Where Did We Lose Our Founder's Mentality®?

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In Bain's book The Founder’s Mentality, we described how founders typically start their companies with a clear sense of purpose and an “insurgent mission” that focuses employees. These founders create a deep feeling of responsibility in all employees, as they abhor complexity, bureaucracy and anything that gets in the way of the clean execution of strategy.

Our research shows that since 1990, return to shareholders for companies where the founder is still involved is three times higher than in other companies. Indeed, we found that internal factors (leadership, execution capabilities, and an “owner’s mindset”) rather than external factors (strategy, market) often determine the long-term success and value of a company. It supports an idea often attributed to Peter Drucker, that “culture eats strategy for breakfast.”

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But as companies grow, so do complexity and bureaucracy, stealing focus from the qualities and mindset that really matter.

The key question then becomes, how do we reclaim the Founder’s Mentality? In most cases, the challenge starts at the top—reshaping the behaviors of the company’s leaders. Building more leaders who act like founders and aligning them around an insurgent mission is a critical first step. But it doesn’t happen on its own.

Beyond founders, we have found three other archetypes that typically characterize the behaviors of leaders in an organization that goes through change (see Figure 1):

  • Founders lead the change, take initiative and act as if they themselves are founders and owners of the business.
  • Tourists observe from the sidelines, have survived and will survive the corporate jungle, and have learned to not take initiative and just play along. They cheer from the sidelines and thereby limit personal risk and successfully stay around.
  • Victims complain from the sidelines. They typically blame others: the competitors, the market, the customers, the regulators or the management for the situation the company or they are in, and are passive and show little initiative.
  • Blockers openly or covertly block change, sometimes out of fear, often out of self-interest. They will try to block anything that will change the status quo and might hurt their position of power and influence or their future in the company.

founders-mentality-leaders-fig01_embed

A person can, of course, be in different boxes during his or her career, depending on that person’s context or situation. As a leader, it’s important to look at yourself and your team without judgment, in an effort to explore the reasons why a person fits a certain archetype, and create awareness, as only then are you able to shift your mindset and behavior and that of your team.

And you will find these archetypes of behaviors at all levels in the organization: the top, middle management and the front line.

When we ask top executive teams (at companies where the founders are long gone) to estimate the distribution of these archetypes among their top 100, the result is very interesting. By their count, the number of founders accounts for only 20% to 30%, while 50% to 60% are described as either tourists or victims. Blockers make up the balance (10% to 20%).

The goal, therefore, is making sure that 70% to 80% of all our employees, and especially among the top 100, act like founders and owners, rather than this 20% to 30% that seems typical for companies these days.

There are a few important ingredients for such a transformation.

  • All employees, especially leaders, need to feel they are part of a journey, a story that is exciting and taps into their purpose and sense of meaning.
  • They need to contribute meaningfully to the development of new, successful ideas and help design and implement the transformation of the company.
  • They need to become more aware and need to be developed, and that development has to start at the top. Key executives, who have been promoted in the current organization, need to stop certain behaviors and adopt new ones.

Taking three steps can help get such a transformation underway.

  1. Accelerate ownership.

    The CEO, as the leader at the very top of the company, must lead this change and be a role model; you cannot outsource or delegate transformation.

    CEOs must develop leaders throughout the whole company: the top 100, middle management and the front line. This is what we call the “leadership spine” in your organization.

    The top 100 and executive team are especially important. They need to direct and give purpose to the organization, and provide resources for, and focus on, those initiatives that will create maximum value.

    The top needs to be aligned and tell the compelling and engaging story of what the company can achieve in the next three years, a story that taps into employees’ purpose and creates energy and commitment to get there. The top 100 need to be role models of the new required behaviors.

    Middle management, often overlooked, is the group with the most experience and the potential to make a difference in mobilizing the frontline staff. With some exceptions, this group is often skeptical, having seen many (failed) change programs over the years. These managers often just want to survive.

    Engaging the leaders in this group and involving them in driving change is fundamental to ensuring broader engagement and a sustainable result, as the leaders of an Asian bank recently discovered. Executives leading a program to change the culture of the bank chose a group of opinion makers and informal leaders among its middle managers, and made them project leaders of a series of smaller initiatives within the broader project. Many of these middle managers had been there for over 25 years, and by involving them in leading the change, bank leaders effectively transformed them into supporters owning the change.

    The front line is in day-to-day contact with customers, and is a source of ideas on how to improve the way of working. Too often, bureaucratic and complex organizational structures have prevented these good ideas from being put into practice and taken away any initiative to deliver superb customer service.

  2. Use micro-battles to create engagement.

    We have found the Bain Micro-battles System℠ an effective way to create the required engagement in the leadership spine and energy to focus on improvements that matter and, when scaled, to ultimately create the insurgent winner in the market.

    A micro-battle is a focused, high-energy improvement initiative, aimed at achieving a specific high-priority business goal, and staffed with the best and most suitable people. After developing the insurgent mission for your company, define the first three or four key initiatives that, when scaled, will move the struggling bureaucracy back toward the path of becoming an insurgent.

    In cultures and companies where unions are active, we’ve often found it useful to include these groups’ opinion makers on the team that designs and executes micro-battles. Making them part of the solution from the very start is fundamental.

  3. Build leaders by developing a mixture of hard and soft skills.

    An important part of executing micro-battles is creating a series of leadership training programs that use a “field and forum” approach. This approach combines workshops for leaders at all levels in the organization with hands-on experience in real business settings.

    It’s also critical to create a learning center; namely, a physical space in which the executive team and micro-battle teams come together to exchange ideas, learn, grow and plan.

    These leadership programs should integrate IQ capabilities (strategy and business problem solving) as well as EQ capabilities (how to work with people, build trust and collaborate effectively). To be aware of your own needs, beliefs and fears as a leader, and mastering your behavior are fundamental to being able to lead others effectively.

    Indeed, we would argue that a lot of the victim and tourist behaviors we described earlier are often unconscious. Helping leaders to look at themselves and others, without judgment, to examine what’s causing these behaviors has proven to be transformational, not only for the individual, but also for the teams they work with and ultimately for the organization as a whole.

    And it’s proven so across industries and locations, helping align top teams at a high-tech company on the West Coast; supporting a digital transformation for the UK government; and improving operations at the previously mentioned Asian bank. Six months after making these changes, overall performance measures were improving, while the management of each company reported a positive shift in culture based on their anecdotal assessments. Performance was rising, and the number of tourists and victims was dropping.

Shifting the mindset and behavior of leaders at the top and throughout your organization is the single most important element to get right if you want to create a Founder’s Mentality.

Having a Founder’s Mentality is not just a luxury for companies that are already successful. It’s an imperative for any company that wants to excel and outperform its competition year after year. Without it, incumbents become bureaucracies, increasingly vulnerable to insurgents that are adapting and scaling faster than ever before. With it, they will not only be able to outperform their competition tomorrow, but will have built the inherent mindsets and capabilities to do so long into the future.

Peter Slagt is a partner in the Kuala Lumpur office of Bain & Company and a member of the firm's Global Results Delivery® practice.

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