Acutance Insights

In his wonderful book, Rework, Jason Fried, the founder of  37Signals.com, wrote this:

Why grow?
People ask, “How big is your company?” It’s small talk, but they’re not looking for a small answer. The bigger the number, the more impressive, professional, and powerful you sound. “Wow, nice!” they’ll say if you have a hundred-plus employees. If you’re small, you’ll get an “Oh … that’s nice.” The former is meant as a compliment; the latter is said just to be polite.
Why is that? What is it about growth and business? Why is expansion always the goal? What’s the attraction of big besides ego? (You’ll need a better answer than “economies of scale.”) What’s wrong with finding the right size and staying there?

It was a question that really got me thinking. It is a pivotal question, no doubt – Why grow?

Well, perhaps it stems from the fact that our anthropological history probably ingrained into our minds, “bigger is better”, and that it is the mantra of most capitalistic nations, organizations and communities out there. Houses, cars, music players, storage space, number of functions on a device whose primary job is to tell you what time of day it is, price tags of our jeans – everything has to be bigger (or larger). We just can’t help it. And unfortunately, there are not too many people who think like Jason Fried.

Fried’s answer to the problem is simple. This is how he puts it:

Small is not just a stepping-stone. Small is a great destination in itself.

But perhaps just like words of many great prophets, messiahs and seers of the past, a simple answer just doesn’t cut it for us. And so, for everyone else who is not Jason Fried, our ultimate fate in this universe is to grow. Doesn’t matter how much, we just want to grow. (Reminds you of Wall Street philosophy, doesn’t it?)

Distribute the work-load

Almost every organization in the world aspires to grow – revenues, head-counts, market size – whatever bakes their buns. But it is also a commonly known fact that most of these organizations that grew to enormous proportions got unwieldy, slow and competitively disadvantaged. Of course they would, it’s like steering 10 horses with one hand tied behind your back, while trying to balance a plate on one foot and doing other ridiculous things at once.

CEOs and their lieutenants of CXOs and VPs, constantly find themselves inept to manage such a huge show (though most wouldn’t care to admit to their limitations and failures). It’s just not humanly possible.

Management gurus found a way around – hierarchy. As complex as the business demands it. Decentralizing operations and controls until the next guy isn’t worth admitting to the club. However, this figurative assembly line of span and control doesn’t work either. Problems of trust, responsibility, accountability and capability start creeping in. By the time you are 3rd level down, the values, mission statements and the vision of the organization becomes garbled, twisted or misinterpreted.

So, anyway, by the time you are three-levels below, the grape-vine effect comes into play and whatever was, isn’t anymore prompting management to play musical chairs.

(This is where I want to tell you about the “musical chairs” of management control and it’s worth to side-step for a bit to just tell you this.

Every few years, every company that I worked for plays musical chairs with its organization structure. ‘Re-structuring for the future’ is a fancy term from the boardroom, but anyone who was not in the boardroom when this was decided, knows that the management realized (finally!) that their last restructuring didn’t work and so, they are either reverting to the old structure (decentralized to centralized or vice versa) or trying on an idea from the latest management guru/director that was hired, which is to try some combination of the previous and new structures.

Like I said, most companies that I worked for have done this while I worked for them. Matrix to Functional to Divisional to Regional to Centralized to Decentralized to by Lines of Business and back to Matrix. Musical Chairs!)

Moreover, in a very recent client organization, I saw first hand the reluctance to delegate control. So lacking was the trust in this organization, that those even second-in-command, were mere puppets to the guy-in-charge.

To Grow, But not to Grow

And so, here is my solution. I don’t claim it to be novel and I am sure there are smarter people than I, who had this figured way before I did and put it in practice (Semco, Brazil does something very similar).

What if we took the division of control a little further? What if board of directors behaved like venture capitalists and not bosses. Business and management experts like Mintzberg and Hamel have long been proposing the real strengths of the organization are not the processes or positioning, but their people. Business, product, process and other ideas don’t usually come from the boardrooms, they come from below. Sometimes far below.

So, when a company decides to expand into a new segment, product, market, etc., why not let that employee spin off and form a company of his/her own? The only job of a board of directors is to fund the venture and support its growth. Instead of keeping total control over the project and putting a guy with 30 years behind him but no passion for the idea, product or service, let the guys who are passionate about seeing it take off be in charge.

And moreover, if they do this as well as the venture capitalists do, this is what is in store for them:

1. The whole company is motivated to be creative and innovative.
2. A larger pool of ideas that can be taken to market, patented or leveraged. Imagine the ideas the hundred, thousand or even hundred thousand of your employees can bring forward if given the chance.
3. A higher rate of success. Venture capitalists usually make money from one start-up, but yet invest in ten. But the yields from the one successful start-up is more than enough to cover up all other losses.
4. Maximized profits. Retained control, even if partially.
5. The agility to develop and put ideas into production. The lower time to markets. All because the new intrapreneurs want their shot at success and will work hard for their dreams.
6. Flexibility to adapt to market demands. No longer will an organization be a behemoth that takes forever to respond to market or industry forces. No longer will it have chains of bureaucracies.
7. And all other advantages that start-ups have over incumbents.

Ricardo Semlar of Semco does this to a good extent and can take it a step further. In his book, the Seven Day Weekend, he says something that really struck a chord (paraphrased, for the lack of good memory):

I’m not the boss. I’m just the funds-provider (investor).

And so, the strategy of growth for this century should be to empower employees and encourage them to take risks and kick-start their ideas, while investing and retaining some (virtual) control over them. The strategy should be to grow without growing.