Founder's Mentality Blog

Taking the Inevitability Out of Bureaucracy

The CEO and other company leaders must demonstrate how those behaviors should unfold in the corporate setting.

By Toshihiko Hiura

Published on July 09, 2014
min read


When corporate executives talk about creeping bureaucracy they tend to sound like frustrated gardeners battling an infestation of kudzu—cut it back today and it will reappear tomorrow. We recently assembled some of Japan’s most successful corporate leaders in Tokyo for a discussion of the Founder’s Mentality and how companies can maintain it as they grow. All agreed that taming bureaucracy was one of their stiffest challenges. “When you grow,” said Asahi Group CEO Naoki Izumiya, summing up the group’s common view, “you inevitably become bureaucratic, and it happens for all the familiar reasons while you are still growing.” Those reasons are, indeed, familiar to most large organizations. We’ve characterized them here as the southward winds. Growth leads to complexity, which begins to curtail growth. Succumbing to process becomes easier than maintaining the insurgency. People lose track of the company’s nobler mission and start to focus internally instead of on customers or competitors. The organization becomes comfortable with the status quo and begins defending territory, rather than fighting new battles on behalf of their customers. Learn more About the Founder's Mentality The three elements of the Founder's Mentality help companies sustain performance while avoiding the inevitable crises of growth. The best defense? This group agreed it is essential for leaders to rediscover and redefine the essential set of behaviors—instilled by the company’s founder—that keep the company focused on delighting its best customers. Those behaviors can then be codified and embedded into the organization so they act as a constant buffer against the creep of complexity and bureaucracy. As important as defining the winning behaviors, however, is living them: The CEO and other company leaders must demonstrate, day in and day out, how those behaviors should unfold in the corporate setting. As the organization sees these behaviors in action they become ingrained in the company’s culture and, over time, develop into the fundamental principles guiding action. Living the Founder’s Mentality in this way can take many forms. Here’s how some of our meeting attendees approach the challenge: Keep a strong focus on customers. Japanese retailer Muji lives and dies by maintaining its distinctive appeal to customers as a low-cost design leader. So the company’s chairman, Tadamitsu Matsui, puts special emphasis on listening to the voice of the customer. Every week he gathers all senior executives in one room to read complaints or requests from customers. The rule is that the group must decide before the meeting is out how to respond to each one. It then communicates the decisions to the entire organization, driving home the commitment to customer focus. Establish a bias to action. For Yoshihiko Hatanaka, CEO of Astellas Pharma Inc., what’s crucial is that decisions are made quickly by those in the organization best suited to make them. “The meeting does not decide anything,” he told the group. “People make decisions.” His solution is to distribute final decision-making authority (“the D”) for various important decisions to his senior executives. They are then responsible for finding the right people in the organization (often not their boss) to provide meaningful input and, if speed is important, they take action, even before consulting the management committee. Create and embrace conflicts. Akira Morikawa, the CEO of LINE Corp., a rapidly growing Internet messaging company, told the group that his job is to create conflicts within the organization. This begins with recruiting people with “edge” and building an organization that includes those with diversified views. That way, when someone comes up with an interesting idea, there is always a conflicting viewpoint. As advocates press their positions—without intervention from the CEO—the battle sharpens each point of view. The company then seeks input from customers, who are always the final arbiter. Morikawa also said he keeps a certain distance from his employees. If he gets too close, he said, people start trying to find out what he likes and only bring him proposals they think will please him. Create “mini” founder experiences. Muji’s Matsui also gives up-and-coming employees the ability to build something on their own. The company routinely identifies self-motivated employees in the organization who can be sent to new countries to start a new store or group of stores. The idea is that they will encounter many of the same experiences the founders did in building the original company and will develop an appreciation for the Founder’s Mentality organically. Create a separate organization. Several of the leaders in our group agreed that when bureaucracy dominates a global organization it is sometimes necessary to create a separate organization dedicated to achieving an important strategic objective. The new unit provides the opportunity for new leaders to practice a new set of behaviors. What’s crucial is that the CEO works to ensure that those behaviors provide a model for the parent organization as it strives to revive the Founder’s Mentality and pare back its own bureaucracy.

When corporate executives talk about creeping bureaucracy they tend to sound like frustrated gardeners battling an infestation of kudzu—cut it back today and it will reappear tomorrow. We recently assembled some of Japan’s most successful corporate leaders in Tokyo for a discussion of the Founder’s Mentality and how companies can maintain it as they grow. All agreed that taming bureaucracy was one of their stiffest challenges.

“When you grow,” said Asahi Group CEO Naoki Izumiya, summing up the group’s common view, “you inevitably become bureaucratic, and it happens for all the familiar reasons while you are still growing.”

Those reasons are, indeed, familiar to most large organizations. We’ve characterized them here as the southward winds. Growth leads to complexity, which begins to curtail growth. Succumbing to process becomes easier than maintaining the insurgency. People lose track of the company’s nobler mission and start to focus internally instead of on customers or competitors. The organization becomes comfortable with the status quo and begins defending territory, rather than fighting new battles on behalf of their customers.

Learn more

About the Founder's Mentality

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

The best defense? This group agreed it is essential for leaders to rediscover and redefine the essential set of behaviors—instilled by the company’s founder—that keep the company focused on delighting its best customers.

Those behaviors can then be codified and embedded into the organization so they act as a constant buffer against the creep of complexity and bureaucracy.

As important as defining the winning behaviors, however, is living them: The CEO and other company leaders must demonstrate, day in and day out, how those behaviors should unfold in the corporate setting. As the organization sees these behaviors in action they become ingrained in the company’s culture and, over time, develop into the fundamental principles guiding action.

Living the Founder’s Mentality in this way can take many forms. Here’s how some of our meeting attendees approach the challenge:

Keep a strong focus on customers. Japanese retailer Muji lives and dies by maintaining its distinctive appeal to customers as a low-cost design leader. So the company’s chairman, Tadamitsu Matsui, puts special emphasis on listening to the voice of the customer. Every week he gathers all senior executives in one room to read complaints or requests from customers. The rule is that the group must decide before the meeting is out how to respond to each one. It then communicates the decisions to the entire organization, driving home the commitment to customer focus.

Establish a bias to action. For Yoshihiko Hatanaka, CEO of Astellas Pharma Inc., what’s crucial is that decisions are made quickly by those in the organization best suited to make them. “The meeting does not decide anything,” he told the group. “People make decisions.” His solution is to distribute final decision-making authority (“the D”) for various important decisions to his senior executives. They are then responsible for finding the right people in the organization (often not their boss) to provide meaningful input and, if speed is important, they take action, even before consulting the management committee.

Create and embrace conflicts. Akira Morikawa, the CEO of LINE Corp., a rapidly growing Internet messaging company, told the group that his job is to create conflicts within the organization. This begins with recruiting people with “edge” and building an organization that includes those with diversified views. That way, when someone comes up with an interesting idea, there is always a conflicting viewpoint. As advocates press their positions—without intervention from the CEO—the battle sharpens each point of view. The company then seeks input from customers, who are always the final arbiter. Morikawa also said he keeps a certain distance from his employees. If he gets too close, he said, people start trying to find out what he likes and only bring him proposals they think will please him.

Create “mini” founder experiences. Muji’s Matsui also gives up-and-coming employees the ability to build something on their own. The company routinely identifies self-motivated employees in the organization who can be sent to new countries to start a new store or group of stores. The idea is that they will encounter many of the same experiences the founders did in building the original company and will develop an appreciation for the Founder’s Mentality organically.

Create a separate organization. Several of the leaders in our group agreed that when bureaucracy dominates a global organization it is sometimes necessary to create a separate organization dedicated to achieving an important strategic objective. The new unit provides the opportunity for new leaders to practice a new set of behaviors. What’s crucial is that the CEO works to ensure that those behaviors provide a model for the parent organization as it strives to revive the Founder’s Mentality and pare back its own bureaucracy.