Marc Emmer is chairman of Optimize Inc. and an author, speaker, and consultant specializing in strategy and strategic planning.
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“Our culture is a force, and I never want it to feel corporate.” I regularly hear this or a similar refrain from managers of growing companies.
But this is an unrealistic expectation for companies scaling up. As a business grows, it needs structure, including integrated computer systems, policies and procedures, and HR controls that can feel “corporate.” What I’ve found is that the most successful growth companies have a way of maintaining a sense of family and values, even as they build systems that are repeatable.
Growth requires structure, but complexity is the enemy of growth. Therefore, companies need to prioritize and structure their strategic objectives without unnecessary complexity.
In their book The mindset of the founderChris Zook and James Allen provide data suggesting that founders who are able to maintain such principles through their various growth stages have shareholder returns three times that of other companies.
Here are the elements needed to maintain culture as you scale:
Create inspiration with mission and vision
Usually I’ve worked with two types of management teams: those with an unbridled fixation on mission and value statements, and those that don’t care at all. As a business grows, these statements should serve as true north for day-to-day decisions.
Strategic clarity
In larger companies, it is more difficult to keep the focus on investing in the essential few strategic priorities that enable growth. Companies should have a streamlined process (such as objectives and key outcomes) to ensure that strategic objectives flow throughout the organization. Every employee must see how his role fits in with the mission.
Institutionalize values
Value statements cannot be limited to static posters on a wall. For example, in the extensive work I’ve done with one company, their commitment to safety was very clear and included every meeting of theirs starting with a safety announcement. Other companies have moved to using values as criteria for their performance appraisals and employee rewards.
Customer obsession
As more layers of management are added to a company, managers easily lose sight of customer needs. By comparison, General Motors has a net promoter score of 3 while CVSs score is -5. Perhaps more striking than Steve Jobs designing revolutionary products like the iPhone, he was involved in product design at all as CEO. It’s rare for a CEO to be so obsessed with customer needs.
Empowerment on the frontline
To encourage customer obsession, frontline workers must have the latitude to make decisions that improve the customer experience. A common problem in larger companies is that central departments such as legal and accounting operators are overloaded with pointless administration. Business functions must have a “servant leadership” mindset, serving the people who serve the customers.
Building a management team
Very often a company outperforms the management team that founded it. As companies grow into the mid-market segment, they must have professional managers (C-suite and VP level) capable of supporting growth. That may even require the founder to step aside and assume a non-executive chairman role.
Commonality
Companies with the most vibrant cultures, especially hybrid ones, empower their employees to have fun. From t-shirt contests and ugly sweater days to blowing the afternoon away in an escape room, the best-run companies encourage employees to bond.
Innovation
A limitation of large companies is that they grow out of their innovative capacity. While some companies have product teams focused on keeping their offerings fresh, others get bogged down in the process. Managers stop taking risks. A key element of keeping such businesses entrepreneurial is encouraging risk and tolerating failure. Companies cannot innovate unless they allow employees to make and acknowledge mistakes.
Accountability for results
Another problem for larger companies is that people hide behind bureaucracy. A key element of a “founder” mindset is the drive to succeed, measured by financial results. In my work with employee-owned businesses, I have perceived collective responsibility to reduce waste and be efficient. I find this particularly critical for larger companies operating on zero-based budgets every year, as it ensures strict adherence to budget constraints.
Performance incentives
Using things like stock options can serve as a “perverse incentive” that actually encourages the wrong behavior. One of our listed clients is underwater on their stock options, which is discouraging.
Management teams need to be hyper-focused on these principles as they grow from startups to mature companies and eventually go public. Make sure your business never loses sight of the artistry that made it great.
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