Founder's Mentality Blog
Traveling across three continents in the last two weeks, I’ve heard the following:
- From the CEO of a UK-based European office services business: “Corporate marketing solutions have become too prescriptive. Most of the propositions they say my guys are supposed to sell are not tailored enough to the local situation—they are unsaleable.”
- From the CEO of a US-based global consumer goods company: “We have a bunch of great tools for local sales and a bunch of great tools for cost management. But every day, I see the cost tools growing in importance, with a huge empire of planners around them. And every day, I see our local sales tools—based on local empowerment and a culture of ‘think like an owner’—losing out in terms of management mindshare. The two initiatives started on equal footing, but now all I see is a vast central cost-management bureaucracy. What happened?”
- From the CFO of a global company just finishing the first phase of a transformation: “Phase 1 was all about the ‘hub and spoke’—the CEO created initiatives and we rolled them out. But now, we are in a different phase in which the local teams have to feel empowered. We have to sell better; we have to adapt quicker on the ground. We need peer-to-peer learning and feedback among the 1,000 sales people. But I fear that all eyes are looking up toward the center, waiting for the next big initiative.”
These three statements have one major theme in common: Each company, for various reasons, has become too group-oriented, too focused on hub-and-spoke solutions, too oriented toward central tools and processes that the top develops and pushes down to the local level. In the first case, the initiatives don’t add value. In the second, the bureaucracy is overwhelming local initiative. And in the third case, the hub-and-spoke processes that were needed in phase 1 are not the best fit for the new phase.
In each case, local has been subordinated to group, which by definition means that sales has been subordinated to other functions, and the front line has been subordinated to other layers. As one CEO commented, “It sometimes feels like we can’t walk and chew gum at the same time. I don’t seem to be able to launch a set of group initiatives without them somehow overwhelming our local teams. Why is that?”
As a starting point for discussion, we’ve identified three main reasons:
- Great companies, including insurgents and incumbents undergoing transformation, often go through a very powerful “hub-and-spoke” phase and it is difficult to learn a new way of doing things. For insurgents, the hub-and-spoke phase is frequently the founding period, when the original team is running the company tightly and launching campaign after campaign. Success is more about fast execution of the core team’s vision than peer-to-peer learning. For incumbents undergoing a big change, the hub-and-spoke pattern often occurs when a new, charismatic leader shakes things up. Phase 1 of a shake-up demands a few major change initiatives, tightly controlled and executed.
- The local guys have championed the notion that everything’s different and eroded their own abilities to create cross-local initiatives. Good organizational design creates a conflict between two possible customer benefits: difference and sameness. Local teams are the passionate spokespeople for the value of difference, in part because they believe it and in part because it keeps corporate off their backs. Their default starting point is, “It needs to be local, because my consumers are different.” But that also makes it harder to build multi-local programs and to encourage best-practice sharing. If you can’t scale a local sales initiative, then it is easy to see why the group initiative on marketing, on supply chain or on costs can overwhelm. In a battle between group and any single locale, group wins every time.
- As companies grow, they lose the Founder’s MentalitySM and the culture starts to change. First, companies lose the organization clarity that everyone is there to support those who sell. Sales is subordinated and put at the bottom of the organization. Second, execution becomes less valued and is subordinated to strategy, as doers are subordinated to thinkers. Third, the company loses the voice of the front line and voice of the customer as strategy becomes something different than a set of actions. As Herb Kelleher, the founder and chairman of Southwest Airlines, famously said, “We have a strategic plan: It’s called doing things.”
Companies need to put local back on top of the agenda. Three ideas for how to do that:
- Embrace peer-to-peer learning. Leading companies are working on “pull tools,” not just the “push” tools of the hub-and-spoke model. To create robust peer-to-peer learning, the local sales teams need the right forum, the right distribution model and the right best-practice sharing skills. This means the local guys—the de facto champions of difference—need to embrace at least one benefit of sameness: They need to create a common vocabulary to help transfer best practices. This usually demands common customer and channel segmentation.
- Embrace the very hard task of nurturing very soft things. It is relatively easy to create a plant cost-optimization tool and roll it out. It is relatively easy to create a zero-based budgeting tool and roll it out. It is a lot harder to maintain a culture that promotes a bias to action. Instead of a legion of planners to support it, it takes a few leaders driving home the messages every day with their teams. These are very soft, but massively necessary, cultural attributes that are very hard to maintain. It takes leadership and not legions; role modeling and not just spreadsheet modeling. But if you want to maintain a Founder’s Mentality, you’re going to have to work on it with as much intensity as you’re applying to all other group initiatives.
- Restore the king. Be clear about who sells and delivers the core propositions of the company, and restore them to their rightful place on the throne. Don’t let local drift to the bottom of the company or its agenda.
Large companies are always balancing when to act globally and when to act locally. Add a third dimension: When is it time to act cross–locally, creating a culture where leaders from the front line learn from each other?