It’s been my experience that leaders at Torrent consistently recognize the value of learning from others. Our Golden Circle was inspired by Simon Sinek’s book, Start with Why, for instance, just as our three-year vision was shaped by models from Cameron Herold and the Zingerman’s Community of Businesses. Sometimes the things we learn are so valuable that we not only use them in our own business, but also pass them along to our customers. Such is the case with the “Stages of Growth” framework.
“Stages of Growth” is such a frequent topic of conversation in the day-to-day of Torrent — and has made such an impact on our business — that we here wanted to share it with as wide of an audience as possible. To learn the ins and outs of these stages, I spoke with Dustin Shea, our director of business development and “Stages of Growth” expert. He and I recently got together so I could ask him a few questions about the framework — what it is, where it came from and how it helps.
Note: This transcript has been condensed and edited for clarity.
Max Branson: How would you describe the “Stages of Growth” model?
Dustin Shea: “Stages of Growth” is a framework that allows organizations to understand what challenges they’re currently facing that might not be super obvious — or at least not well articulated — and what challenges they can anticipate happening as they continue to grow their firm. It gives you some comprehension of where you’re at and why you’re going through the things that you’re going through. That’s been the biggest point of solace for me as Torrent has grown.
You might realize as you reach 25 full-time employees, for example, that you feel like you’re having trouble defining what your core values are. Or maybe there’s some other pain that you can’t pinpoint exactly where it’s coming from. What “Stages of Growth” offers is a roadmap of the challenges you’ll continue to face as you grow, as well as some specific words to put to some very common themes.
MB: And where did this framework come from?
DS: “Stages of Growth” was formed by a company called TTI Success Insights. I don’t know exactly the sample size of their research, but basically they studied a whole slew of organizations and mapped out all the common themes that organizations tend to go through as they grow. Based on the patterns they found, they were able to identify 7 stages, each with their own unique problems and areas of focus.
The foundation here is that each stage is based specifically on the total number of full-time employees you have. It’s not about revenue, location — those don’t matter. The only thing that this is derived from is the actual number of employees.
MB: And what are those stages? Where are the cutoffs for each one?
DS: Stage 1 is the “Start Up” stage. You have 1 staff member up to 10 staff members, and this is really all about proving profit. Do you have a business that the market is potentially interested in? It’s about proving out a business — not necessarily a full business model — but proving out a business that is economically viable.
As you get into 11 to 19 employees, profit is still really important, but so is scaling. They call this the “Ramp Up” stage. Scaling, bringing in additional salespeople, back office employees, or those aligned to delivering your product — most importantly hiring those staff members that allow you to get into stage 3.
And that’s the “Delegation” stage, between 20 and 34 full-time employees. Once we get through the Delegation phase, the CEO’s not wearing 40 different hats anymore, he or she wears maybe 2 or 3 hats. You’ve got a management layer in place, you’ve got your daily producers — then it’s all about operationalizing your entire business.
Next is what they call the “Professional” stage. Stage 4 is between 35 and 57 employees, and the modality of focus becomes process definition. So, you’ve proven a business model, you’ve grown it, scaled your business, delegated and you’ve got the appropriate leaders in place — now it’s all about taking those individual processes and defining them, whether it’s marketing, whether it’s sales, whether it’s service, whether it’s cash collections. Whatever your 6 or 8 core business processes are, you start to define their individual stages — what happens when something enters a process, what happens when something exits a process, and the impacts both upstream and downstream.
So, naturally what happens is the marketing team or the sales team or the services team, they begin to define and scale their processes, but it ends up happening in a silo. And this is super normal, very natural, because the next stage — between 58 and 95 employees — is the “Integration” stage. This is where you’re taking the processes that you’ve defined and bring them all together into one cohesive customer lifecycle.
From there, once you get to 96 employees, that’s the “Strategic” stage. This is where the focus gets back to people. It’s all about staff buy-in. How are you onboarding staff? How are you orienting them? Are you getting quality staff, right? At this point, you’ve got a proven business model, you’re clearly becoming successful, and I think a lot of firms are either pushed by their private equity or their board to hire, hire, hire.
But the folks that move through this phase successfully are those that have said, “These are our core values, this is our culture, this is why we do the things we do,” and bump that attitude out into the marketplace. They bring on employees that align with these things and they end up being the kind of quality employees that you’re looking for in the long run. It’s critical that you’re not just bringing on people for the sake of filling shoes, but actually bringing them on because these folks are going to become the next generation of leaders as you continue to grow.
And finally, the “Visionary” stage is where you get to 161 employees. One of the biggest challenges in this stage is lack of product differentiation. So this stage is about how you’re going to market, how your products resonate with your customers, how well those customers are able to navigate your organization and the way you sell your products. Outside of that, this is where a weak business or a weak profit design can start to peek back up. So if there have been some issues with how a firm’s been managing profits and gaining profits throughout the entire lifecycle, this is where that can start to become a problem and force you to focus on revamping or refining your business processes to better align all of the changes that have happened to the business throughout the previous stages.
MB: You brought up the idea of “focus” a few times during that answer, and how it shifts from stage to stage. Is that a core part of this framework?
DS: Absolutely. There are 3 gates of focus and they rearrange themselves based on what stage you’re in. Really, what they’re trying to answer is: What is the main priority for your business as you’re in each stage? And it’s either profit, people, or process. Early on, it’s all about profit, profit, profit — so that you can get to the Delegation stage. Then your business starts to become reliant on the people as the area of focus. At that point, some of the main issues are staff buy-in and communication from leadership. Then, as I mentioned, it becomes about process definition.
MB: What are the dangers of just “figuring it out as you go,” rather than using this model?
DS: The thing that’s been really helpful about the “Stages of Growth” is how validating the framework is. It allows you to say something like, “Hey, we’re not crazy. This is common for us to feel a really strong tension within the business based on our size. We’re in the Professional stage, we’ve got a lot of turnover right now, but that’s a natural thing.”
The challenges that I think we would have faced had we not had this roadmap would have been “order of operations” issues. The fact that this framework puts such an early emphasis on core values, for instance, is hugely important because I think it’s really rare for folks to even worry about things like that before they get to 100 or 150 people. You know, they think, “How do we get to $10 million in revenue the quickest,” right? So I think having the order of operations to say, “All right, this is what we need to be doing and when we need to be doing it” — that allows you to grow more easily and less painfully throughout all of these stages.
The other really interesting piece is the concept of stage debt.
MB: Stage debt?
DS: You can be a 100-person firm and in stage 6, the Strategic stage, but that doesn’t mean you’ve necessarily solved all of the problems and all of the challenges that you may have been experiencing since you were 20 people.
They call this debt — carrying over debt from one stage to another, or even multiple stages throughout. What we see a lot is that companies get to 100, 200, 300 people, and they haven’t properly set up a model in which they can effectively delegate. So, instead of the CEO focusing on the things they should, they keep getting pulled into the minutia, the day-to-day, and end up not being able to be an effective leader. I can’t tell you the number of organizations I’ve walked into where the CEO is on 400 different meetings in a single day, 90 percent of which are not about continuing to build the business or to scale the business or strengthening the go-to-market strategy — it’s putting out fires with customers, or even with individual employees.
MB: You’ve talked a lot about the pains you suffer as you move from stage to stage — but what about between stages? What are some of the key challenges organizations traditionally face when moving from one stage to the next?
DS: Great question. There are 2 different kinds of transition zones between stages: flood zones and wind tunnels. The wind tunnels happen between stages 2 and 3, 4 and 5, 6 and 7. Flood zones happen between 1 and 2, 3 and 4, 5 and 6 — they alternate.
When you get towards the tail end of the Start-Up phase, what’s likely happening is, you’re at this critical mass where you’re starting to attract a lot of interest, and your product’s starting to get a lot of traction. Naturally, when that happens, the market says, “All right, great, here’s all of this opportunity for you to take advantage of.” This is a flood zone, and it’s important how the business responds. You get into these points of “We have too much work to be able to handle all of this.” So what’s the next stage? Ramp-Up. You’ve got to bring on additional staff — the number one challenge of stage 2 is hiring quality staff to be able to handle all of the opportunity that’s brought your way.
The other kind of transition zone is the wind tunnel. Some of the biggest challenges here are that profits could be down, employees might be becoming frustrated, and there’s just a general sense of difficulty as you move from one stage to another. For instance, as you move from the Ramp-Up stage to the Delegation stage, usually what has to happen is you’ve got to break down what you built up. If you can imagine moving from 1 employee to 20 employees, you’ve proven that your product is viable in the marketplace, you’ve hired a bunch of people to handle the additional opportunity, and now you’ve got to break down whatever inherent structures have naturally been created so that you can start to delegate. And there’s just naturally going to be resistance from the organization as you start to break apart what some of these structures have looked like up to that point.
I almost think of wind tunnels as the internal struggles that result from organizational change that just has to happen. Versus a flood zone, where things are going really well, but you’ve just got too much to handle. Both are difficult.
MB: And what are some ways to solve those challenges?
DS: The biggest thing is visibility. As you move through all of these different stages, you’re going to see a lot of gaps in data. Once you have individual processes in place, then it’s a matter of how you’re seeing the transition points between them. Every single morning in our leadership team meeting, we pull up a single dashboard out of Salesforce that shows the 2 KPIs we’ve defined for each of the different segments of the customer lifecycle. Were we red, yellow or green yesterday? Then, every Monday morning, we do red/yellow/green for that KPI for the previous week. So, the fact that we’ve got all of our marketing qualified leads in Salesforce, all of our new sales opportunities in Salesforce, things like that throughout the customer lifecycle — that’s allowed us to say, “This is the health of our business as it stands right now.”
I think a lot of firms struggle with understanding their performance from the last month, or the last quarter, or the last 6 months. What we’ve been able to do with Salesforce is say, “This is our performance today, to the minute.” Which offers us a lot of speed in identifying and solving problems. Instead of saying, “Oh man, we missed our numbers in Q3 and now it’s the beginning of Q4,” we’re now able to make real-time adjustments.
To summarize, you should define KPIs throughout your entire business cycle, visualize those KPIs through some type of real-time reporting, and — I think this is the most important thing — have everyone buy in to a single system. It’s really important that the CEO, the C-suite and the executive team have a lot of buy-in and hold people accountable for the system of record, whatever it may be. The executive team has to hold the management layer accountable, but management — in turn — has to hold their teams accountable. And then for the end users, the day-to-day producers, whatever system you’re using can’t be some “big brother” tool, it needs to actually help them gather all the customer data they need and store it in one place.