Friday, May 13, 2011

Mission-Oriented: Between Startup and Big Company

I have seen entrepreneur colleagues hit ceilings in their effectiveness as leaders.  I have also seen VCs unsuccessfully replace entrepreneurs with “big company” executives. In both cases, there is a mismatch in the skills of the leaders and the needs of the organization. I believe that there is a middle stage in the life cycle of a growing company that requires a fine balance between flexibility and structure. In Steven Blank's excellent book on company building entitled “Four Steps to the Epiphany”, he defines this middle ground between startup and big company as the mission-oriented company stage.

In order to survive in its early days, a startup must be opportunistic and meet the needs of any customers that it captures.  A combination of risk-taking and can-do attitude allows a startup to quickly adapt to market opportunities. An entrepreneur often leads a loyal team of followers by articulating a compelling vision and demonstrating sheer will and determination. Significant challenges are overcome through a combination of vision, passion and effort. The strength of a startup is its speed, flexibility, and passion.  Its leadership is typically a dominant personality such as a founding entrepreneur.

On the other extreme, large established companies define and adhere to processes to ensure standardization and consistency. My favorite example of big company procedure is from my experience working at a McDonald’s restaurant as a teenager. At McDonald’s, everything was precisely controlled by timers and buzzers. Employees did not know why things were done in certain ways, we just followed the established procedures. This is how McDonald’s is able to make identical hamburgers using minimum-wage teenagers all over the world. The scale of a large organization requires bureaucratic overhead to manage processes and personnel and to enforce standardization. The strength of a large company is its size, its established brand reputation (i.e. consistency), and its economy of scale.  Its leadership requires an experienced team of long-viewed and disciplined managers.

Startups do not instantly and automatically transform into big companies. In between the two stages lies the third mission-oriented stage that is necessary for any startup that wants to break out. This transition stage may be painful and may require new leadership. A mission-oriented company requires leadership that can combine and balance the strengths of both startups and big companies. The essential elements include a strong leadership team, an internally-focused mission, and a philosophy of adding process only when warranted.

Strong leadership team (as opposed to a strong leader) – Often the leader of a startup is its founder, who has the vision and personality to drive the Company's initial success. At a certain size, a single charismatic leader cannot scale the organization without developing a strong leadership team. At this stage, a leader must alter his/her style from that of a superstar to that of a team builder and coach.  A single leader can only participate in a limited number of decisions and drive the activities of a limited number of people. A leadership team that works cohesively and applies a variety of talents and perspectives will always outperform a single leader.

Internally-focused mission – With strong department heads making up a leadership team, the leader’s role changes from making things happen to defining a clear mission that assists everyone in making the right choices. The company must have an internally-focused mission statement that provides the framework for making daily decisions throughout the organization.  The mission should be expressed in terms that are specific and measurable. Essentially, the mission gives everyone the framework for what they need to do as they work towards a common objective. Decision-making is disseminated throughout the organization, and everyone is expected and trusted to make good decisions. The culture of the organization has to attract and develop individuals who take responsibility for making decisions and solving problems. Everyone within the organization and especially the leaders need to maintain focus on the mission. 

Add process only when warranted – Adding process for the sake of process alone will destroy the company's biggest strength: its speed in making good decisions.  Process is added ONLY when it returns immediate value in quality or efficiency. If the process is unnecessary overhead, it is avoided.  If the process helps to avoid repeating mistakes, it is added.  Business decisions do not get sidetracked by every potential legal, HR, PR or other objection.  Everything is evaluated by keeping the mission in mind and finding ways to make the organization more agile and competent in making timely decisions. Company leadership must embrace and communicate this dichotomy where process and flexibility are constantly balanced.

The mission-oriented phase of a company provides great opportunities for everyone in the organization. Leaders emerge, outstanding teams form, and everyone develops valuable skills and professional experiences.  I have found this phase to be the most exciting and rewarding time to be part of an organization.

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