Learn more about Jonathan Lowenhar at ETWadvisors.com.
Have you ever sat in a meeting and wondered halfway through what the hell people were talking about? Or have you suffered seemingly bottomless email threads so long you struggled remembering why they started in the first place?
Every one of these moments brings cost. That cost is as real as buying equipment, acquiring media, or paying a legal bill. Founders understand that inefficient execution costs time, and time is not free. So why does it happen anyway?
I obsess about hidden costs.
They’re sinister in their invisibility, staying clear of detection and, therefore, elimination. It’s their subtlety that makes them so dangerous. They are hard to measure, and absent quantification; they fail to make the data-obsessed leadership team’s priority list.
However, I contend that difficult measurement is not a sufficient excuse. Hidden costs, when aggregated, can impact the health of a young venture. But not all hidden costs can be mitigated in the same way. I see two categories:
Do you have a culture where a day full of meetings is the norm? Where the gatherings equally are used to provide updates as they are to host discussions? Are agendas inconsistent and pre-reading materials rare? Are meetings started and ended somewhat loosely? Are requests for follow-up actions inconsistently monitored and enforced?
At Enjoy The Work, among our core values is a phrase:
The concept is a simple one — all of us on our team operate with a desire to meet the needs of those with whom we work. We wish to be in service to our founders and to each other. Being in service is to live in a state of contribution and respect for one another. Culturally, it means respecting each other’s time, being punctual, staying on topic, and communicating clearly is not just about good execution. Rather, it’s an ideal by which we live and hold ourselves accountable.
So let’s say you’re a founder with a business suffering hidden costs. What, from a culture perspective, might you do?
It starts with an honest conversation with your leadership team and a moment of vulnerable reflection. I would contend that if a team is not punctual if a team does not respect calendars, and if a team does not make an effort to communicate well, it starts with the founders not being punctual, not respecting calendars, and not communicating well.
Own your part. Collectively, with your leadership team, craft a new set of values and then empower your colleagues to hold each other accountable. It won’t shift overnight. Culture shifts are lengthy affairs. But with tenacity, it is possible. And I promise the end results are exceptional.
But not all hidden costs can be addressed just via culture alone. Some require executional rigor. And the faster you’re growing the more likely these types of costs will bite you.
A company I know (though not one from the Enjoy The Work portfolio) had been growing steadily in all the right ways for ~2 years. They had raised multiple rounds of capital and expanded the staff from ~10 to ~25 people. New customers and revenue both had risen healthily, and churn was negligible. The founder decided it was time to pick up speed and expanded the team by 60% in one quarter.
The founder is a thoughtful executive. She gathered leaders in preparation for the expansion. They discussed setting up interview teams, onboarding protocols, and where existing processes might strain under the weight of a larger team. They updated their financial model to include recruiting expenses, assumed new hire ramp-time, and even added anticipated software expenses.
But wow, did they miss the hidden costs.
Every key metric for the business quickly dropped. The sales team closed fewer deals, the marketing team generated fewer leads, and several important projects got severely delayed.
When hiring a sales candidate, current account executes are asked to interview. That means less time selling.
When a new hire starts, the current staff is asked to bring them up to speed on history, culture, tools, etc. That means other projects get de-prioritized.
When a new hire is learning their role, the most experienced people often are asked to do the training. In this case, sales and marketing staff were coaching more and selling/marketing less.
And when a team expands quickly, existing processes crack at the seams. Purchasing new software can help, but that requires identifying, implementing, and training people on those tools. All take away from short-term productivity.
First, figure out what type of hidden costs you’re dealing with — if people are showing up late to meetings, it’s culture. But if business performance is dropping as the team is growing, I bet more rigor is needed.
I tend to avoid horror movies. I just don’t like things that go bump in the night. For startups, hidden costs are mean-spirited apparitions. They float across your Zoom meetings, travel by email thread, invade your employee onboarding, and sneak up on your new hire training.
Turn on the lights, wear garlic around your neck, and admit you’re partially to blame. These costs don’t have to stay hidden any longer.