As insurgent companies gain scale and scope, they also encounter a number of forces that threaten to drive them off course and away from their Founder’s Mentality^®. The best companies recognize these forces early and take action to resist them. We call these forces the westward winds (see Figure 1).

Figure 1

The unscalable founder

Although the Founder's Mentality provides companies with an essential sense of insurgency and mission, an owner's mindset and a passion for the front line, individual founders themselves are not always personally able to take a company through every stage of its development. Too often, they believe the rules that governed success in their home markets can be applied on the international stage or they fail to realize that they owe some of their success to local advantages—proprietary access to talent, capital and government relationships—that won’t be available as they expand abroad. Their inability to adapt their behaviors results in diffused focus, over expansion and outmoded ways of running the business. Likewise, unscalable founders often try to play a role in every decision the company makes, long after it has grown too large for such hands-on management. Their limited capacity and unwillingness to delegate result in governance debates and slow decision-making.

Lost voices from the front line

Insurgents with a Founder’s Mentality focus tirelessly on their most important customers and doing what it takes to delight them. This deep understanding is ingrained throughout the company—from the leadership to the front line. And the frontline employees who serve customers are treated as kings, who the rest of the company supports.

But as companies grow, they often gravitate toward the law of averages. Increasingly, they find themselves seeking a common language across their many geographies, products and organizational units. Management starts to talk about serving the "average customer," rather than delighting the most important ones, leading to a stale, undifferentiated customer experience. The rise of middle management “planners” with no frontline experience results in a lack of priorities. Instead of using resources to overwhelm any obstacles to growth (often called “applying the power of 10”), planners instead spread resources around democratically. In this world of averages, a typical management meeting might focus less on customers and markets and more on moving average operating margins a tenth of a percent. As spreadsheets and slide shows become the currency of corporate discussion, customers' needs recede into the background. The organization develops an incumbent mind-set, defending its position rather than hustling to innovate and transform industries.

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About the Founder's Mentality

The three elements of the Founder's Mentality help companies sustain performance while avoiding the inevitable crises of growth.

Revenue grows faster than talent

Behind the early success of most insurgent companies is a high-performing team of dynamic, talented individuals who have a clear understanding of the company's mission and implement it passionately. They are typically close to the founders and to their vision of what the company should be.

But the golden years when a company's skills mesh closely with its needs are usually short-lived. Fast-growing insurgents quickly discover that while they don’t have a revenue problem, they often have a talent shortage. They can’t scale up their teams quickly enough to keep pace with opportunity and very often turn to a strategy common among their incumbent rivals: They put in place a series of procedures and processes intended to translate the original founding mission into a rule book. To keep up with growth, these insurgent companies often hire vast teams and professional managers with little frontline experience. 

For a while this seems to work. It solves the immediate talent problem by making things easier for second-tier talent, who are comfortable with a more process-oriented company. But what the leaders soon discover is that rather than building a sustainable organization, they have created a bureaucratic company filled with planners.

The erosion of accountability

Founders and their original teams think like owners: They feel personal responsibility for the company's money, the risks they take and the results they achieve. But as companies grow and add more "professional" managers, their focus on supporting sales wanes, bureaucracy allows costs to swell and managers choose opportunistic expansion over reinvestment in the core business.

Related

Founder's Mentality®: The Southward Winds

Large multinationals often struggle against forces that threaten to turn the power of incumbency into the pain of bureaucracy.

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