After securing $7-million in investment capital, things were looking up for Ben Baldwin and Jamie Schneiderman, co-founders of ClearFit. A Series A round of funding meant that they had the resources to grow to their business. But in order to do so, the partners would have to delegate key responsibilities to a new management team. Could they navigate the transition successfully?
In 2006, Mr. Baldwin and Mr. Schneiderman launched ClearFit, an online platform that, they say, "makes hiring easy." The tool finds potential employees finding job and predicts their success at particular organizations.
The key target market for ClearFit is small and medium-sized businesses. Traditionally business owners in this market dislikes hiring is not only difficult, but potentially costly if a candidate doesn't work out. After all, bad performers can not only tarnish relationships with customers and suppliers, but also weaken morale in the office.
Since starting up, over 10,000 firms are using the ClearFit patented software. In Dec. 2012, they received $7-million in Series A financing from GrandBanks Capital and Relay Ventures to scale the business.
But rapid growth, as many startups know, can be fraught with difficulties. As Mr. Baldwin puts it, "we tripled our work force to 30 people, including seven senior hires. The skills needed to manage this growth are different than the skills we needed to get to that point. We had to learn to get the right people on board, give them the space to do their own thing, and get out of their way."
Mr. Baldwin emphasizes the importance of building a culture that fits a larger organization. "Jamie and I no longer make all the decisions, but we realized that if we were going to delegate decision-making, we needed to provide a framework so that other people could make them consistently and coherently."
They hired as Chief of Staff an executive coach who had experience in rapid growth firms and understood the challenges of scaling up. They also made sure they articulated to the senior management team precisely what ClearFit stood for.
The two co-CEOs expected to guide this discussion to a large extent, but were pleased when all of the managers, including the newcomers, discussed what ClearFit meant to them. The group focused on three values, which Mr. Baldwin describes as ClearFit's DNA: (1) we put people first; (2) we strive for excellence; and (3) we're open, honest and fair.
Operationally, this means that managers are able to make consistent decisions and act autonomously while growing the company. It also means that constant communication is important.
"People were becoming 'silo'd' because of the fast pace within the business. They were focused on their own area and didn't have the time to spend learning what was going on in other areas. But when you're changing so rapidly, knowing what's going on everywhere is essential for making sound decisions. Jamie and I talk every day, the management team meets every week, and we find multiple ways to communicate so that everyone gets important messages," said Mr. Baldwin.
Part of the emphasis on communication is enhanced transparency. There is a ClearFit intranet that shares everything, from financial data to the results of marketing experiments, so that people can understand better what's going right and wrong."
Mr. Baldwin estimates that it took the new team at ClearFit about six months to gel, but results of having a larger, experienced team are worth it. He is thrilled that product development time has improved by over 30 per cent, the company's cost to acquire a new customer has dropped by 50 per cent, the customer base is growing by 10-15 per cent per month and customers are raving about new product improvements.
Becky Reuber is a professor of strategic management in the Rotman School of Management of the University of Toronto.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.