Leadership? Do not confuse with management! What is leadership in a start-up all about?

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9 minutes
According to data published by Failory*, up to 90% of start-ups on the market fail. How come? The culprits are numerous: from unsuccessful ideas, ineffective marketing activities and lack of financing to a poorly selected team. However, many of these mistakes can be easily avoided at early stages of development by giving the reins to a founder with well-developed leadership skills. But what exactly is leadership? Is it different from "ordinary" management? How did the transformation on the USS Santa Fe submarine change the view of leadership models?

Understanding leadership

Coming up with a good definition of “leadership” is not easy, because we are dealing here with a set of competencies that are multifaceted and difficult to verify, and which can be acquired almost exclusively through practice.

“In the start-up industry, there is a lot of talk about unicorns meaning start-ups valued at a billion dollars or more. However, I have the impression that people with a full set of leadership skills are equally difficult to find,” says Kamil Sabatowski, Interim CEO supporting the building and scaling of start-ups within the Tar Heel Capital Pathfinder portfolio. “Smart leadership means setting the direction, inspiring and giving wings to team members, skilfully combining talents, but also undermining the status quo and being ready to change the direction of the organisation’s development when it turns out to be necessary.” 

Sounds a bit pompous? The start-up industry is associated primarily with creativity and unconventional approach to business – for a reason. It requires the ability to infect people with energy, an idea, to pull them along and to make them feel fully responsible for their work. Every founder should have such skills, but in reality, this is often not the case.

Manager = leader? 

So, who is a leader in the business sense? Is every experienced manager an expert in leadership? It turns out that even a long record of successful business projects, which many start-up entrepreneurs can boast about in resumes, does not necessarily translate into leadership competencies. 

“The difference between managers and leaders lies primarily in the fact that the former have operational competencies. This does not mean, however, that they can galvanise the team, draw up the roadmap and re-evaluate it if necessary. A manager who is also a leader has such skills and is not afraid to make decisions, often difficult and revolutionary, that will turn the organisation upside down. These are the people we are looking for to build our companies,” Kamil Sabatowski emphasises. 

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“Leadership” is not only the founders’ domain – in a modern organisation it should manifest itself at all its levels. So, what should we pay attention to when building an organisational culture and values in a start-up so that from the very beginning it is soaked with the spirit of leadership?

In a way, in a start-up we are all leaders

Start-up managers should first of all remember not to succumb to the temptation to take over all the agency, responsibility and decision-making within the organisation. A business operating in the leader – contractor” model will never be able to make use of the most valuable capital, i.e. the knowledge and potential of the people working in it, especially in industries that are specialised or that require creativity / innovative thinking.

The negative consequences of this model have been described in detail by  L. David Marquet in his book “Turn the Ship Around!”. In the book, he tells the story of him being in charge of the USS Santa Fe submarine back when he was a captain in the US Navy. At some point, he gave the crew an order that was technically impossible to execute, which he did not know. The crew knew, and yet did not defy the senseless order – they simply did not carry it out, and the captain’s goal was not achieved. 

“In the U.S. Navy, it was unthinkable at the time to question the command given by the captain. This is how many companies still function – the team has its own manager who gives orders, and employees follow them even if they know that they are infeasible or do not make sense in the context of the goals set,” Kamil Sabatowski explains. “After this memorable situation, David Marquet introduced the ‘leader-leader’ model, a completely new style of management transferring decision-making power to other crew members of the ship. This revolutionary leadership model is today a strategic element of building start-ups and a model that we implement ourselves by supporting self-organisation in Tar Heel Capital Pathfinder portfolio start-ups.”

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Micro-management = micro-startup

In start-ups, there is also no place for the so-called management by instructions. A much better idea is to use the management by objectives model, i.e. management by goals, which in the appropriate time horizon helps implement the strategy and achieve the so-called milestones. 

“Founders are sometimes convinced that they must do everything themselves thereby falling into the trap of the so-called micro-management. Not only is this approach harmful but it also often affects all levels of the organisation. And yet we know that it is impossible for one person to have a comprehensive, aggregated knowledge of everything: the market, trends, customers, or available technologies. Therefore, a modern leader does not strive to know and decide about everything, but to unlock the potential of the team and fully use the competency and know-how of its members,” Kamil Sabatowski says. 

“Micro-management” is easier to avoid for organisations that operate in the learning organisation model, which enables them to verify hypotheses, draw conclusions, improve processes and gradually self-improve in a systematic way and in short cycles.  

“By supporting our venture building projects in our day-to-day operations, we see that the pace of a start-up’s development is often directly related to how quickly its leaders develop, as well as how often they re-evaluate the achievements and goals of their own and of the organisation,” Kamil Sabatowski adds.

To be a leader – but how?

First of all, you should often look yourself in the mirror and aim not to deceive yourself. Being aware of your own incompetence or lack of leadership skills is the first step to building or supplementing them. This is helped by regularity and a methodical approach, including root cause analysis. 

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It is also worth opening up to the opinions and feedback coming from people who work with us and observe our activities from the outside, in particular from the perspective of experienced investors or entrepreneurs. 

“Founders developing projects with the support of Tar Heel Capital Pathfinder receive such feedback regularly, because it is one of the elements of our venture-building support. We create a space where management boards can freely talk about areas they can’t handle. Importantly, we also help to address these shortcomings and fill in competencies,” Kamil Sabatowski says. 

Talking about our own competency gaps, even if we notice them, is obviously not easy, especially in relations with investors. However, it is worth keeping in mind that a wise investor will not lose confidence in us based solely on the fact that we admit to our weaknesses – on the contrary. 

“Investors who work on projects in a long-term perspective will appreciate this approach. And the benefit that derives from that kind of founder’s approach for the organisation itself is so great that it is definitely worth the effort,” Kamil Sabatowski assures.

* https://www.failory.com/blog/startup-failure-rate 

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You are a leader an would like to build your own startup? You are a founder of a startup, but you would be keen to acquire an experienced business partner to help you grow and scale it? Or perhaps you find the above interesting for other reasons?

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