Is your business fit-to-scale?

Founders need the ‘hustle’ factor to build a business out of an idea. But they can’t do it alone. That’s why we are now asking a deeper question: does the workplace itself have ‘Fitness to Scale’?

“Ideas are easy. Execution is hard.” Plenty of investors have said this. And for good reason – it’s true. Being able to make things happen – that’s what sets successful entrepreneurs apart.

At AlbionVC we meet many founders with great ideas. But to turn these ideas into world-beating companies we look for teams full of energy, resilience and hustle. A track record in similar ventures also goes a long way. We want to know that a team can execute on ‘external’ elements – target a valuable market segment, build awareness, close customers, prove routes to market and so on.

But there’s a second, internal, factor to execution which I don’t think gets enough attention. A factor that determines whether a company can grow from 15 people to 250 people in a couple of years – building towards category leadership – without losing what makes it unique.

I’m talking about Fitness to Scale.

In other words: does the workplace share the same ‘hustle’ factor as its leadership? Does it have the people and processes it’ll need to meet skyrocketing demand or the need to pivot?

The founders are critical, of course. But as important as what they have going for them as individuals is whether they can cut the business from the same cloth. And can they then adapt and grow as leaders and as people to meet the challenges ahead?

To assess Fitness to Scale we ask these questions:

• How well does the business attract, manage and retain talent?
• To what extent is the top team and the entire business aligned around a clear and compelling purpose and direction?
• Does the organisation enable people to work well together?
• Is there potential and capability in the business to execute flawlessly?
• Does the business respond and pivot quickly and effectively?

We have always had a sense that workplace culture is underestimated and poorly understood.

We see this in our tech portfolio, where many of our investments have grown employees and revenues 10x in 2-3 years from their Series A. In every case the value proposition has changed, the mission, vision and purpose evolved, the competition increased, but the workplace culture has ensured these companies continue to prosper.

And yet some founders dismiss workplace culture as an ‘HR thing’, a function to be administered as cheaply as possible, or they ignore it completely.

This is wrong. Workplace culture is actually the under-examined priority factor in Fitness to Scale. The often-missing ingredient that enables hyper growth.

To test our faith, we ran a 92-question survey of companies in our cohort together with interviews of the CEO and a focus group. In each case we first examined their workplace culture to see if it would make them fit to scale or not. Then we matched their Fitness to Scale against commercial measures of success.

The results proved our hunch.

Every company that scored well on Fitness to Scale is currently outperforming commercially. Every company that scored poorly is underdelivering against its potential. There was a 100% correlation between these two measures of performance.

Today, when we meet founders, we make sure they are thoughtful about workplace culture. We want to see that they are open to learning about key factors such as leadership, hiring and retention, and process. We’re excited when they challenge themselves to improve it – it gives us confidence their companies are Fit to Scale.

For some entrepreneurs, the tools to nurture workplace culture come naturally. For others, less so. People who start businesses can often be exceptional engineers, innovators, inventors or marketers. But building a great workplace culture? That’s something some have to learn.

It can be done. It’s a question of finding the right approach to hiring, training, communication and leadership.

There’s more about our study and its conclusions online. I hope you’ll take a look and let us know what you think of the practical insights we’ve highlighted.

More work needs to be done to fully understand the link between workplace culture, Fitness to Scale and commercial performance. We’re certainly not suggesting internal factors trump external. But we’re clear on one thing: workplace culture matters to us. We hope it does to you, too.