
Every time I am interviewed or giving presentations out in the community, I keep in mind that our employees may also see or read about it.- Philippe Notton, CEO of SiPearl
Two ways to develop a sense of belonging
Published in the Journal of Applied Psychology in 2024, our meta-analysis of 157 studies of supervisor-subordinate relationships supports this hypothesis. We found that a belonging-based connection (“relational identification”) had more impact than an exchange-based one, explaining 7% more variance in job performance and 27% more in commitment – both critical leadership KPIs.
So, how can leaders adopt this beneficial belonging-based approach to leading their people? We recommend two evidence-based practices – one for the growing C-suite or leadership team and another for the employee and stakeholder population:
Personalize relationships with direct reports through career identity-focused one-on-ones
Google, via Project Oxygen, popularized 1:1 meetings between managers and their direct reports. One-on-ones within scaling organizations became an essential way for leaders (and the increasing middle management cadre brought in) to “keep things moving” with agility. Effective 1:1 meetings should focus on transactional issues such as task completion and project work. However, these sessions are also the perfect opportunity for leaders to get to know “who” their direct reports are, especially regarding their career identity.
As we have seen, career goals are central to work identity and sense of belonging. People spend much of their lives preparing for, thinking about, and planning their careers. As a result, work becomes a big part of “who they are”. Leaders will create a sense of belonging by asking them about their career aspirations and linking them to the employee’s current and future projects. This is not the same as the traditional “get to know your team” advice. We are not talking about personal lives or interests. To scale up your leadership impact, we recommend focusing on getting to know their work lives – especially their career goals and aspirations.
For example, a founder–CEO of a European-based SaaS scale-up learned of his CTO’s career aspirations during their 1:1 meetings. As the company scaled, the CEO realized they needed to elevate their product management function by hiring a Chief Product Officer. He thought his CTO would be a natural fit. “I realized during our 1:1 meetings that my CTO loved the technology but didn’t want to drive the customer discovery process,” he said. “Product management just wasn’t part of who he was. We changed directions and hired an external CPO. In the end, my CTO was excited to collaborate with (rather than be) the newly hired CPO.” This career-identity-focused decision led to a successful organizational restructuring.
Scale your ‘persona’ with employees by embodying what the organization stands for
A belonging-based approach to leadership is built on “getting to know” your employees, but don’t worry, this is not the same as getting to know everyone personally. Research shows that leaders can create a personal bond with employees, even when there is considerable distance between them. How? A leader can create a collective sense of belonging by embodying the “persona” (or the “who”) of the organization. Ask yourself: how representative am I of the organization’s identity and culture – that is, the organization’s persona?
Using the 2012 US presidential election as a backdrop, Niklas Steffens and colleagues found in a 2014 Leadership Quarterly study that party-identified voters felt more of a personal bond with Barack Obama or Mitt Romney when they embodied the persona or identity of the voter’s party. Similarly, research cited above found that newcomers in companies are more likely to feel like they belong when their immediate supervisor embodies the organization’s values and norms.
Every action and communication by a leader becomes not only symbolic, but “up close and personal” for the broader ranks of employees and stakeholders. Employees come to know the leader’s persona by listening to their messages and observing their actions. They pay particular attention to whether the leader is “living” the organization’s values – are they embodying the organization’s persona (or identity)?
This can be quite a shift in focus for leaders. As Philippe Notton, CEO and Founder of SiPearl (a Europe-based deep-tech scale-up), mused: “Every time I am interviewed or giving presentations out in the community, I keep in mind that our employees may also see or read about it. So I need to make sure that my demeanor, message, and tone match what SiPearl values.” He noted that this practice keeps everyone – employees, stakeholders, clients, and investors – aligned on SiPearl’s identity and goals.
“My job, as a leader, is to focus on my people. My people’s job then is to focus on the product. In a real sense, my people are my product.”
Leading from startup to scale-up
To scale leadership impact as an organization scales up – and to avoid stifling growth and your team, entrepreneurial leaders should rely less on an exchange-based leadership style and adopt a belonging-based approach with direct reports, broader employees, and other stakeholders.
Personalizing and scaling your relationships are not mutually exclusive. Leaders personalize their direct-report relationships by knowing and responding to career goals and aspirations. They can also “personalize” themselves for the organization as a whole by embodying its identity in all that they do and say.
Rather than overwhelming their team with too much emphasis on the product, the leader’s newly personalized focus on the “who” of the organization inspires others to passionately focus on the “what”, enabling the whole enterprise to scale and grow. As the COO from a European-based unicorn said, “My job, as a leader, is to focus on my people. My people’s job then is to focus on the product. In a real sense, my people are my product.”
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