How Do You Build a Sexy Small Company? | Maybe Europe Has the Answer ⑤

Hold the company to around 35 or 40 people — stay lively, get more done.

No. 39 Lauriergracht, Amsterdam: an ordinary 19th-century convent. Like most buildings in the Dutch canal district, where the water runs everywhere and the land is scarce, the house is tall and narrow. Push open the wooden door, cross a dim reception room, and sure enough there is a 19th-century painted wall. But a film poster from the 1960s hanging on it makes you wonder fast: is this really a proper church?

The ad agency KesselsKramer bought the old building a few years ago. Founded in 1996, the firm kept the original stained glass, the pulpit and the organ. Its young staff joke that their parents are at least reasonably happy with the job, because every day their children go to “church.”

It did not take those young people long to turn the place into a flea market spanning several decades: a pinball machine, a claw machine, a phone-booth sign, the plastic food models Japanese restaurants set out by their doors, a fire hydrant, huge charcoal portraits. The chapel's prayer room is now a smoking area, the Bible-story paintings that once hung there have yellowed, and the filing cabinets are stuffed at random with the trophies KesselsKramer has won over the years. The staff call this “the place where we look for inspiration.”

Most of the KesselsKramer office is given over to things that “spark inspiration” rather than to desks. “In the creative business, the one thing you have to hold on to is inspiration,” says Pieter Leendertse. Leendertse runs the company and likes the loose atmosphere. Where the church pews used to be they built a two-story wooden loft; a desk squeezed into the small space beside the organ became a workstation.

That is exactly enough room for 30 employees. No more, no fewer.

“Most clients already know what they're walking into before they knock on this door,” Leendertse says — true of the decor and of the way the company works. Not one employee holds the title of account manager, the person whose job is to handle the client. When a client turns up, everyone has to be ready to take them on.

An Ad Agency With No Account Managers

Erik Kessels and Johan Kramer founded the agency in Amsterdam in 1996. Leendertse quit W+K to join the new firm.

The founders had all worked for big companies. “The big companies we used to work for really did produce a lot of interesting ideas, but a lot of the good ones never turned into actual work,” Leendertse says. Part of the reason, he thinks, is that “big companies are too structured, with too many layers.”

When they started KesselsKramer, they agreed to work in a completely different way.

KesselsKramer became an ad agency with no account managers. Talking to prospective clients fell to Leendertse, the partner, alone; the company simply stopped hiring for the role. Strategists and production people each take on a piece of the account manager's work. They belong to a four-person team set up inside the agency, and whatever the size of the project, the same four people carry it from the pitch through the client conversations to the final execution.

Leendertse wants this to keep the line between the creative team and the client as short as it can be. “We did it differently. We wanted to be closer to the client, with nothing in between,” he says. “We try to talk straight to whoever makes the final call. The best results come out of a close relationship.”

That advantage belongs to small companies. In 1986 the German economist Hermann Simon analyzed data on 3,500 small firms worldwide and found that small companies have closer relationships with their clients than big ones do.

Add to that the fact that each employee can run several projects at once, with a typical project cycle of two months, and Leendertse says KesselsKramer now has 30 projects going at the same time. “People always assume we must be a much bigger company,” he says. In fact the Amsterdam headquarters he runs holds only 30.

In the financial crisis a few years ago, Leendertse also learned to cut staff when business turned bad. Economists agree that in a downturn a small company is far less likely to survive than a large one, because it has a much harder time getting a loan from a bank. And staff is this agency's single largest cost.

Luckily, outsourced teams are easy to find in the Netherlands, which let KesselsKramer stay lean even as business recovered. You will not find any production equipment in this church either — all of that work goes to outsiders. “If we did everything ourselves, our team really would be ten times the size it is now,” Leendertse says. “We find the developers, photographers, directors and models that fit best, and hand the client the shortlist.”

Besides looking after clients, a team of 30 to 40 is also easier to manage.

That is close to an old saw by now. “Double the headcount and you may spend four times as long on management, because the whole structure has to be redesigned,” Leendertse says, citing a piece of management theory. Past 40 people, he believes, a company has to invent a middle layer — “and we don't like that.”

The way Leendertse and his partners like to work is with “management never far from the creative company.” Unless there is an unusually early meeting, he cycles to the office every working day from his home 25 kilometers away, and the first thing he does is ask the project teams where things stand. “This office is small. You can find the person you want and go talk to them,” he says.

Employees are expected to carry responsibility too, and to keep in mind the Facebook-style creed that nothing is somebody else's job. The world's largest social network, with more than 12,000 employees, still wants the sense of ownership its staff had as a small team — so a small company like KesselsKramer has all the more reason to want it.

“Rather than hand out advice, I'd rather they knew I'm always nearby and they can come to me with a problem.” The founder, now approaching fifty, is doing his best to judge the distance between giving an order and talking as equals. When he speaks with younger staff he always closes the conversation by asking politely, “Does that make sense?” — probably more politely than most project managers you have met.

Doubling in Size

Small companies that do well, KesselsKramer among them, soon meet more projects, more clients and more users. They used to use their people efficiently, but once the work multiplies and tangles, that no longer holds. Put plainly, a team of 30 to 40 is the limit of what Leendertse's attention can cover. Past that number, the founding team has to find a new balance between cost and assembly-line efficiency.

Holger Seim is up against exactly that problem now.

In 2012 Seim and three friends founded the book-summary app Blinkist in Berlin. A year or so after launch, more and more users asked for audio versions of the summaries. But given Blinkist's headcount and its internal product plan at the time, a voice version would take at least seven or eight months. Two choices lay in front of the company: hire a dedicated team for the audiobooks, or push the release back again.

Blinkist had 25 people then, and its structure was not flexible, because everyone already had a pile of work in hand. Money was tight as well: the $1.8 million seed round had to stretch from the end of 2013 until the Series A closed this January.

They solved the problem with a new way of managing. “We changed our management from command-and-control to a system with no hierarchy, which we call Holacracy (as against a hierarchy, this is a form of self-organization).” One of the co-founders, Sebastian Klein, wrote a whole e-book about that stretch. (The same self-management method has been used by companies including Medium and Zappos.)

According to the e-book, the word “manager” was redefined at Blinkist. Employees no longer carried titles like content manager or community manager; they were sorted into “roles” by what they took on. The goals the company had to hit were broken into individual “responsibilities,” and an employee could pick up a different responsibility — which was, in effect, how they joined a different project.

So the employee who had been negotiating rights with publishers started coordinating the audio-summary feature, doing the work of a product manager, while an editor took over contact with the outsourced voice talent. In the end the audio feature shipped in a quarter of the planned time, quickly became the feature users opened most often, and tripled Blinkist's monthly revenue.

Looking back on that burst of fast iteration, though, some of it was luck. They happened to discover that one of their summary writers was a sound engineer, so they asked him to be the producer. He started making audio versions of the content in his home studio while the head of engineering found time to work out how to fold audio into the existing app.

The founders suffered for it. Seim and the others each carried five to ten roles, with marketing, HR, PR and finance split among the co-founders. That shaped how they made decisions, too. “Sometimes all I could do was react — I'd only get to a responsibility once somebody came to me about it,” Seim says.

Blinkist is still adjusting how it works inside, and the direction is the assembly line. With more money in hand, the first thing Seim did was hire specialists so that each employee could concentrate on one thing. In the six months after the Series A closed, the team grew quickly to 35. By the end of this year it should reach 50.

“We hired new engineers so development moves faster, and we added people on the content side — a dedicated rights editor, so we can put out more new summaries in the same time and still have room to test which subjects readers like. Plus marketing, finance, PR. Basically we hired for everything,” he says, pointing around the office and introducing each new colleague in turn.

3D Hubs, not yet three years old, is growing faster than Blinkist. The Dutch startup has 35 employees today. Because 3D printing is in a boom, its headcount doubles every year along with the printing capacity on the platform. There are now 33,000 printers on it, spread across more than 80 countries and territories; anyone who owns a 3D printer can apply to become a print station, a “hub,” and anyone who needs something printed places an order through the platform.

A few days ago 3D Hubs announced a $7 million Series B. Co-founder Brian Garret expects 10,000 new print stations to register this year, and headcount to reach 70.

The Character of a “Small Company”

Garret is still working out how to handle what a doubled headcount brings.

“This is an online business to begin with, so talking across borders isn't the hard part. Holding on to the company's culture while all this happens — that's the hard part. It was one thing at 10 or 15 people; it's another thing now.” Looking back on the start of the company, Garret sees no special solution: “You do it and you learn at the same time.” That day he still had to find time for a few interviews; product, engineering and social media all had openings to fill.

When a small startup grows into a big company, fitting a bigger team and a bigger market sometimes means dropping the old convictions, adding layers and hiring professional managers. But some big companies also claim they are working hard to keep the character of a “small company.”

Apple is the most successful example.

“When a company reaches a scale of billions of dollars, it always loses some of its vision. Layer after layer of middle management gets inserted between the leadership and the people doing the work. Designers stop feeling any real passion for the product, because even when passionate people know in their gut that what they want to do is right, they have to convince five layers of managers first.”

When Steve Jobs came back to Apple in 1997, he found it had become the kind of company he had despised ten years earlier. Over the next decade and more, Apple cleared out most of its middle managers and organized the whole company by function rather than by product team or anything else, so as to create the illusion that its people were not really working for a big company. Steve Doil, a former Apple supply-chain executive, put it this way: “Apple is a professional boxing ring you have to show up to every day. Lose your concentration for a second and you slow the whole team down.”

There must be other answers too: start small to fight the clutter of a big company, and still handle the many demands of a global market.

Seim at Blinkist can already see that his management will soon have to fit a new team size. The answer they found was to use the collaboration tool Slack instead of email. “You don't have to write ‘Hi XXX’ and ‘best regards’ and all the politeness,” Seim says. “It's faster and more direct. We need that.” It looks like a small thing, but Seim says it has raised efficiency a good deal.

To grow without adding a layer of management, KesselsKramer sent two core employees to London in the spring of 2008 to open a branch. The office, called KK Outlet, opened on Hoxton Square. It was partly for the British market — British clients would rather pick a British agency than one on the Continent — and partly because the Amsterdam team had grown.

The choice proved right. In the autumn after the London office opened, the financial crisis reached Europe. Amsterdam was not doing well, but London was, which spread the risk. “And our team is small and our costs are limited, so we're fairly flexible.” Having come through the crisis, KesselsKramer went from serving four or five clients at a time to running 30 projects at once.

Today the Amsterdam headquarters Leendertse runs has 30 people and the London office has 15; in 2012 they used the same method to open one in Los Angeles.

“If the team keeps growing, we'll keep opening offices in other cities around the world.” Leendertse does not think there is anything in the creative work you could call a “KesselsKramer style,” but when it comes to opening a branch he insists on sending the most essential people to clone a KesselsKramer on the spot.

“The feeling is that you have to be there. Not just buy a company locally. You hire local people first, and we learn from them what's particular about that market, and by working together we bring our influence to the local team. There's a chemical reaction,” Leendertse says. Essentially, every new branch that opens is a “clone” of the lean, efficient KesselsKramer.

Cover image from Moyan_Brenn, Visualhunt.com / CC BY

Photography in this article by Tang Yunlu