This article originally appeared on HBR.org.
Companies still run by their founders have a certain magic. That’s not just a hunch—among public companies since 1990, returns to shareholders were three times greater at firms where the founder is still part of the management team. In an upcoming book and in a recent article in Harvard Business Review, my coauthor Christopher Zook and I identify the qualities of “the founder’s mentality” and show how all organizations, even those whose founders have long retired, can harness its vitalizing effects. We believe that a company’s best hope to sustain profitable growth is to stay true to the characteristics that great founding management teams naturally possess.
The founder’s mentality has three components: It requires that companies view themselves as business insurgents, fighting on behalf of an underserved customer; that they have an obsession with the front line, where the business meets the customer; and that they foster an owner’s mindset, which keeps them fast, bold, and infused with a deep sense of responsibility for long-term results. As part of our research to understand these attributes, we interviewed scores of founders and ran dozens of workshops with leaders of the Founder’s Mentality 100 (a network of fast-growth, mostly founder-led companies). Almost all of the founders we interviewed provided useful lessons, but three CEOs in particular exemplified each of the qualities that make the founder’s mentality so powerful.
Robbie Brozin and the insurgent mission
In 1987, a Portuguese audio engineer named Fernando Duarte took a friend, South African entrepreneur Robbie Brozin, to a small takeout restaurant in a suburb of Johannesburg. Brozin found the chicken there so delicious that he made a radical move: He bought the restaurant, renamed it Nando’s, in honor of Fernando, and made plans to expand. In the years since, Nando’s has become one of the most successful chicken restaurant chains in the world, with more than 1,200 restaurants in 23 countries.
What’s the secret to Brozin’s success in a world with no shortage of chicken joints? He and his employees rally around an insurgent mission. Every day they make a conscious choice to be world-class at the few extraordinary capabilities that make it possible to deliver a better product or service to customers. Great founders focus ruthlessly on these capabilities — and they accept that they cannot be world-class at everything, only the things that truly matter.
This “spikiness” is the key to staying competitive, but it isn’t easy. To make everybody happy, to serve every need, to hedge every bet, many CEOs spread resources around democratically as their companies grow—and they lose the spikiness on the cost sheet that is the telltale sign not of profligacy but of focus. The result is a slide into mediocrity.
Brozin knew exactly where to spike Nando’s resources: on its amazingly tasty chicken. It was his love for that chicken, after all, that got him into the business in the first place. Everything else — even the industry norm of speedy service—was secondary. “In our industry, all the talk was about fast, cheap food,” he told us. “I remember folks telling me that if we couldn’t cook our chicken within three minutes, we were doomed. But we rejected that thinking. We argued that the quality of our chicken would be remembered long after the wait was forgotten.”
The lesson for other companies: Neither your customers nor your employees want you to do everything well. Declare war on “functional excellence” programs that consume money and management time, and refocus resources on the few capabilities where you must be amazing. Seize control of your strategy and budget processes, which too often are designed to ensure every bureaucrat holds on to last year’s resources, and demand a real discussion of where you must redeploy resources. Focus is undemocratic. Embrace that truth, and refuel your insurgency.
M.S. Oberoi and the frontline obsession
Successful founders understand the economics of customer loyalty. In their early days they know every customer by name. Keeping that up becomes impossible as they grow, but nevertheless they remain obsessed with making sure that someone is looking out for every customer at all times.
Few business leaders have developed this attention to the front line as effectively as M.S. Oberoi, the founder of the Oberoi Group, a chain of luxury hotels in India. Oberoi obsessed about every detail in his hotels that might affect the customer experience. Even in his eighties he kept visiting his hotels to make sure employees were getting everything right, and in doing so he established a culture by which all employees shared in his obsession.
Poornima Bhambal, the assistant manager of the front office at the Oberoi Udaivilas, in Udaipur, described for us the company’s empowerment program, which encourages all employees to do what it takes to delight customers and even gives them access to small amounts of money in order to do so. “We love to surprise and delight guests with little gifts and niceties,” Bhambal said, “and the empowerment program allows this to happen.”
One example, related to us by Vikram Oberoi, a grandson of M.S. Oberoi who now serves as the group’s CEO, was what happened when the staff at one hotel discovered that an American family occupying two rooms was taking all the toiletries—twice a day. This seemed a bit much to the housekeeping staff, and the manager’s first instinct was to go to the family and politely point out that they probably had enough toiletries.
But instead, says Oberoi, after some coaching, “He created a basket of soaps and shampoos and oils used at the hotel’s spa, and wrote a note that was signed by the housekeeping staff. The note said, ‘We notice you like our toiletries and wanted to give you a supply you can take home and share with friends.’ The family loved this. They wrote us after, saying that we were the most fantastic hotel and that they would tell all their friends to visit. That’s a wonderful business result from the investment of a box of lotions!”
Of course, everyone can recite the mantra customers first. But it is striking how few organizations are actually set up to deliver that promise. You can’t put customers first unless you also put the people who serve those customers first. And you also can’t put customers first until senior leadership meetings are filled with the voices of the customers and front line. Check your last executive committee meeting agenda. Did customers drive the agenda? Was the focus to empower the front line and reorient center activities to help your front line do their job better? Or was the agenda designed to serve the needs of the senior leadership, as they reported out their activities and demonstrated how busy they are? At most founder-led companies, CEOs spend all their time in the field and very little behind their desks. Why? They know which voices they need to listen to.
Galip Yorgancioglu and the owner’s mindset
Leaders with a strong founder’s mentality also have what we call an owner’s mindset: They think about every expense as if it were their own money (which it often is) and hate any sort of bureaucracy that slows the company down. Their bias is toward action. One leader who exemplifies this is the CEO of Mey, a leading spirits company in Turkey that makes raki, the country’s national drink. Once a government monopoly, the company was privatized, in 2004, and bought by a set of construction entrepreneurs, for $292 million. Two years later, they sold it to TPG, for about $810 million. In 2011, TPG sold it to Diageo, for about $2.1 billion—not a bad value-creation story. The first employee those original entrepreneurs hired was Galip Yorgancioglu, who remains CEO today.
Yorgancioglu has been passionate about maintaining an owner mindset at Mey, especially as it moved from private equity to corporate ownership. “If our team thinks like owners, we know we can retain our speed and agility,” he says. One way he maintains that speed is with a Monday meeting where his leaders can get together and rapidly solve issues. “One of the hardest things to do culturally is to make everyone understand that conflict is OK. I want my supply chain team fighting to rationalize, to look for scale benefits. And I want my marketing guys fighting for new variants, new products. My job is to make sure that we address the conflicts that inevitably arise when our people are doing their job.”
Embracing conflict, he explains, keeps Mey agile. “The whole company knows that we’ll deal with the issues that come up each Monday, so they raise any issues that are stopping them from taking action. It’s a social contract, and if we do it right, it ensures that we move faster than our competitors.”
As Yorgancioglu notes, speed is a competitive asset. But too many companies lose sight of this and fall victim to the growth paradox: Growth creates complexity, and complexity kills growth. While Yorgancioglu’s meetings are designed to rapidly resolve conflict and eliminate problems, too many companies have meetings that add new processes, new analysis—even new meetings. As companies lose the elements of the founder’s mentality illustrated above, they lose the antibodies to complexity. Ask yourself: How’s your company’s immune system holding up?
James Allen is a senior partner in Bain’s London office and a coleader of its global strategy practice. He is a coauthor of The Founder’s Mentality: How to Overcome the Predictable Crises of Growth (Harvard Business Review Press, forthcoming).