Leaders who want to grow need to learn benefits of staying small

Setting up a company is hard. You need to come up with a business plan, find investment, sort out legal and regulatory issues and then find enough customers or clients to pay the bills. And that is just the start.

But what happens when a company grows? It requires more structure and processes, making it harder to remain nimble and innovative. This is especially the case in the internet age, when companies can scale up so quickly that it is hard to manage the process.

As Stanford professors Robert Sutton and Huggy Rao point out in Scaling up Excellence, there is no definitive template to meeting this challenge.

Most experts, however, agree that culture matters. Vinay Gupta, head of business design at consultancy Ideo, stresses that culture trumps all when it comes to staying innovative.

He says: “A value system that encourages curiosity, empowerment and openness is what helps companies stay innovative as they grow.”

As a company gets bigger, it becomes less flexible and open to new thinking. This means change takes longer to happen, he explains.

One answer to this conundrum may seem perverse: try and stay as small as possible as you grow.

This approach is a corporate reflection of human behaviour. The work of evolutionary psychologist Robin Dunbar has been influential in this regard. The Oxford professor has studied how we form communities and he says most of us struggle to maintain more than 150 “meaningful” relationships.

Beyond this, our brains find it difficult to cope.

The so-called “Dunbar number” has been studied by fast-growing tech businesses, such as the social network Facebook, and has been a guiding principle for others in how they organise themselves. For example, WL Gore, the maker of high-tech fabrics including Gore-Tex, breaks up business units when they get beyond 150 employees.

BlaBlaCar, the French ride-sharing company that was recently valued at €1.4bn, has developed its own version of this approach. The company, founded in 2009, acts as an online marketplace, pairing drivers who have spare seats with passengers looking for a ride. It employs 400 people in 12 markets, from the UK and Germany, to Mexico, India and Turkey.

The company has expanded into new markets through acquisition, buying existing ridesharing companies and their employees.

Nicolas Brusson, co-founder and chief operating officer, says this allows the company to be “hyperlocal” and to respond quickly. “We benefit from these guys who are as smart as anyone you can find in the country, which saves us a year or two in setting up.”

He says the company makes sure teams “never end up bigger than 10 to 15 people. This keeps a strong sense of purpose, people stay fast and hungry.”

The challenge is how to integrate the acquired start-ups, particularly when they are so widely dispersed.

Mr Brusson says the key for BlaBlaCar was to focus on “co-ordination rather than management”. This means giving the local entrepreneur-run companies enough autonomy to come up with their own ideas, using the Paris headquarters to run finance and group functions.

To embed the culture and make sure there is enough cross-fertilisation of ideas and best practice, BlaBlaCar does not rely on electronic communication but makes sure its staff are able to “travel a lot” to meet in person.

Country managers gather eight times a year in Paris and the company runs a programme called “BlaBla swap”, whereby any member of staff can spend a week working in another country.

“You can do some of this by Skype, but you need to do it in person — to go for a drink or a meal — for teams to really gel,” says Mr Brusson.

But his most important insight reflects the no-template advice of Profs Sutton and Rao: no structure will last, so you need to be prepared constantly to change things if circumstances require it.

“You end up changing organisation every year,” says Mr Brusson. “When you go from 100 to 200, to 400 or 800 employees, all the stuff you set up is going to last 12-18 months before you will need to restructure and break down your teams again.”