What does it take to have a well-balanced (well run) company?
I have been a consultant for companies for a dozen years, and been an employee at various companies for at least that many. So here are some oversimplified (for brevity) views on what makes a tech company successful or not.
No company gets it all right, some just get it more wrong than others.
The pillars of a company
The most basic foundation of a technology company (and most companies) are the three pillars (as I call them). There are many other areas of a company, but they often fall under one or more of the other pillars (at some level).
Each of these pillars has to have power and balance with all the others. If any one has too much power or influence over the others (or the others don’t have enough), then the company will be unbalanced. Think of it as a triangle or three-legged table. You need all three, of equal length, or you have instability and a tendency to fall over on the weak side. Any group with too much power will screw up a company, each in a different way.
- If marketing and sales has too much power then companies tend to oversell, and over-market (over promise). When they can’t deliver the goods (and no one can ever deliver unrestrained promises), then the company gets a bad reputation or often gets into litigation over contracts and so on. This type of company tends to try to do too much at once, and they become a jack-of-all-trades and masters of none. The results are that they compete poorly in many markets, and usually fail in each.
- If business, operations and finance have too much control, then they often cut R&D or funding too much, which means you’ll do great short term (quarterly report) and run a profit — but long term, the company is starving. They fail to innovate or reinvest and they can’t compete and they will die — or they try acts of desperation, like "design by acquisition", where they can’t develop anything themselves, so they keep trying to acquire companies that can. That delays the inevitable, but usually those companies die too. They often cut so much fat out of the company that there are no longer any reserves (people, ideas, hardware, infrastructure) — and a few key losses (like people leaving) can destroy the company. The other pitfall is not enough capital is made available to get the tools necessary to keep the company, or there is so much process in getting the money that people give up and let things fail or go somewhere else. Cut backs and running lean can be necessary moves for the short term — but can also be lethal for the long term.
- If Engineering or Technology run the company they often go crazy. They often develop the perfect electric screwdriver when the market just wanted a hammer, or they often spend so much time designing (over engineering for what if’s and the future) that nothing ever gets done in the present. A few of these high cost failures in a row can crush a company.
Each area will often do things that are in their best interest — but may not be best for the other areas, or the company as a whole (their biases get in the way of success, unless they can listen/respect the others).
So any area having too much power (or having too little) has its dangers — you need all three, in balance! Not unlike the United States Government having three branches in order to offer checks and balance against each other.
The CEO is at the top and is usually doing more of the marketing and sales role — because let’s face it, if a company can’t move the product they make, then they are doomed, no matter how good the other two pillars are. But no matter how good your sales and marketing is, if you don’t have good product(s) and engineering/technology, or you don’t have reasonable operations, then your company is doomed (long term). You might be able to grow and get started — but it is just a matter of time before things go flop.
So while the power doesn’t have to be perfectly equal — and it has to change depending on where the company is. In the early stages of growth, often engineering needs more power to get things done. In other phases, marketing and sales need a little more power to kick start growth, name/product recognition, gain direction and focus. If a company is having financial problems, then Operations and Finance must have more power (at least short term) to get things cleaned up. So the power moves around, and nothing is stagnant — and each must adapt to changes in the environment. But there has to be a balance of power (over time)– or the company will short cut shooting itself in the foot, and go straight for the head.
To achieve a balance and a stable company is to have a little spread. Companies need diversity of ideas. Even if you have balance, but all the people are clustered in a close nit clique that only talks with itself (or they only talk to those that have ideals similar to their own), then what you get is as below.
Notice the company is balanced — but they are also too small in it’s thinking. Sort of marketing myopia, applied to all areas of the organization. The company is not living up to its potential. And this is the best-case scenario since the people balanced — it is much worse if they are grouped to any one particular bend (unbalanced). If they aren’t perfectly balanced, then we are right back to the most critical problem in a company of making one or two-sided decisions.
Even in the best case (balanced), the company might be stable — but only narrowly so. Their ideas are too narrow and small. This also makes most of the employees "outsiders", harms morale, and increases the frustration and likelihood that you are going to lose people (some of them important, or even critical). The same results can be achieved through a bunch of yes-men — no real diversity of ideas means no real spread. When a wider thinking, more stable company comes along, that is filling out its full potential, it will eventually gain on (and possibly replace) the too narrow company — since they will get more (better) ideas, or get and keep better people, and will make better (broader) decisions accordingly. So you need diversity and breadth of ideas — and the way to achieve a better spread is through good management and good communications.
Management and communication needs to start at the top and run all the way through the company. Both directions. Coming down the food chain to the "little people" is not usually much of a problem. Most people and companies get this. But if you have an organization that only runs communications in one direction (top-down) then you have a poorly communicating company, more likely to make bad decisions than companies that can communicate in many directions.
People coming out of the military (used to rigid rank), younger management, egotists, insecure people or people that come out of larger (more bureaucratic companies) are more likely make this mistake. They are used to orders, and not asking questions — thinking slows down the process (and is unpopular). So just "passing" of someone else’s thoughts or giving orders is easier and safer. Sanity and rational thought take a back seat to covering one’s ass, playing turf wars or "just passing on the message". But if no one is challenging the messages then you don’t have good management, and no checks and balances against making bad decisions — frankly, just buying parrots (instead of managers) would save the company lots of money. Good management can gather information (through the "little people"), and analyze that information fairly, before decisions are made, and then drive that back up the food chain with as little distortion as possible.
This backward information flow (feedback), is at least as important as the other direction and is one of the things that separates good companies from bad. A well-run business hierarchy will have managers who collect and filter information from their people (listen), and pass that up the food chain. They are not "yes-men" just telling their superiors what they want to hear — but instead are willing to say "no" or challenge ideas to make sure the company is taking the best path, or at least informed about the risks of the current path — thus spreading out, and diversifying the company and its position, by getting more views. The problem is that in most companies it is too easy to get blocked going up the food chain — and create a poorly communicating company. Remember, it only takes one person who is looking out for their own interests (and maybe not the companies) to block that information — and it is perfectly natural for humans to have their own spins and agendas, and don’t want things to be too negative or troubling for their bosses. The most common problem is to soften (water down) the tone and "spin" of information — to prevent "upsetting any one". Which is another way of saying, "hiding the risks, or the truth about what the company is doing". The more levels you have in the hierarchy, then the more distortion is likely on the message. The more any one person has their own strong agenda (and that isn’t making the best product possible), then the more likely the message is to get lost in the noise/distortions. So you not only need a hierarchy — but you need managers and individuals that are willing to tell the truth, no matter how unpleasant. They need to value the company and the importance of good communications and make sure that the decisions aren’t being made in a vacuum, more than their personal agendas. If you have any one "yes-man" in the mix, then critical information will be lost — with negative consequences. If a manager is afraid to stand up to the boss, or unwilling to tell the truth, then they have far less value to the company.
Another pitfall, even in a well-run hierarchy, is isolationism (or compartmentalization). If any area or group of a company gets isolated, it will start to atrophy and die. If you have this, you will have people that are unhappy and leave (taking knowledge with them), you will have groups doing their own thing (because there is poor communication) thus wasting money and resources, or you will have things being done that are outside the scope and focus of the company (thus useless work that never gets used). At the least, you will not be getting information for that whole group/area, and thus likely be back to being an unbalanced, or undiverse (clique) company.
Information peters out from the top (center), and goes through steps (people) to get to all areas of the company. Then information is channeled back, and gets back to the center (or top). But each stage (step) has the ability to be cutoff. And once cut off, that branch will die, or at least be unhealthy. A very formal hierarchy, even balanced, and with good managers, may look something like this.
Imagine you are at one end of the company and trying to communicate to the other. There are many steps in the game of telephone, with each person putting a potential spin on things (intentionally or not). The results are that the right hand doesn’t know what the left hand is doing, or why — and so everyone thinks everyone else in the company are a bunch of boneheads, or too slow. This harms morale — which has many issues of its own.
The trick in any company (large or small) is to eliminate as much of the bureaucracy, and minimize the hierarchy as much as possible. You need to have processes, of course — and companies need formal communications that go through the hierarchy and for settling disputes. So I’m not saying eliminate process or hierarchy entirely — but not everything should have to go through formalized channels. People that demand that are usually just insecure and trying to micromanage. Channels do give management control — but they also reduce the flow of information. So you need to allow some back-channel communications, and for informal and direct communication. Then you have a company that looks more like the following:
This allows cross communication (direct communications), and groups working together instead of apart. Individuals and groups may still not agree with each other (and they often disagree), but at least if you have communications (and professional employees) they can understand where things are coming from, and why. They also have some idea of what is going on elsewhere, and that will probably make them feel more secure about what they are doing. Usually when people are in the dark, they are afraid. And formal communications is almost never enough to keep every group brightly lit. So allowing some direct communications builds the team and corporate culture to see that they are more working together.
If you have a team or manager that is building completely separate (and autonomous) groups, that aren’t interacting or communicating with the others — then they aren’t serving a clear purpose, and are not likely to live up to their potential. If each area is isolated and can only communicate through formal channels, then it would probably be a better strategy to just outsource that function to companies that specialize in doing whatever that group is supposed to do, since the strength of having that function in-house is the communications and feedback that others can gain from them.
All this communication also means that if you have any single point of failure (one person that isn’t communicating well) that information will still get to where it needs to be. Information will go over or around the blocks, and still reach the goal. Water will find its own course — as information should. Those that are trying to dam the river, may be trying to hoard all the water for themselves. Those that are working against open communications, and trying to collect power and influence, by making themselves the key to keeping information flowing, so they can filter information in order to put their own spins and agendas on things. Don’t trust them, they are control freaks and likely to do more harm than good. A far better "network" design doesn’t have any single point of failure or bottleneck.
The last element of a company’s success is focus. Marketing and some management types like the "vision statement" as a cliche, but effective, way of setting the focus. The basic idea is to set some goals and get everyone reading from the same page. It certainly helps if you have the right focus (vision) — but even if it is a little off, if the whole company is behind the same goal, the company is more likely to do well than if they have no focus. So focus is deciding what the company trying to do, stating it, getting everyone behind it, and then doing it!
Now well-run companies aren’t egalitarian democracies — they are dictatorships. Hopefully they are benevolent dictatorships and the dictators have enough wisdom to listen — but dictatorships nonetheless. If the goals of the company don’t match the goals of an employee (or vise versa), and the employee won’t adjust, then they company needs to get rid of that employee (or the employee needs to leave). Get on board, or get out of the way. In order for the company to succeed, they need the employees to have the same agenda/focus — those that don’t need to be cleared out, not because they are bad people or bad at what they do, but if they aren’t going to help the company get where it needs to go, then they are harming everyone else.
Some people think this dictatorship thing is contradictory with good communications — but it isn’t. Employees should be free to state what they feel and why. They should be able to state their views, and communicate them — and get heard before decisions are made. This helps get them on-board. But once a decision is made — and clear, unambiguous, decisions absolutely need to be made and stated — either the people arguing against that path (and there will always be a few) need to accept the decision and try to achieve the goals to the best of their ability. If things go wrong they can reserve the right to say "I told you so" — but for the time being they need to accept that the company (and it’s leaders) had many reasons for making the decision — and live with the fact that they were allowed to try to defend their views. But no decision will please everyone, and there are many variables that make a decision wrong for some individuals (or groups) — but still right for the company over all. That’s life in corporate America — and employees that don’t have enough professionalism to accept this, need to be cleared out before they harm the entire corporate culture and the morale of everyone left.
The other key part of focus is to not try to do it all. You can do one thing well or ten things poorly — you choose. This is the exact opposite of diversity of thought. You want diversity of thought — and specialization and focus in purpose. Even athletes competing in a decathlon are focusing on winning one event at a time — not thinking about the high jump while doing sprints. Focus on a core market or area, and just do that one thing well. Once you’ve penetrated that market, and narrowed your purpose to where everyone understands your goals (including your customers, users, suppliers, employees, etc.), THEN you can expand those goals.
If you can’t clearly state a goal, and you can’t build a reputation for following-thru with your stated goals, then you are doomed. Say it clearly, then do it. If it takes more than 30 seconds to explain the basics of what your goals are, then you don’t have enough focus. Marketeers and salespeople call this the elevator pitch — if you can’t get people interested in what you are doing in the time it takes them to reach their floor on an elevator ride, then you’ve lost them for good.
The final part of focus is vision. Focus and goals are usually set for the present, or short-term future — what are we doing now and what are the immediate goals. But an important part of focus is vision — the longer term. Not just the quarterly report, or year-end report but the 3 or 5 year plan. And again, it can’t be that ambiguous, "we’ll be doing 50 things" haze — there should be some razor sharp directions. It won’t be perfect, but adapt when you have to. Tell people where the company going, why — and make it exciting and sell the sizzle. The steak has to be there (that’s the meat that people are eating and digesting today), but people need the sizzle, the foreplay, and the excitement of anticipation. They need to know that what they are doing isn’t just ending with what they are doing immediately. Not everyone needs to know every detail of the five-year plan, but it helps if they have some clues and some ideas that you have one. So the vision is just long term focus.
So to me, the key to a well-run company is as follows:
- Balance — not perfect balance, and not all decisions being made by committee. And different groups will have different power and different times. But all groups need to be heard and represented. This increases the diversity and quality of the information, thus improves the quality of the decisions.
- Communications — information needs to flow, and it needs to flow freely around the company. This prevents isolation of groups and people, it keeps the decisions being made as "informed" decisions. It allows adaptability, and the ability to measure progress — before things are too late. It gets people involved in their company, and feel heard and like they are somewhat in control of their environments, instead of victims of it (and the whims of management).
- Professionalism — we need to leave egos at the door and keep things focused on the common goals (the company’s success). But to do that, you have to get people behind the same goals. It isn’t about personal turf, or personal power and income — those are nice, and we do need to look out for ourselves as well — but if an individual is only building their own power base or turf, then they become a detriment to the company and an impediment to the companies success. Thus it is in individuals best interests to remember to be professional because that has more value to the company (and thus themselves — assuming the company is well run and values those things).
- Focus – say it clearly, then do it. Keep the goals clear and achievable. Leaders must listen (collect information) — and then lead. Leadership means making decisions, and doing everything they can to make those state goals happen. Conquer one goal at a time. You need to have a vision and a future, as well as the present part of the focus. Never stop pushing, and be willing to expand your core competency, but make sure you own one market before going into the next — and make sure that splitting your targets won’t unfocus the company or confuse your customers. Everyone needs to know what you do — so you need to know what it is that you do!
We’ve all seen companies fail because of shortcomings in one area or another. And every company has elements of all of the above (good and bad) — because humans operate them, and all humans have elements of all of the above. The trick is to not let the bad block out the good — or let the negatives you see in a company blind you to the positives.
In my usual optimistic view of the world (and having been in many companies), I’ve never seen a problem so bad that it couldn’t be worse — and every time I think I’ve seen the worst possible example of something, someone tells me of a place (or I see it for myself) that is worse. So focusing on the negative of a company, or thinking that "anywhere else is better than here" is naive and destructive. Try to turn the negatives into a positive. If a company isn’t behaving the way you like — try to change it (make it better). They will either realize what you are doing, and you will be appreciated, or they will not, and you’ll probably be happier somewhere else. At least you can leave with the satisfaction of the effort (and trying to do what you know is right). The fatalistic stance, "why try, things are the way they are" is bad for personal growth, and prevents any growth of any company.
Every employee makes the companies culture. Take satisfaction from trying to do the right thing. Focus on the successes, and diminish the significance of the failures. Keep trying to improve yourself and the company. No one (or no company) is perfect — but you can make it better (at least for yourself) if you try.
2000.03.14 in a now defunct tech magazine