Wednesday, March 27, 2013

Big Companies Want to Think Small: Right Idea, Wrong Execution

We learn in today’s Wall Street Journal (@WSJ) that some big companies are trying to get more nimble and creative by sending employees to work in startups.  The article, “Field Trip: Learning From Startups,” by Rachel Emma Silverman, explains it this way: “The hope, managers say, is that workers who spend time immersed in small, emerging firms will bring some of that scrappy spirit back to headquarters and change the way things get done.”

That says in a nutshell why big-company thinking is off base.  The executives of these firms have delegated an important strategic transformation to their employee base.  They expect these lower-level folks to come back and change a company that they, the executives, are being paid handsomely to make productive and profitable.
Light bulb
Don’t get me wrong: it’s possible for transformation to come up from the bottom, but it’s like the joke about how many psychiatrists it takes to change a light bulb.  The answer is: just one.  But the light bulb has to really want to change. 

At one point in my career, I was recruited by a very large technology company ($3.5B) to become part of a new “professional class” of managers.  The company knew that they were not good at management and set out to hire people who were actually trained in management and knew how to do it.  Like the other members of my class, I talked to a lot of people and asked a lot of questions.  The answers were very enlightening.  I observed the company’s Marketing processes and procedures and asked more questions.  I talked to people up, down and sideways in the organization.  I noted where problems existed and figured out how we could fix them.  When I presented my findings and recommendations to Marketing management, I was met with blank stares.  Their response was, basically, “What?  You want us to change how we do things?”

I have worked in big companies, medium-sized companies and a variety of small, venture-funded startups.  On the whole, I prefer the latter because of their energy, focus, teamwork, and unity of purpose.  Those things exist for four reasons that are not mentioned in the article.  They are reasons that don’t come from expecting your employees to drive change from the bottom up.  They come from an environment that senior management has to create and nurture.
  1. Membership: Every employee in a startup is a member of an elite team that is focused on one goal—to make the company grow and become profitable.  That’s done with stock options.  They give everyone, sometimes including the janitor, a piece of the action.  You’re not working for the VCs (although they will profit enormously) or even for senior management (although they will also do very well), you’re working for your own best interests.  If the company succeeds, you will benefit. 
    While exit strategies vary, the company has to amass value before anyone can think of cashing out.  The golden carrot, not management edicts, drives employees to work long and hard. 
  2. Flat structure:  In a company of 10 to 70 people, there’s no room for layers of management.  The @WSJ article quotes a professor at Dartmouth’s Tuck School of Business, who says, “The rule-breaking mindset of many entrepreneurs doesn’t fly when ideas need buy-in from senior executives and several levels of management.”  Ya think? 
    Running an idea up the food chain for approval takes time.  At every level, managers feel the need to add or change or criticize, or run a test, or get more data because they think that’s their job.  And if your idea or innovation challenges his pet project, her plans for getting promoted, or the status of their entrenched product line, forget it. 
    Senior management doesn’t much like “rule-breaking mindsets” either.  They created those rules, remember, and breaking them is a form of unspoken criticism.
  3. Trust:  This goes hand-in-hand with membership.  If you are a member of a small and nimble team, you are trusted to do your job.  You are trusted to make decisions based on information you have gathered and analyzed.  You are trusted to ask questions, offer suggestions, and challenge stale thinking.  You are trusted to meet with vendors, to write plans, and to read and sign contracts. 
    I remember working at Chipcom when it was still private and planning to go public.  Our CEO, the late Rob Held, called a company meeting and stood in front of his team of Chippers to tell us what was happening.  He said that he was going to be transparent about the process and tell us—the Chipcom team—everything.  At the same time, he reminded us that what he would tell us was confidential information and he trusted us to keep it that way.  After a vote of trust like that, who would even think to say anything?  He kept his part of the bargain and we kept ours.
  4. Teamwork:  In big companies, you do your job, keep your nose clean and your head down and hope that senior management is making the right decisions.  In small companies, everyone jumps in to help out.  If someone else in your department—or even another department—needs help, you pitch in.  You ask questions like, “How can I help you get that done?  What can I do to make sure you hit your deadline?  And you do that despite having an enormous workload of your own.  You do it because you’re all on one big team and that team won’t succeed if you allow someone to fail.
Rob Held
Rob Held

The article concludes by saying that @PepsiCo HQ shadowed a startup called @Airbnb Inc. and concluded that, “They are a lot scrappier in the way they approach marketing.  They are more trusting of instinct.”    

Well, yeah.  Small companies honor both trust and instinct.  Maybe it’s senior management who should be getting out of their corner offices and doing internships at startups.  That would be a real transformation.

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