I thought I would break with my usual technically focused posts and instead take a look at an area of company management that every growing organization faces at some point in their life cycle, the introduction of corporate policy. When I take a look at the broader business landscape I often find myself wondering how large technology companies can go from leading innovators only to become irrelevant later and while there are plenty of examples of such organizations within the industry, there are also plenty of examples of organizations that have seen massive success at scale.
When you examine the differences between once-successful and still-successful technology companies, one thing always stands out – how organizational process is implemented and more importantly much of it exists. To understand the impact that process can have, it is useful to visualize it against both the life cycle of a business as well as the success expectations.
If you take a look at the graph on the left, it depicts 3 typical stages of a (technology) company beginning with the startup phase moving to growth and finally IPO. What you will notice on the graph is that as the growth requirements and expectations increase, the amount of corporate policy being implemented also increases. Where many organizations go wrong here however is that during the growth phase too much procedure and policy is implemented which becomes incorrectly associated with the requirement for business success and in many instances actually has detrimental effects on success.
Another challenge at this point is that the implementation of policy and procedure can feed itself causing a destructive frenzy; for example, if finance implement a policy that restricts equipment purchases without 3 levels of authorization to save $100k on the quarter and are commended for it, next quarter they are more likely to shoot for a $200k saving by making the policies tighter.
The downside to all of this is its effect on employee motivation, which in turn, has a direct influence on innovation. In the graph, the green line represents employee motivation and demonstrates how it is affected by the implementation of corporate policy. The reason for this comes down to the effort required, especially for technically focused individuals to get tasks done and the general lack of patients involved.
Technology People Lack Patience…
Some of the most successful technology companies in the world were started by technical people with Facebook being a perfect example. Creating technology today is different than it was 20 or even 10 years ago and in a lot of ways much easier for the average Joe to startup in their garage and this is having a profound impact on the industry. In many instances the individuals who create (and run) the nimble and agile startups that are seeing great success today lack business experience and while on the surface that may seem like a bad thing, in an indirect way it helps them avoid the usual pitfalls that larger organizations fall into. When a group of undergrads or entrepreneurs are together in a house creating the latest and greatest social product they are not thinking about expense policies or organizational structure and they’re not experiencing the usual corporate politics which in turn allows them to focus 100% on the technology.
While not every excellent technology person starts their own billion-user social network they do tend to share many characteristics with those who do including being self-motivated and self-disciplined. While both of these properties are good, such individuals also typically don’t like to be told what to do and get impatient quickly if creativity is hampered. In the startup house, if such person needs to rent a hosted Linux server to develop on they would call it out and it would happen, they wouldn’t need to complete a form for approval and explain how they planned to use it.
Why Do Organizations Rush To Implement Policy?
Many organizations implement policy for a very simple reason, to avoid chaos. Chaos occurs within an organization as it grows and the diversity of people is affected. As an organization moves to establish roles and responsibilities, bends to the views of experienced management and hires many different personality types, chaos is introduced into an organization and this is amplified by confusion and the rush to catch up.
The graph on the right highlights that as a company grows the increase in people diversity means that overall performance of employees is reduced and while this is normal, when organizational complexity is considered, it is easy to see how things can become chaotic. The challenge at this stage is that organizations implement process in order to address chaos and this often starts what becomes a downward spiral. The trend in employee performance is normal (and mostly unavoidable) as organizations grow however the effect that the introduction of process can have further exacerbates the issue as morale and lack of motivation also become negative factors.
Another challenge that occurs at the process acceleration stage is that results can be immediate and attractive. If the introduction of a spending restriction policy results in savings of $250k many managers will attach themselves to the perceived success realized and not consider its greater impact. When this happens, people loose the personal connection with each other and become negative resulting in individuals becoming disruptive – remember, negativity spreads negativity.
Encourage Independent Thinking, Remove The Barriers
Process within an organization is required however in most instances it can be hidden and curtailed. Lets say for example that an organization wants to restrict the amount they spend on employee laptops in order to reduce costs, however employees are used to a specific level. Rather than restricting (or reducing) the quality of machines causing resentment, an organization could introduce a BYOPC (buy your own PC) model where they contribute the (now reduced) policy amount for equipment purchases and allow the employee provide more and ultimately get the device they want. The result of this is that the organization achieves the policy implementation they want yet the employee now owns the device and feels exceptionally happy and motivated. Another benefit is that if the organization looked past the requirement to implement this policy, they would see that in most instances, because of the way in which BYOPC works they can usually realize some form of tax benefit as a result.
Another important element to dealing with the policy against motivation factor is to encourage independent thinking. While the implementation of a formal corporate structure might have negative effects on employees who now lack a clear promotion path, this can be easily overcome (and hidden) by encouraging them to present, promote and even research their own ideas and thoughts. Creating a team for example that spends 10 or 15% of their time on something new and “out there” is normally enough to dispel the requirement that someone has of becoming the next corporate VP – especially when they are finally compensated to reflect their efforts.
Large Organizations Can Still Act As Startups
I guess in closing the remarks I would make are that large organizations can certainly act in startup mode and don’t necessarily always need the process and procedure they believe they do. By trusting employees to “do the right thing” and by rewarding people in other ways when avenues such as promotions and alternative roles are not always available, organizations can help maintain motivation levels even when growing; remember, people don’t have to be a VP to be financially rewarded like one. I’m fortunate that I work for an organization that enforces this type of culture and maintains its beliefs and values from being small and this directly shows in results and employee satisfaction.