The Scale Myth
Recently a senior executive at a large healthcare analytics firm told me that he was struggling to find a leader to run a multimillion dollar business unit. Upon asking why, the executive said that the people he had considered have not managed a portfolio similar in size to the current unit. “Does it matter?” I asked, already knowing what his response would be.
“Of course it does!” he barked. “If they don’t have experience running large departments, how could they possibly know what it takes to take us to the next level?”
This is a very popular response.
But here's the thing - and I've seen this play out about half a dozen times. Revenue size is probably the worst predictor of leadership capability that you could pick.
Let me repeat for emphasis - revenue size is probably the worst predictor of leadership capability that you could pick.
Let me explain.
The Real Story Behind Scale
About six months ago I was in Manhattan, NY having lunch and catching up with a PE-backed analytics company president and friend of mine from our MIT graduate days. We were arguing about whether the Red Sox-Yankees rivalry was still even a thing when the inevitable subject of work came up. He summed up his situation perfectly. His $200M business? Well, they're wrestling with exactly the same challenges they had back in 2010 when the company was bringing in $20M. He complained about his operations lacking discipline, wishing his teams would stop focusing on one-off solutions and start thinking about developing more repeatable products, and making sure growth actually puts money in the bank. Same problems as in 2010 – the only difference now was the numbers just have more zeros behind them.
But let’s get real about what actually matters?
Growth is Growth
Let’s presume for a second that a start-up analytics team grew from $0M to $1M in the first year, then to $5M in year 2, and last year brought in $8M. That's 60% growth in just the last year - try finding that at any scale. Can you guess how they did it? Not by continuously hiring someone with experience managing increasingly larger budgets. But rather rock-solid operations and quickly identifying and turning high-value custom work into repeatable solutions that customers value and need. The starting revenue? Completely irrelevant.
Profit Beats Size Every Time
Here's another fun anecdote: I know of two business units fairly well: one doing $15M with negative margins, and another at $5M making 40% margins. Which leader would you bet on? I recently spoke to that SVP to find out how their smaller unit consistently outperformed their larger divisions – the answer? “I simply run a tighter ship” she beamed.
It's About the Team, not the Number
Let me share a story about a leader who grew their team from 15 to 25 people while keeping utilization rates at 85% while actually improving quality! Think those skills wouldn't work with 100 people? Think again.
The Stuff That Actually Matters
See what I’m getting at? The real predictors of success are clear:
Can you run a tight operation?
Do you track utilization (hint: should be 80%+ for delivery teams)
Do you know your margins (40%+ is considered healthy by most) and are they accurate
Do clients actually like you (98% satisfaction isn't unreasonable, in fact it’s a requirement to stay competitive)
2. Do you invest in your people? A smart executive figured this out:
She rotates people across functions
She shows everyone where they can grow
She measures both delivery and innovation
She invests in skill development
You know what's funny? None of this changes whether you're running 20 people or 200.
Let's Get Real
I know, I know… all of what I’m saying is common sense and not mind-blowing.
But common sense is not common practice.
Still skeptical? Let me throw some other relevent examples at you:
I came across an investor report that said a $6M analytics unit developed a visualization tool that's now their fastest-growing product.
Another quarterly report spoke about one department within the company driving 30% efficiency improvements for their life sciences clients from the same quarter the year before
Another leader on a conference call last year shared that he grew from 8 to 20 people with zero voluntary turnover for 18 months during a challenging economic period due to inflation.
Tell me which of those achievements wouldn't be impressive at any scale.
Here's My Challenge to You
Next time someone asks "but have they managed this size before?" ask the following:
How well do you run your current operation
What kind of growth have you driven?
How do you develop your teams?
Can you innovate while keeping the trains running - how do you balance the two?
If that person doesn’t have a good answer for you, maybe they're the ones who need more experience.
Look, I get it. Bigger numbers feel safer. Less risky. A more compelling argument for investors demanding high returns from big bets. But I've seen too many experienced leaders of large teams fail – and too many "small team" leaders crush it at bigger scales – to buy into the myth anymore.
Revenue size is probably the worst predictor of leadership capability that you could pick.
