The Founder Bottleneck
a venture grows to the point where its founder appears to be the bottleneck for further growth

The Founder Bottleneck

When a venture starts up with just a few people, its founder knows everything going on in every corner of the enterprise. In these early days, the founder personally controls the firm's resources and coordinates its actions.

However, once the company grows -- to around 50 people, perhaps US$25 to $250 million -- that founder can no longer know everything going on, and make every coordinating decision. (The greater the complexity -- diversity of functions, disciplines, channels, and geographic dispersion -- the sooner this transition-point arises.)

At that point, the founder may appear to be the bottleneck to further growth.

"A venture's founder doesn't have to become the constraint to growth. Dean Meyer's organizational principles free the founder for strategic thinking while reinforcing an entrepreneurial culture."

Max Henry serial entrepreneur and coach to venture CEOs

Worse, he/she may be involved in decisions that subordinates are better equipped to make. As a result of micro-management, mistakes are made and strong leaders at the next level are driven away.

Meanwhile, a CEO immersed in operational management doesn't have enough time to focus on strategic decisions and external relationships, where he/she is most needed.

When this occurs, the founder who created the company ironically becomes the constraint to its continued growth (or survival).

Typical (Unfortunate) Solution

Too often, and sadly, the investors who funded the firm step in and push the founder aside, replacing him/her with a "professional manager."

The consequences are severe. The people who know the industry and the firm's concept, and who have the passion to make the firm great, are marginalized or chased away.

As a result, the venture often fails to grow, or fails altogether.

A Better Alternative

There is an alternative: Move those coordinating mechanisms out of founder's head, and into mature organizational processes.

The risk is that organizational processes can be bureaucratic and stiffling, killing the entrepreneurial spirit so necessary for growth.

"Innovation is the spark that makes good companies great. It's not just invention, but a style of corporate behavior comfortable with new ideas and risk."

Peter Drucker

However, if those coordinating mechanisms are designed around the business-within-a-business paradigm, you can "have your cake and eat it too."

With the right organizational processes, you can retain the creative, motivated founder and leadership team, as well as the innovative entrepreneurial culture, and still build a scalable organization poised for growth.

Organizational Systems

What, exactly, are those mature organizational processes?

There are five "organizational systems" that comprise the ecosystem in which people work:

• Structure: the definition of internal entrepreneurships and teaming mechanisms

• The "internal economy": resource-governance processes based on internal market economics

• Culture: accepted patterns of behavior, in themes such as integrity and accountability, customer focus, entrepreneurship, and risk

• Methods and tools: how we do our jobs

• Metrics and rewards: dashboards, performance metrics, and consequences

These organizational systems send signals that guide people day by day. In conjunction, they permit empowerment without any loss of coordination and control.

Analogy: You don't have to tell entrepreneurs to strive to please their customers and to manage their suppliers well. That's what it takes to succeed in business. Market economics guides entrepreneurs to do the right things.

Similar systems of influences can be designed within organizations to align personal success with the best interests of the enterprise.

By maturing organizational systems, the founder and leadership team can drive the machine, instead of being a cog in the machine.

How NDMA Helps

NDMA helps investors and founders assess the bottlenecks, develop an organizational strategy that supports the business strategy, and then design those organizational systems and their implementation processes.

In parallel, Max Henry, a seasoned and successful entrepreneur and an executive coach, can help the founder focus on strategic challenges and develop leadership skills, and help senior executives evolve from functional experts to business leaders.

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