From Startup to Scaleup: When Improvisation Must Become Organization

Despite the common belief that creative chaos, agility, rapid changes, and small, close-knit teams are fundamental characteristics of startup success, the reality of further scaling (expanding scope) of a business proves that this model of operation, although initially effective, cannot last forever. Long-term insistence on improvisation and verbal agreements instead of structure and clear processes eventually becomes destructive for the company’s ambitious plans, as well as for its team.

When important information starts getting lost in the hallways, trapped in individuals’ heads, or lost in the columns and rows of Excel spreadsheets, it may be time to introduce stricter standardization and organize business processes. Those who have experienced this process firsthand, whether as (co)founders or as team members of a fast-growing company, agree that the ideal moment for a stricter division of tasks and responsibilities is long before the first problems surface.

– The ideal moment for standardization is not when ‘everything is chaotic’, but much earlier: when you first notice that information is being lost, that people interpret goals differently, or that you are solving one problem multiple times – emphasizes former chief engineer at Bugatti Rimac with extensive experience in developing Nevera, Snježana Miliša, who is now the owner of the consulting firm Merlin Hat, where she advises other startups on how to organize work and align teams.

– In a startup, speed is an advantage, but without a basic structure, it turns into a cost. My experience is that processes need to grow with the company; they should not stifle, but must create predictability. True standardization is one that facilitates work for teams, not hinders it – adds Miliša, but notes that standardization should not bring more bureaucracy, but clarity regarding who decides, who is responsible, how progress is planned and monitored.

‘Hire Mark’

The most common signal that a change needs to be introduced is when one job suddenly requires more coordination than work, says Matija Nakić, co-founder and director of the Croatian startup Farseer, which recently secured $7.2 million in funding and expects a phase of accelerated scaling and team expansion.

– The second signal is when the introduction of new people into the business slows down and becomes costly because knowledge is transferred verbally, via Slack, and according to the principle ‘ask Mark’ instead of a clear system. The third signal is when problems surface late, only at the end of the month or quarter, instead of being seen in a weekly rhythm and reacted to earlier – Nakić points out.

At Sofi IT, the company behind the popular sports app Sofascore, they also began to introduce standardization when they realized that verbal knowledge transfer was simply no longer sufficient. As co-founder and chief strategy officer Ivan Bešlić explains, when knowledge was held by one person with whom all new employees had to talk, it became clear that they needed to introduce more comprehensive regulations and significantly improve documentation.

– We had situations where a new employee would arrive in the middle of summer, when a large part of the team was on vacation, and for months could not get the key information needed to perform their job effectively – Bešlić testifies, emphasizing that they made mistakes while introducing processes, which they consider a normal part of learning and the company’s development.

When communication could no longer resolve problems quickly enough, Dario Marčac realized that his agency Crew, which gathers content creators on TikTok, was no longer a small team, but a collective that requires clear rules and division of roles.

– When there were three or four of us, everything was resolved with energy and trust. Ideas were agreed upon in one conversation, decisions made instinctively, and changes introduced the same day. This works while the system is small and everyone has a complete picture of everything. The first real signal that we were entering a new phase was when the same mistakes started repeating and when decisions began to get lost in translation – says Marčac, who then realized that he was not leading a team, but a system.

Continuous Process

However, the co-founders of the startup qohubs, Dijana and Viktor Vetturelli, note that the question is not ‘when to standardize’, as this should be done immediately, but ‘what’ to standardize. Although standardization in startups sounds like the opposite of agility, the Vetturellis believe that every organization inevitably carries repetitive tasks that require ‘a clear division of roles and minimal structure to free mental capacity for what is complex’.

– Whether the organization is small or large, new or established, each in its context needs some level of standardization. It is useful internally, but also in relation to clients. Anyone who claims they do not need it is generally wasting precious time, repeating the same mistakes, and at best missing market opportunities – emphasizes the couple who also runs the consulting firm of the same name with over twenty years of experience in business consulting.

When scaling a business, there is no single moment for organizing business processes; this must happen continuously, says one of the most successful domestic startup founders, Tomislav Car, who has experience scaling Infinum and is currently developing his second company, Productive.

– You must constantly find opportunities to do something better. Sometimes this involves introducing processes, tools, new departments, whatever leads the company in the direction you think it should go, and sometimes eliminating unnecessary processes that have accumulated over the years – says Car.

Founders as Bottlenecks

In addition to changing the way of working, it is important for a growing and changing company to recognize the moment for redefining the management structure, i.e., professionalizing certain functions. For example, Car believes this depends on the complexity of the business model, but that it is good to think about professionalizing finance after the company exceeds a few million euros in revenue.

On the other hand, Bešlić believes that C-level roles, such as those responsible for product or finance, make sense to introduce when founders can no longer make all decisions quickly and effectively enough.

– When the organization starts waiting for answers, when further development slows down because everything must go through the founder, that is a clear signal that it is time to strengthen the team at that level. It is then important to introduce people into the system who can independently decide on moderately complex tasks and thus enable faster and more sustainable growth – advises Bešlić.

Miliša notes that a chief financial officer should be appointed when finance becomes a matter of capital management, investments, and long-term stability, which usually happens before significant growth, not after it. Nakić agrees and adds that roles such as chief product officer make sense when the product question grows into a matter of maintaining focus and quality during growth.

– You build the management team when it is no longer enough for founders to ‘cover everything’, but when that becomes a bottleneck for growth – says Nakić.

This timing is particularly important to weigh in companies with external investors, the Vetturelli couple notes. Namely, when making investment decisions, investors, among other things, assess the composition of the team, which is why CFO and CPO functions are introduced earlier, as a kind of signal to the market. In companies that finance growth with their own money (bootstrapped enterprises), the situation is different.

– At one point, you realize that you are no longer just a founder but also a bottleneck. Not because you are doing something wrong, but because the system has outgrown the logic in which everything goes through one person. While key decisions, finances, or products are ‘in the founder’s head’, the organization is fragile. This does not mean that the management team is built to relieve the founder, but so that the organization can function at a higher level of complexity. This implies a change in the architecture of decision-making – explain the Vetturellis.

Founders sometimes find it difficult to assess when to place someone from the organization in a particular position and when the team needs someone from outside, a professional manager with a fresh perspective. In other words, who among the existing operators can and wants to take on a managerial role, and which profile of expert is still missing in the system and needs to be found and hired.

Miliša believes that the management team needs both: people who have been with the company from the beginning and know the business best, as well as external experts who bring desperately needed experience from other companies.

– First, you need to identify and develop people who have grown with the company. They carry the culture, understand the context, and have the trust of the team. They should be systematically developed, entrusted with responsibilities, and prepared for larger tasks. Secondly, external experts should be brought in purposefully and thoughtfully. They are extremely valuable when they bring specific knowledge that is not yet present in the organization. Ideally, they come to transfer knowledge and empower employees. Keeping them long-term makes sense only if they are top experts and fit into the company’s culture. The culture should not be adjusted to the individual; they must fit into the company – Miliša is clear.