Philipp Engelhardt is the former CFO of Groupon Central Europe and is now a researcher at the University of St. Gallen. Over a time span of four years, using scientific theories and multiple iterations (24 so far) with high growth companies, Philipp created the Growth Management Canvas to support the scaling of startups.
What is the Growth Management Canvas?
Growth is imperative – in order to have impact, startups have to grow in terms of business as well as people. Research shows that management can both be an accelerator and inhibitor of business and people growth.
The Growth Management Canvas is a framework designed to help founders understand the management approach that is right for them to steer their growth in a sustainable way. It consists of a series of questions that help identify whether a startup has all the management instruments it needs in place. During the growth stage these needs change all the time: a 10 people startup needs less and different instruments than a 50 people growth company.
I built the Growth Management Canvas upon the latest theoretical entrepreneurship and performance management research as well as from empirical data with high-growth startups. After starting from a theoretical point of view, I deep-dived into case studies and observed how the theories fit with the actual needs of growing startups. In this process, I regularly received a lot of feedback from entrepreneurs, venture capitalists as well as from other researchers. I used it to constantly iterate and improve the framework.
What can kill startup growth?
Growth has two aspects. First, the market opportunity – customers like the startup’s value proposition and actually pay for it. The second aspect is that a startup’s employees learn how to deliver on its value proposition at scale. Both aspects have individual and organizational learning at its heart: learning about the market opportunity and learning how to deliver on the value proposition at scale.
The main reason for not growing is that learning processes are not deliberately managed. This includes: (1) not managing at all, (2) not using essential management instruments, and (3) not updating the management approach on a regular basis while scaling.
What is the advantage of using Growth Management in startups?
Usually, management is done in silos: there is strategic management, cultural management, human resource management, financial management, organizational design, and so on. These are all separate disciplines, often headed by different managers.
However, all these components need to fit together perfectly to support growth. Growth Management provides a holistic perspective: culture & customer, strategy & execution, organization, people operations, goal setting & feedback, key metrics and incentives. And it integrates all to a consistent performance management approach.
The Growth Management Canvas prompts the leadership team to methodically analyze the company’s current management approach and their readiness for growth. It does so by asking key questions like: “What are our company values?” or “How and when do we set goals?” or “What are our business model’s key metrics?”, “Do the key metrics support our company values?”
Whether a company is prepared to manage their growth is reflected in the quality and consistency of the answers given by the leadership team, i.e., founders, department heads, and in some cases also investors.
When should a startup start thinking about Growth Management?
Growth management should start early. Start thinking about it at 10 employees. At the latest with 30 employees, startups need to be able to provide solid answers to most questions of the Growth Management Canvas.
When a company has more than 50 employees and leaders cannot answer the Growth Management Canvas questions, or they disagree on some answers, the company will start running into problems. Roughly knowing the startup’s vision or relying on OKRs only is not sufficient and not precise enough. All management instruments should be defined in detail, written down and actually used – in the right sequence and at the right point in time.
Who should use Growth Management?
The leadership team and especially the CEO are responsible for creating what I call the growth management context. Creating the management context starts with the top management and should involve large parts of the team. Developing a sound management approach should not be delegated to human resources, corporate development, or any other support function.
I consider it essential that all of the top executives have a shared understanding of the context within which the company’s employees operate. The Growth Management Canvas can support here – it is also a communication framework for a shared understanding of management.
When implementing management instruments, it is beneficial to use existing software solutions. A big advantage of using software tools is that they make it easier for companies to roll out management instruments and really stick to them.
How has the Growth Management Canvas helped companies? Can you give examples?
One startup I consulted was strongly focused on metrics. The approach didn’t work for them, but founders didn’t know why. An analysis with the Growth Management Canvas revealed that the company did not well in setting operational goals. Without setting goals the startup did not have an instrument to systematically improve their key metrics. So we introduced a very short rhythm of goal setting – a four weeks rhythm – that then helped to drive up the metrics very quickly.
Another good example is a startup that used OKRs. OKRs did a really good job bringing the organization from 10 to about 30 employees, but then the founder team felt something was missing. The Growth Management Canvas showed that the company used OKRs also as their primary tool for performance reviews. That’s not what OKRs should do. You want ambitious goals in growth companies – otherwise it’s quite difficult to grow. But at the size of 30 people the company needed another management instrument to do performance evaluations. They decided to introduce a 180 degree feedback system.
In the first example, the startup focused too much on a management instrument (metrics) that did not fit their growth stage. In the second example, the startup missed out an essential instrument (performance reviews). In both cases, learning processes were hindered and growth slowed down accordingly. And in both cases, additional management instruments (goal setting and performance reviews) helped to realize learning potentials in the organization and growth returned.