Call them growing pains.
Fast-growing companies face an all-too-common dilemma. To become global leaders in their industries, they must create organizations that can sustain growth. They need to lead in their industries, striving for the scale and scope of their larger, global competitors.
Too often, however, they are urged to emulate those competitors, to adopt the so-called best practices of large, global incumbents. Yet those best practices are often anathema to insurgent companies. To date, they've thrived by breaking the rules, by being fast, agile and adaptable. They hate complexity. Everyone in the company is imbued with a Founder's Mentality®—everyone from the front line to the CEO understands the company’s strategy and everyone focuses relentlessly on core customers.
The traditional path of growth—trading the Founder's Mentality of the insurgent for the scope and scale of the global incumbent—threatens that culture. Often, when insurgents accept the trade-off between scale and the Founder’s Mentality, they run the very real danger of drowning under the complexity they've created—sinking into struggling bureaucracies that have not only lost any sense of a Founder’s Mentality but also begin to lose any real net benefits of scale and scope.
What causes them to make this trade-off? We believe that there are certain predictable forces that cause insurgents to lose their Founder's Mentality as they grow. We refer to them as the westward winds.
- 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 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. 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.
- Lost voices from the front line. Insurgent companies focus tirelessly on their most important customers. But complex portfolios lead to bureaucracies of middle management planners who focus on the "average customer." The voice of real customers and the frontline employees who serve them grows faint.
- Revenue grows faster than talent. As an organization grows, talent rarely keeps pace. Companies are unable to hire sufficient first-class talent, so instead they lower their standards and resort to rules and procedures that the leaders hope second-rate talent can deploy. Unfortunately, that simply leads to the massive hiring of employees who work by the rule book. The commitment to the founding mission that characterized the original team is weakened by an influx of second-rate talent—and so is the company’s ability to achieve that mission.
- 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.
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