How Running Organisations Shapes Every Decision I Make About Teams

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The Hidden Cost Of Scaling Too Fast The Most Founders Are Taught Too Late
The mythology surrounding scaling is in large part about speed. Reach a product-market fit then pour fuel on the fire. Enhance the team, broaden markets, then raise the next round before the previous one has settled. The narrative rewards the founder who is always working hard, constantly adding staff, constantly expanding into other areas before your core operation has genuinely stabilized and before the company has built the internal capabilities required to effectively manage this growth without losing its coherence. I know where the mythology comes from. For certain market conditions and certain business models the one who grows the fastest actually wins, and stories about companies that were aggressive and successful are reported more frequently and with more vigor than reports of companies who grew recklessly and broke. For every company that aggressive quick scaling is the correct strategy, there are some instances when the speed of scaling is the root cause of problems that ultimately destroy the company. In those cases, negative stories aren't getting not nearly as much attention the success stories.
The hidden cost of scaling too fast is not the one that appears in the calculation of the burn rate or cash flow projection. It is the one that shows up after six months, once the company has gone beyond the coordination mechanisms of informal nature that kept it in place as it was a small one, and prior to establishing an official structure to hold larger organisations together. The gap that exists between formal and informal that is between the organization you used to be and the one you need to become - is where most businesses that grow end up breaking. The first and earliest indicator of a company in that space is when decision-making slows while everyone insists that nothing has changed fundamentally. The founder remains accessible in the theoretical realm. The team remains united in theory. The culture is still solid in theory. But in the real world the organization has gotten into a position where informal channels used to transport important information have become clogged and no one has yet created formal channels to replace them. Information that flowed easily now needs to be controlled. The decisions that were swiftly taken now require alignment across many functions that have not been clearly defined relative to one another. The accountability that was individual and immediate now is spread out and delayed, and the organisation begins to show the symptoms of a system that is running at the edge of its coordination capabilities.

All of this is not apparent from the metrics that investors and founders usually follow the most carefully. Revenue could still be rising. It is possible that customer acquisition is heading in the right direction. The staff may still be energetic and hardworking. However, underneath the surface indicators that the organisation is developing structural issues which will only get worse slowly until they can no longer be ignored. At that it becomes more costly and disruptive than it be had they been addressed earlier, when the signs were more subtle than obvious. That is what I am talking about which is not the monetary cost of growing, but the long-term organisational cost of growing beyond your infrastructure as well as the cost of putting that infrastructure into place in a reactive fashion rather than.

The founders who master this transition well are not necessarily the ones that grow more slowly, even though taking a more deliberate course of growth might be the answer. They recognise that building the foundation for their business's governance is as crucial as developing their product and invest in it with the same enthusiasm and discipline that they bring to product development. This means doing the boring operational work of setting up roles and rights in a clear manner, establishing reporting structures with the right information executives require to make the right decisions, designing accountability systems that are particular enough to be meaningful and thoughtfully pondering the kinds of cultural norms your company requires for its current size instead of depending on the norms that have been created organically when the business was smaller. None of this work is interesting. This won't generate public attention or spark investor interest. But it is the work that determines if your company you are building can actually maintain the growth you are after.

Companies that do not achieve this feat do generally not fail very immediately. They fade. They lose their top employees initially - those who have enough self-awareness to see how things are going in the organization and to have options to leave before the situation becomes substantially worse. Customers are then lost, at times invisibly, because the level of execution quietly deteriorates because accountability has become too diffuse and too long to be able to recognize issues before they get to the customer. In the end, they are losing momentum and by the time that slowing down becomes evident in the numbers as structural issues become deeply rooted. The culture damage is massive, and the cost of fixing both is much larger than it would've been if the investment in governance had been made at the right moment. Treating organisational infrastructure as a product - something you plan mindfully, construct carefully and improve upon as the business grows is among the most significant shifts in mindset you can make for a founder when they go from the very early stage to reaching a larger scale. It is the founders who achieve this tend to build businesses that are able to realize their potential. However, those who fail tend to create companies that fail to meet their potential. View James Deller for more tips including what advising growing businesses reinforced operational discipline about teams.



What Makes Most Ppps Fail Before They Even Begin - And What Can Be Done To Prevent Them From Happening Again?
Public-private partnerships have an image problem that is, at least in part paid for. The past of these agreements includes many projects that were released with genuine enthusiasm and significant politically-motivated capital. However, they that drained significant public and commercial resources over long periods of time, and ultimately delivered outcomes that bore only a passing resemblance to what had been pledged when the collaboration was in place. The academic literature and the postmortem evaluations that governments and institutions are required to conduct after the errors are comprehensive, and they concentrate on the major, on the structural and contractual elements of what went wrong which include the misaligned motivations, the ineffective risk distribution between both private and government entities and the governance structures built in theoretical terms but did not function in practice, and the procurement frameworks that were able to pick the wrong items. What this analysis tends ignore, and in the end in the long run, is the cultural and operational dimension – the fact that private and public enterprises are fundamentally different kinds of entities, shaped by different incentive structures, operating on radically different timelines, accountable to completely different stakeholder groups, and evaluating their the success of their operations in ways that are far from being the same in all respects but different in substance. If you attempt to bring these two types of organisation together in a formal relationship without having the effort, prior to and explicitly, in order to appreciate and address the differences, you are not forming any kind of partnership. In fact, you are preparing the ground to cause a slow-motion crash that will be evident at the least convenient time.
I've participated with advisory services to assist institutions in their modernisation projects, some of which involve public-private partnership structures of varying levels of complexity. My most common observation that I can draw from this experience is that the ones that performed well - that actually achieved their stated goals and maintained a functioning collaboration between the private and public sectors throughout it - weren't distinguished from those that failed by the sophistication of their legal structures, the strength of their risk frameworks, or the seniority of the leaders who led them. These partnerships were distinguished by how the parties on both sides table had worked to understand the way in which the different sides operated prior to when the formal partnership structure was formulated. What this means in the real world is understanding the decision-making process of each organization and the accountability structures that define what each of the parties can come to an agreement and how quickly each party can achieve its goals, the definitions for success that both parties will eventually evaluate itself against, and any points that could cause tension between those definitions. The understanding of these concepts isn't difficult to come up with. The entire process is often overlooked in favor of the more obvious and quickly accessible task of negotiating contracts as well as establishing governance frameworks.

The typical process of public-private partnerships goes from the initial idea to a executed agreement with barely any systematic attention being paid to question of whether the two entities involved are in fact able to work effectively over the course of the arrangement. Legal teams negotiate the contract. The finance team model the economics and risk distribution. The communications team is in charge of preparing the announcement in advance of the time of signing. The implementation team gets started planning the work. At some point in the process there is a discussion about cultural and operational compatibility - concerning whether the individuals whom will cooperate day-today across the border between two organisations share enough common ground to ensure that collaboration truly collaborative rather as antagonistic – is not likely to be conducted in a structured manner. It is commonly assumed and without any specifics, that agreements in formal form create prerequisites for effective collaboration and that any cultural or operational issues will be resolved informally whenever they arise. This assumption is essentially false, and costs of this tends to increase in proportion to the ambition and complexity of the partnership.

The practical implication of this analysis is that one of the most profitable venture a public-private partnership might invest in - prior the legal frameworks are formulated and before the governance model has been agreed upon, or before any announcements are made it is in what I would refer to as operational alignment. This is a specific, well-structured, and efficient work that identifies the points where the organizations have different operating assumptions as well as to set out clearly how these divergences will be managed before they become operational issues when the partnership is in its implementation. The factors that are most crucial to consider are usually the same across different kinds of partnerships. In terms of speed and authority, they tend to be among them. Public institutions are structured for slow decision-making, with a multitude of levels of review and approval for reasons that are entirely legal and usually mandated by law. Private organizations - specifically technology firms that have been designed on speedy iteration processes and quick decisions - typically see this speed as a major roadblock to progress. there is no consensus about why the pace is what it is and the steps that would truly be needed to modify it, the discontent that builds on the private team can ruin the relation long before the alliance has established its own footing.

Success metrics and what counts in terms of progress are a separate and significant source of disagreement. Public institutions are typically evaluated on process compliance, equity of outcomes between different stakeholder groups, as well as the rejection of glaring failures which attract political or media attention. Private sector partners are typically evaluated on their efficiency, progress measured against targets, and financial results. These measurement frameworks can be adjusted to work together, but doing so requires conscious design, not good intentions. However, the organizations that do not take part in that type of design will encounter, at critical situations, between two parties that are evaluating the same partnership in inconsistent ways and thereby coming to different conclusions about whether or not it is succeeding. The partnerships I've observed fail most definitively were the ones where this misalignment was accepted as a problem that would disappear over time. However, the ones that worked were the ones in which the problem was clearly stated at the start, and when designing a shared accountability process that accommodated the legitimate measurement needs of both parties requirements turned into an actual work, rather than an option on a wish list of things to attain.}