I’ve just finished a set of meetings with founder-led companies in South America. Many of our conversations focused on the basic question of how these companies can continue to maintain their Founder’s MentalitySM while growing and achieving the benefits of scale. A key theme of discussion was how organizational complexity can destroy the founder’s original orientation to the front line.
At their founding, companies are always clear about “the unit of value creation,” that is, the organizational unit that is ultimately empowered to deliver a company’s products or services. The founders ensure the heads of this unit have everything they need to deliver. And the units themselves have clear metrics and the necessary decision authority and information to do the job.
As one founder I met with put it, “We know who the king is. He runs the stores. And we are all his subjects.” The organizational design principles are also pretty clear at the beginning. The company is divided between those who sell and serve, and those who support those who sell and serve. The king sells and serves customers; the subjects serve the king.
But as a company’s scale increases, it is often confusion that reigns in the kingdom. As the leadership team tries to capture the benefits of scale and scope, functional heads gain increasing power. And as the footprint of the company expands, so do the number of span breakers—people whose roles interpose them between the CEO or other executives and the front line. For example, the store manager might have an area boss, who has a regional boss, who has a country boss. And the store manager might have a dotted-line responsibility for managing functional support, but the direct-line reporting responsibility of the local functional staff is to the functional head. From a simple fiefdom, a complex society emerges.
This new society has many leaders, and each has a voice on various committees, a different agenda and varying goals. The store manager—the former king of the organization—isn’t even invited to those committee meetings. He remains on the front line, but his voice is no longer heard. His former subjects rule the kingdom.
Likewise, the organization is no longer neatly divided into those who sell and serve, and those who support those who sell and serve. The heads of functional departments focus on their own functional excellence programs. Area, regional and country bosses are busy shuffling resources between stores. Everyone is working hard and has a complicated agenda with a lot to deliver, but one thing is clear: The king’s voice is dead.
Every company, regardless of size, should be able to answer two questions:
- Who is the king? That is, what is the unit of value creation?
- Who are the subjects? In other words, is the rest of the organization providing what’s necessary to help the king deliver to the customer?
In any complex organization, there will be multiple units of value creation, and certainly some functions will operate independently as some responsibilities are pulled from the front line. Back office, product development and supply chain, for example, tend to become regional or global roles pretty quickly.
But complexity must not be an excuse for failing to define who in the organization is the king and who are the subjects. Defining these roles brings clarity and speed. And it produces a far better proposition for customers.
You might expect that the leaders of companies with a Founder’s Mentality would think of themselves as kings, but they don’t. “Who are you then?” I asked one founder. “I guess I’m God,” he smiled. But joking aside, he and all founders know that the king of the company is the one who gives customers the royal treatment they demand.