As VC Jeff Bussgang has pointed out, scaling your business is hard.
As you add more people, you need to find a way to retain the culture and agility that brought you success in the first place, while also expanding your reach and putting in systems that allow your company to make decisions efficiently now that it’s a far bigger beast. How great are these challenges? So great that Stanford Business School professors Robert Sutton and Hayagreeva (aka Huggy) Rao spent seven years researching them for their latest book, Scaling Up Excellence: Getting to More Without Settling for Less, which comes out next month.
What did they discover? The two professors offered a bit of a sneak preview in the latest Stanford Graduate School of Business newsletter, including a surprising tidbit about how the best businesses manage to balance the need for structure with the need to remain innovative and flexible.
Break It to Make It
As you grow, how much bureaucracy to create and when is always a challenge, Sutton told GSB. "There’s always this challenge, as you get bigger, about structure,” he explains. “If people are telling the same story, you can have less bureaucracy, less micromanagement. But you do need some authority."
So how much micromanagement is the right amount? Sutton and Rao talked to many successful leaders, including successful VC Ben Horowitz, Chris Fry at Twitter and Steve Greene, who helped to grow Salesforce from a few dozen employees to 600 people, and found many of these folks told him the same thing.
"All of them make this argument that you should have a little less structure than you think you need," Sutton says. "Then, wait for things to break a little bit as a sign that you should add just a little bit more. Greene called this light structure 'running a little bit hot.' If you’re a little bit too heavy, it feels like you’re walking in muck. And, if you’re way too light, things fall apart. So, the ideal condition for scaling is that little things should be breaking all the time, but not the big things."
What Are the Big Things?
This technique of waiting for small things to break and then fixing them is intriguing, but it raises an obvious question -- what things are small enough that you can get away with breaking them and what aspects of the business are so big it’s essential you get them right?
Rao and Sutton studied this question as well, examining cases where scaling failed and identifying a the killer "trifecta of illusion, incompetence, and impatience." Sutton explains that business often get in trouble when they try to scale all at once without taking the time to do it right because they’re convinced the normal rules of business success don’t apply to an exceptional organization like theirs. "You can see it, for example, in what the Obama administration did with their healthcare rollout," Sutton says to illustrate.