In this episode, Sel Watts, founder of wattsnextpx, outlines how leadership team design must evolve as professional services firms grow and scale. From early growth through exit, we explore how roles change, how people change, and what founders often get wrong when they don’t plan ahead. Sel shares practical insights on anticipating transitions, structuring your team for scale, and avoiding painful missteps. In a business where people are your biggest asset, org design is too important to leave to chance.
TRANSCRIPT
Greg Alexander: Hey, everybody, this is Greg Alexander. You’re listening to the Pro Serv podcast brought to you by Collective 54. If you’re new to this show, the show is dedicated exclusively to founders of boutique professional services firms. So if you’re in the expertise business and you’d like to make more money, make scaling easier and make an exit achievable, this show is for you. And today we have a long standing well respected Collective 54 member. Her name is Sel Watts. Sel, amongst many other things, is an HR strategist. And today’s topic, we’re going to talk about how leadership changes as you go through the life cycle stages of a boutique professional services firm. So with that, Sel, it’s good to see you. Welcome. Please introduce yourself to the audience.
Sel Watts: Thank you, Greg. Always great to be here with Collective 54. So I own a company called What’s Next PX in the US. I originally started my first business, What’s Next Group, in Australia 18 years ago next month, which is crazy. And the business here in the US, we focus—we call ourselves culture architects. So basically, we work with founders who are growing, helping them to scale and look at what their teams—not necessarily what their teams need, but what they need to be doing to ensure that they’re getting the performance and engagement of their team as their business grows.
Greg Alexander: Okay, sounds great. So I’m gonna just briefly reintroduce the boutique lifecycle, and then I’m gonna ask you some questions about how the team changes at each step. So for those that are new to us, I wrote a book called *The Boutique: How to Start, Scale, and Sell a Professional Services Firm.* In that book there’s 3 sections: grow, scale, exit. And it introduces the concept of a life cycle of a firm. And our point of view is it takes 15 years to go from cradle to grave. And 5 years in each stage—5 years in grow, 5 years in scale, 5 years in exit. And there’s a very different playbook at each one of those steps. A very important component of that playbook is how leadership—the founder him/herself as well as the team—and how things change as you go through each step. So with that as a background, let me get to my first question, which is: In the early years, let’s call them the grow years, which are typically years kind of one to five, founders often lead by instinct and grit. And sometimes that’s effective, sometimes it isn’t. So what kind of leadership is most effective at this stage? And what are the common blind spots that hold firms back from scaling?
Sel Watts: Yeah. So usually at the beginning stage, let’s say, up to the first five employees, usually they are friends, family, people that have bought into the vision of the founder. So they’ve said, “Hey, I’ve got this awesome idea. I want to make this impact on the world. Come and join me.” And usually, and certainly in my case, the people that you’re wanting to join your company—they could get better pay somewhere else. They could have more guaranteed security somewhere else, more structure. But they really want to be part of something bigger than themselves. So they join. And together as a team, as a family—which you may call it at that stage—you’re really making decisions together. You’re talking, everything’s sort of open, and everyone’s driven by the inspiration that the founder is giving off. And so there’s not really any need at that point to be considering leadership. You think you’re good at it because you’ve got this really engaged group of people. They work much longer hours than other people would have. They’re really engaged. They’re doing it for the business, and you don’t really need to have any other things other than inspiration. And that’s a really fun time. I really enjoy that time.
And then the business starts to grow, and you then start to have to bring in employees who you’ve gone out to market to recruit, who are strangers, so to speak. And then they come in, and they’ve been working in other organizations, and no longer are you the inspiring founder, but you’re the leader. You’re the employer. And the employees’ expectations change significantly. I’ll just stop there in case you want to.
Greg Alexander: Yes.
Sel Watts: Yeah.
Greg Alexander: Well, it’s such a great thing, and I agree with you. I mean, the founders are charismatic, you know they have that founder magic. And those first five or ten employees, you know, people from their network—as you say, sometimes family members…
Greg Alexander: And there’s a lot of kind of leaps of faith that people take, but that certainly changes as you get into the scale stage. So that that takes me to the the second question, and and by me asking this hopefully, you can highlight some of these traps to avoid as we go from the grow to scale stage. So let’s say I’m now the founder, and I’m entering the scale stage. So maybe I’m in like year 6 or 7 or something like that. And I’ve got a shift from doing to delegating. And that’s a hard leadership move. There’s a bunch of habits that need to be broken, and there’s a lot at stake. If I don’t evolve at that moment in time. So so give me your perspective on that critical moment of transition.
Sel Watts: Yeah, this is, that’s such a good point, because ultimately the business won’t grow if the founder doesn’t grow. And so I think founders are so focused on growing the business, but forgetting about themselves, and how much they need to adapt as their business grows. So once, then, they get to the point where they’re hiring new people. Usually the 1st thing that is missed is that they haven’t clearly defined what success looks like clear Kpis clear outcomes clear expectations, because previously everyone just did everything and didn’t need that portion. They didn’t even need to know what was expected of them. They just went for it. And so so what happens is people come in and they don’t really know what’s expected of them, but they get in there, and they’re, you know, they’re excited, and they’ve been brought in by the vision somewhat, too, but they’re also got high expectations of the leader and what I’ve seen so many times, and has happened to me is that then people tend to not be performing. And the leaders like they’re not doing it. They’re not doing a good job. They’re the wrong people I can’t hire. Well, I’m not all of these things when really that may be the case. But really, in most cases it’s that they haven’t had clarity around what’s expected of them and what success looks like, and how they’re going to be measured. And so then we have this issue of this person isn’t performing when, like every founder that has to terminate their 1st person, I mean you. You never, ever get comfortable with that. That’s just. I think human beings we don’t like having to terminate, or or you know, our staff, but but you sort of feel like they’re not. They’re not performing, but also I haven’t really given them what they need. So you either recognize that you haven’t given them what you need or you just go. I’m just keep hiring the wrong people. But not necessarily. You haven’t actually set them up for success. I see this 9 times out of 10. At this, at this stage.
Greg Alexander: Yeah, you know one thing that I would like to get your perspective on a follow up question to that, and and maybe just a comment or 2 from my own experience is. You know, when you’re in a job interview and the candidate is selling themselves to you. The responsibility there is on the candidate, I mean. The candidate is then saying, Hey, here’s what I can do for you. If you hire me. Once the candidate accepts the position, and they come to work for you. The responsibility now shifts. You, the founder CEO, of your firm. You’ve made the decision. You’ve hired that person. So you’ve told that person explicitly by issuing them a job offer that you believe they can do the job. So if they come in and they don’t do the job. Whose fault really is it? It really isn’t the candidate’s fault. It’s the founder’s fault at that time, because, I mean, what does a candidate know? The candidate is accepting a job based on the things that you’ve told them about the firm. If those things don’t materialize. You kind of oversold the position. So that shift happens there. I think it’s a cop out and an excuse when they say, Well, I hired the wrong person. That person’s a bum. They’re not doing the job. Well, maybe it’s really you. You haven’t put them in a set of conditions for them to succeed. Have you seen that.
Sel Watts: I see that every day, and have for the last 20 years, and you know what’s so interesting. Firstly, the founder goes out to recruit before they’ve actually clearly defined their roles. And so often what I find is that the person isn’t the problem. The role has not been defined properly, meaning that it’s not structured correctly, you’re looking for 2 completely different types of people in one role. I see that all the time. So that’s the 1st thing is that they need to be defining, getting clarity on like, does this role make sense 1st before they go to market? But you know, most people would say, Oh, you know, this was a. These people were no good, but that’s I totally agree with you in most cases that I see it’s like, okay? Well, we can’t really assess that properly, because you didn’t give them clarity. You didn’t give them proper onboarding. You didn’t give them proper training. You’re not giving them feedback. So it’s sort of like, well, do we really know if this person is no good because you haven’t actually given them any of the things that they need to be able to succeed in an environment they’ve never been in before.
Greg Alexander: Yeah, yeah, I agree. You know, when I asked you to introduce yourself, you described yourself and your firm as culture architects, which I think is such a great phrase. I’ve never heard that before. But it’s prompted a question from me to you, which is as I make this transition, and maybe we’ll go to the second transition. Now the first was grow to scale, and now we’re going to go from scale to exit. You know the founder is going from someone who is a doer and operator to someone who is a builder of systems and a builder of other leaders that takes a significant cultural change. What is that cultural change?
Sel Watts: There’s so much in this. Firstly, I don’t know one—I work with founders every day of my life, and all my friends are founders. I don’t know one that went into business because they wanted to manage people. None of us are any good at that, really. It’s not a natural skill. I believe that very few people are really, really naturally skilled at managing people. It’s just a really hard thing to do. But entrepreneurs, you know, we’re all about our outcome and our vision and all of that stuff. So I think, firstly, we need to recognize that we must have a plan around our own leadership development and training because it’s critical. The amount that I speak to that think they’re good leaders—and, you know, we think we’re good leaders—but actually, we’re not at all.
So that’s the first thing that I would like to say. But there’s a couple of things that happen that are really difficult. One definitely is the founder stepping away from doing the work. They are scared to lose the client. They know they can do it better than anyone else, and also they can win the work better than anyone else. So they built the business basically on their own. And so then to step back and enable other people to do those tasks—and in most cases they won’t do it as well as you. But my view is that, well, you either stay in and do the task beautifully and keep your business small, or you train and develop people and hand it over, and they might do it at 85% of how you would do it. And you can scale and do the things that you really want to be doing.
That, I find, is the hardest thing—and for most founders—is stepping away from the client work and not being in it and coming back into it. The other thing that I want to note about this going into that next stage is that often one thing that’s really hard, and that we don’t realize, is that we have this group of people that join us right at the beginning, the ones that took the risk to be to come and join us on our journey, that we couldn’t offer any security. They are really critical in getting us to certain points in the business. But then what happens is that, one, they may not grow with the business, and so the people that helped order are actually the ones that are now stopping it from growing.
And to have a conversation with someone who was there with you at the beginning, and was critical to the business getting off the ground, to say, “Hey, you’re no longer performing. You’re no longer right for this business.” That is—and I’ve gone through that personally, and it is an incredibly challenging thing to do, and most of us don’t do it. We just work around those people. So that’s one thing. And so I always think now that when we bring people in, we say that we’re bringing you in for this part of the business, this part of our growth. And if they grow beyond that, and they’re doing that outside of just growing on the job, and they can grow with the business—great. But what they’re bringing in at that point is this amount of skills. And then it’s going to be up to them.
One thing that is really hard with those beginning ones—the other thing that can happen with those people is that they were used to sitting side by side around the lunch table, making decisions with you and having access to you at all times. And then suddenly, you’re building out the business. You have to build your organizational structure and your hierarchy, and they may no longer have that direct access to you or be able to work with you. And you were really the reason that they were working there. So that can also lead to—well, one, you’ve got new people coming in, and they feel like they’re not in the clique. So there’s that cultural issue. And then you’ve got ones that have been there a long time, and they’re losing connection with you. And that causes a major cultural issue.
You can end up with your key group of people all leaving at the same time because of that shift. In my view, I’ve experienced that myself, and I see that all the time. And this is where I think that understanding early the stages of leadership and what’s going to be expected of you as a founder is really, really important, because these things are very emotional. And I don’t know anyone that’s ever said, “I wish I took longer to get rid of that person.” No one ever says that.
Greg Alexander: You know, you were talking about the emotions about it, and why this is so hard, and something that you’ve taught me when I ask you that question—it’s because your answer is always, “People are messy,” and that’s why it’s so hard. And it is so true. People are messy, myself included.
One issue I see in the second transition from scale to exit is the attack on a founder’s identity. And what I mean by that is that what prevents an exit oftentimes is that the firm is basically a hero and a bunch of helpers.
Greg Alexander: There’s really no executive leadership team. So if an acquirer comes along. They either say I’m not going to buy this firm, because if something happens to you, there is no firm, or I am going to buy this firm. But I’m going to put you on a 5 year. Earn out because there’s too much risk key man or key woman risk, and the founder doesn’t like that, but they’ve created this issue themselves because they’re so focused on being the hero and having their personal identity wrapped up in the business. But it takes a special person to say, Hey, listen! I want to be invisible. I hope no one even knows I’m here. It’s all about the team. It’s all about the clients. So there’s a lot of founders listening to this. And I would say, probably the majority of them fall into this category. So I want you to punch them in the nose right now and get them over this identity crisis. What advice do you have for them?
Sel Watts: Well, firstly, I would say that if I was doing your performance review as the founder and the leader, and you were the hero, then you would be getting a very poor performance review, because that is not your role. And and I know personally where I have stunted other people’s growth in my business, because I’ve been trying to protect everyone and swooping in and making sure that everything’s everything’s okay, and and that if I wasn’t there, what would have happened. Well, I’m sure. Actually it probably would have been fine. But I’ve stunted people’s growth. And so I say, if you are doing that, you’re actually not doing your job properly. You’re actually not performing in your role as the founder. But you’re also doing a great disservice to your people, and I have seen that where you are not preparing your people and enabling them to grow and develop in their career because you’re in the way. And they’re eventually going to say, Hey, you know, like my growth is completely dependent on you. I don’t want that. So this is. It’s really hard, particularly in a services business, because most of us start off. And it’s just us. And we’re doing everything. And we’re the one that’s delivering the work and selling the work and building the relationships. You know, it’s not like a product. So this is really hard. And I would say to anyone that’s starting a services firm, that this is the strategic plan they need to think about.
Greg Alexander: I would agree with you. You know, a helpful tool that I’ve used that was taught to me by one of my mentors early on is that you have 2 vision statements, and they need to be in alignment. The 1st vision is the vision for the firm, and most of us have that, and the vision lays out the aspirations. What you want the firm to become. However, you also need a personal vision statement, which is to say, well, what do I want to become over time? 1, 3, 5, maybe 10 years. And are those things in sync? When I created a personal vision statement which I still have to this day, and I review it and update it every year. Oftentimes it can drift from the vision of the firm, and when those 2 things are not in alignment. This identity crisis, you know, shows up and it causes business problems. But when you have a personal vision statement and it is your north star. Very often it gives you comfort to say, Hey, my identity is not wrapped up in this business. I am more than this business, and I’m going in this direction, and the firm is just a vehicle to help me get there. And that’s a very important thing, all right. This takes me to. I have 2 more questions for you if I can steal some more of your valuable time. The next question is, I’m sure there are leadership traits that you see in founders that endure. Across the lifecycle stages grow, scale and exit. You kind of universal truths. What are 2 or 3 of those.
Sel Watts: So well. Firstly, I would say, I was gonna what? Well, I will say. Communication is is the biggest thing in sort of in any situation, every every mediation or issue we brought into it’s as a result of communication. So I know that like founders can communicate at the beginning from an inspired point of view, but they’re not necessarily able to then create clear expectations and boundaries. And and then they also founders also tend to talk a lot about what they’re going to do and where we’re going to be. And that’s very misleading. So I think that. And then, when you’re going to exit like you’re looking to potentially sell your business or get acquired. And you’ve got these people and and they’re very important. So knowing how to communicate at each stage and making the most of what each stage requires in your communication, I think, is, is critical, and that’s why I think coaches are really really important to be able to help you go. Okay. So this is, this has worked really well in my communication to get me to here. But now I actually have to be more this and this. So that’s so. That’s 1 thing. The other thing is that the, well, I guess it’s sort of aligned to what we were talking about, that it’s not not about the founder. But if I believe that if you have a very clear vision of what you’re trying to create for the business as in. I’m starting today. And I’m going to exit in 15 years. The ones that build the business for that exit are the ones that can get through the stages because they’re the ones that right at the beginning, when no one needs a process, they’re writing processes when they’re putting systems in place before they get 15 people. Now, it’s like, Oh, my gosh! Now we need a system. So they’re doing things before the business may seem ready, because they know at the end where the value of the business actually lies. So that I think. And you know, that’s that’s hard, because a lot of people just sort of fall into starting their business. And then they’re sort of like, oh, this is working. Wow, okay, I’m a business owner. And then it gets the bigger it gets, the harder it gets to implement systems, processes, culture values. You know, all of those things.
Greg Alexander: Great a great observation, and I’ve experienced that myself. You know what I would suggest also, in addition to communication and working backwards from the end, which is the 2 things that Sel just brought out that endure across life cycles is, I would also add, patience. Founders are often working on tomorrow’s business. But meanwhile the team is taking care of today’s business. And the founder gets frustrated
Greg Alexander: when the team isn’t keeping pace. But you need to check that, because if everybody just drops today’s business and works on tomorrow’s business, you can’t make payroll. So you got to have some patience and let them, you know. Get to the future state in some reasonable timeline. If you’re too impatient, you can be too disruptive. So pay attention to that.
Greg Alexander: All right. This takes me to my last question, and it’s the most important one. So I saved it for last. So I read all of your stuff Sel and thank you for putting that out into the world. And you have recently been discussing the impact of artificial intelligence in the domain of human resources and what it might mean to manage things like digital workers and AI agents in addition to managing messy humans. So this is probably too big. Maybe you can come back on the show and discuss this, but maybe share with us one or 2 things about that topic.
Sel Watts: Well, firstly, what an incredible time that we’re in to be learning and being able to introduce AI into our businesses. It’s just from a from my perspective as a business owner and a culture architect. This creates so much opportunity, and our business have the ability to grow and deliver so much more as a result of AI. I know in my business. I’ve noticed that significantly. But yes, we’re now going to. We’re now doing organizational structures that are not just the people. They’re the people and the agents. And how do people manage agents? And how does that impact the way that the workflow is structured, and the functions, like the whole organizational structuring, like functional structures, is changing as a result of that. And we right in the middle of learning all about that. And I know that one of the things we do a lot of is org structures, and that is going to change. That’s already starting to change significantly. So I’m excited. And I think that you know, we just means we’ve got more amazing resources available to us. And so I know there’s a lot of negative. And there’s a lot of you know, it’s gonna take people’s jobs. You know. The thing is, it doesn’t matter. It’s here. And we have an opportunity to use it, and so we should be getting in there and working out how we can benefit from it in our business.
Greg Alexander: You know, the firms that I’ve built. I have tried to follow the blueprints for those from those who came before me. And professional services, which is our area of focus, is built on the apprenticeship model and and a tactic in the apprenticeship model is the summer intern program. And you go to a university and you participate in the job fair, and you recruit a class of interns. And those interns come, and they work for the summertime, and during that time period the founder gets a huge boost in productivity, because all of a sudden he’s got all these extra arms and legs to do all this work. And then they go away. They go back to school. That’s the nature of that thing. So you might have them for 2 or 3 months. Now with AI agents, you have an army of interns like right now at Collective 54, we have dozens of agents working on our behalf, and it’s as if you have an army of interns 12 months of the year, not just the summertime. And what that does is that is boosting the productivity of the current staff. It’s making the staff that much more valuable. They’re assisting, helping, not replacing. So that’s something that I’ve experienced recently that I wanted to put out there.
Greg Alexander: So this is this is the end of our talk. But I know you wouldn’t do this because you adhere to our code of conduct. But I’m going to ask you to do it anyways and give you permission. This Org design work, particularly around AI agents. If somebody wanted to contact you about that and seek your help on that. How would they do so?
Sel Watts: Well, firstly, they can check out the website, whatsnextpx.com. But email, me sell at what’s nextgroup.com or on Linkedin, and also see me on Linkedin. I’m always putting out lots of content around leadership and culture and just real life stuff, not stuff out of a book. And I would welcome anyone to want to come and talk to me about AI and their org structures. That is really fun and exciting.
Greg Alexander: Okay, well, thanks so much for being here today and and for offering that up to everybody. And we really appreciate it. So you’re a huge contributor to our community. So thank you for that.
Sel Watts: Thank you. Greg.
Greg Alexander: Okay, a couple calls to action in closing here. So if you’re a member of Collective 54, and you’ve got questions for our cultural architect Sel Watts. Please attend the private member Q. And A. Session. You’ll see an invitation for that shortly. If you’re not a member of collective 54, and if they’re listening to Sel, you might want to become one. Go to Collective 5, 4.com and fill out an application, and we’ll get in contact with you. But that’s it for today until next time. I wish you all the best of luck, as you try to grow, scale and someday exit your firm.
Note: This transcript was generated by Zoom.