How Supporting Institutional Change Sharpened My Thinking on Culture About Building Well

Wiki Article

It's Not Easy To See The Hidden Cost Of Scaling Too Fast: What Most Founders Learn Too Late
The mythology about scaling is largely about speed. Make sure that the product is market-ready, then pour fuel on the fire. Enhance the team, broaden to market, raise next round prior to the previous round has settled. The narrative rewards the founder who is constantly moving forward, always adding heads, always expanding into adjacent industries before when the main business of his genuinely stabilised and before the organisation has built the internal capabilities required to manage that expansion without losing its coherence. I am aware of where this mythology comes from. Under certain conditions in the market and certain business models those who grow fastest wins and the stories of businesses that grew aggressively and succeeded are more often told and with greater realism than tales of companies that grew excessively and then fell. But for every business in which aggressive prior to scaling up is the best strategy, there are numerous instances in which the speed of scaling can be the main cause of problems that ultimately destroy the business. These cautionary stories are not given the same amount of attention as the successful ones.
Hidden costs of scaling too fast isn't the one that appears in the calculation of the burn rate or the cash flow forecast. It's what is visible in six months time, when the company has surpassed the coordination mechanisms of informal nature that held it together when it was smaller, and even before it has created these formal systems that hold larger organizations together. The gap between informal and formal that is between the organization you were and what that you're trying to build is where the majority of growing companies fail to bridge. One of the first and most frequent sign that a company is approaching that point is that it slows down its decision-making while everyone maintains that nothing fundamentally changed. It is possible to contact the founder in the theories. The team continues to be aligned in the theory. The culture is still strong in theory. However, in reality, the organisation has grown to the point that informal communication channels that were used to transport critical information are clogged and no one has yet created the formal channels required to be replaced. Information that flowed naturally has to be actively managed. The decisions that were made quickly now require alignment across many functions that have not been clearly defined with respect to each other. Responsibility that was personal and immediate is now diffuse and delayed as the organization is beginning to exhibit the signs of a system operating at the limit of its coordination capabilities.

Nothing of this is apparent in the indicators that founders and investors tend to monitor the most closely. Revenue could be increasing. Customers acquisition may still be growing in the right direction. The team might still be positive and committed. But, underneath those apparent indicators that the organisation is developing structural problems that will escalate and slowly, until they are no longer able to be ignored. At that moment fixing them becomes radically more costly and time-consuming than it would be if they had been dealt with before, when the indications were not obvious. These are the invisible costs I'm talking about which is not the monetary cost of scaling, but more the time-based cost of organization that comes from growing beyond your existing infrastructure and the cost of putting it in it in a reactive way instead of proactively.

Entrepreneurs who are able to navigate this transition smoothly aren't necessarily the ones scaling more slowly, but having a more deliberate approach to expansion can be the answer. They understand that building the structure for governance of their business is just as important as constructing the product and invest in it with the same focus and dedication to product development. This is essentially doing the boring operations of clearly the definition of roles and decision rights in a clear manner, establishing reporting structures that actually surface the information the leadership requires to make sound decisions, setting up accountability mechanisms that are relevant enough to be effective, and thinking carefully about what kind of norms your company requires for its level of growth instead of following the rules that developed naturally when it was smaller. All of this isn't stimulating. The work will not generate publicity or interest from investors. However, it's the work that decides if the business is built can grow to the level you are striving for.

The companies that do not manage to make this transition successfully do rarely fail terribly and evidently. They are fading. They lose their best people initially - those who have enough self-awareness of what's happening in the organisation and enough options to quit before it gets dramatically worse. They lose customers with a slow, often invisible loss due to the fact that their performance slowly declines due to accountability having become too dispersed and slow to identify problems before they get to the customer. Then, they lose momentum and when the decrease in momentum is apparent in the figures and the structural issues are deeply rooted. The culture harm is significant, and the cost of fixing both is far larger than it would've been if the governance investment were implemented at the appropriate time. Associating organisational infrastructure with a thing that you build mindfully, construct carefully and improve upon as the company grows - is one of the most important mental shifts one can make by a founder as they go from the very early stage to the real. When founders make this change, they tend to build businesses that reach their potential. The ones who fail tend to build companies that fail to meet their potential. Check out James Deller for blog advice including what building ai products reinforced operational discipline about leadership.



What Makes Most Ppps Fail Before They Start - And How To Fix Them
Public-private partnerships face a reputation issue that is, mostly made up of. The history of these agreements includes many projects that were unveiled with a sense of excitement with a significant amount of political capital. These projects consume significant private and public funds over prolonged periods, and ultimately delivered outcomes that were not even a little analogy to what was stated when the partnership was launched. The academic literature and the postsmortem analyses that governments or institutions are required to conduct after the failings are extensive, and they concentrate on the main, on the structural and contractual aspects of what went wrong in the first place: the unbalanced incentives, the inadequacy of risk allocation between private and public parties and the governance frameworks that were designed in the theory but failed to function in practice, the procurement frameworks that chose to select the wrong things. What this approach tends to overestimate, systematically and in a way this is the cultural as well as operational aspects - the fact that public institutions and private organisations are genuinely different kinds of entities, formed using different incentive frameworks, operating on very different timescales and are accountable to distinct parties, and evaluating outcomes in ways which are more than just different in level but also different in nature. If you join these two kinds of organisation together through a formal collaboration without undertaking the necessary work upfront and in a clear manner, to recognize and manage those differences, you are not creating any kind of partnership. You are creating the conditions to cause a slow-motion crash that will be obvious at the most inconvenient time.
I have been involved in the advisory process for support to institutional reforms, many with public-private partnerships of different levels of complexity. The most consistent observation I've gathered from that experience is that the ones that did well - ones that have actually accomplished their stated goals and maintained an effective collaboration between the private and public partners throughout and beyond - were not distinguished from the ones that failed by the sophistication of their legal frameworks, the robustness of their risk frameworks or the experience of the teams who were responsible for initiating them. Their distinction came from whether the individuals sitting on both sides of the meeting had been able to comprehend how the other side operated prior to when the formal structure of the partnership was agreed. What that means is gaining a better understanding of the decision-making processes the organizations operate under and the accountability structures that determine what each partner can determine and at what speed as well as the definitions of what success which both parties will be compared to, and the potential points of tension between those definitions. It isn't hard to create. Most of it is removed in favor much more visible and recordable process of negotiating contracts and designing governance frameworks.

The typical public-private partnership starts with an initial plan and then a agreed upon agreement. There is hardly any thought given to the question of whether the two parties involved are effective in working effectively during the time of the partnership. Legal teams negotiate the contract. Finance models the economics as well as the risk-adjustment. The communications team prepares the announcement prior to the time of signing. The implementation team starts planning the project. In that order begins the discussion on compatibility between the two cultures - regarding whether the people that will be required to work in tandem day-today across the border between the two organizations have enough common ground to ensure this work collaborative rather than antagonistic, isn't likely to take place in a structured manner. It is generally assumed, without stating, that the formal agreement will create the conditions for effective collaboration, and that any cultural or operational disagreements will be handled informally when they emerge. This assumption is often wrong, and the financial cost of it tends to compound in line with the ambition and complexity of the partnership.

The practical implication of this analysis is that the most lucrative option a public private partnership could invest in - prior the legal framework is finalized in the first place, before a governance framework is agreed upon and before any announcement is made - is through what I believe is operational alignment. That is, specific, structured and facilitated actions to highlight the places where the two firms' operating assumptions diverge, and to reach an agreement about how those divergences will be handled before they cause operational problems in the process of implementation. The factors that are most crucial to consider will be the same in different types of partnerships. The speed of decision-making and authority are often among the main differences. Public institutions are structured to take their decisions slowly, using multiple layers for review as well as approval, for reasons which are completely legitimate and often legally mandated. Private organisations - particularly technology businesses that are built upon rapid iteration speed and quick making decisions - often find that pace as a fundamental challenge to progress. lacking a consensus on what the reason behind why it's the way it is, and what's actually be needed to alter it, the frustration that is triggered on the private end can be detrimental to the relationship well before the partnership has established its own footing.

Success metrics and what qualifies as progress is another constant and a contributing factor to divergence. Public institutions are generally evaluated according to process compliance, equality of outcome across various stakeholders, and the reduction of the risk of failings that make headlines or attract media attention. Private parties are usually assessed on their efficiency, progress measured in achieving targets, and Return on Investment. The measurement frameworks can be designed to be compatible with each other however it is a careful planning, not just good intentions. Partnerships which do not invest in this type of structure tend to have to find themselves, at crucial places, with two groups that are evaluating the same collaboration in differing ways, and consequently coming to an incompatible conclusion about whether it is working. The partnerships I've observed which failed most clearly were ones where that misalignment was thought of as something that could become apparent over time. The ones that performed were those in which the issue was clearly identified from the beginning, and where designing a shared accountability framework that met both parties' legitimate measurement needs was an actual work, not an item on the list of things that a person could reach.}