Fast-growing entrepreneurial companies often face a daunting task of maintaining autonomy while continuously improving the structure and controlling mechanism. As business environment in and out side company is normally not clearly defined, a rigid structure and control system will limit the future of company. The answer is a good balance between a flexible control system that emphasizes cohesion and deliberate plan to grow trust.
Nothing is like being a part of a fast-growing entrepreneurial company, exciting, ambitious and still chaotic. Growing out the first period, there is a strong sense of satisfaction with empowerment, without which, the company would not be this successful. Many people, especially management still remember the days when everyone knows everyone else, did everything and still worked as one.
However, the company has changed with many new generations of people joining, management simply don't have visibility into everything anymore. Management team is challenged by the enormous amount of works and has to rely on trust to give autonomy to units. Without autonomy, the company runs the risk of limiting its future, or even slowing down and doom. Trust is difficult when there are many new people, and when most of the management are working in new capacity than they had been doing before.
On the other hand, management starts to be under pressure from new stakeholders to reduce the risk of losing control of the organization, which they are fully responsible for. Growing the company through the initial days, management often has fear that employing too much control will destroy "the magic" and hamper the growth. In other words, management often finds it difficult to make a compromise between trust and control. In fact, management has no choice, though, but combine these two seemingly contrary measures of reducing risks while managing a bigger complexity.
This post presents a set of recommendations to strike this balance. The measures pointed out below are applicable to the whole company or its autonomous unit. It is still worthwhile to note that application should varies with situation of the company/unit. If most of the people identify themselves well with company, there should be less control necessary. If people have low commitment and there are high potential gains from deviant behavior, control is more important.
The measures proposed included a flexible and lean control system with deliberate trust growing plan. In addition, coordination, negotiation and monitoring are important to reduce the drawbacks of control and to avoid too much interference that harms trust building efforts.
Flexible Control System
Traditionally, companies immediately establish the formal structure with effort to define tasks, authorities and information flows. An issue with clearly-defined structure is silo thinking that reduces collaboration. A thorough exercise like this requires a lot of effort and a large part may not valid for long in a changing environment like in fast-growing entrepreneurial companies, anyway.
Managerial cybernetic sheds new light into the concept for structure,
that is a better fit for entrepreneurial company. It is stable relations that
allow people and other resources to operate
together as a totality define structure. The organisation's structure
is thus viewed as a network of stable 'real life' on-going
communications, or organisational processes, and not as static formal
reporting relations. Objects, such as communication devices or
information systems, thus constitute an organisation’s structure.
Fast-growing entrepreneurial companies should focus on understanding, establishing and modifying these stable communication relationships, which happens directly by conversations or indirectly through coordinate actions as an outcome of sharing a context or culture, among its units and roles.
In addition, these companies should spend time together with their units to define and agree on the coherence boundaries. These are guidelines to make sure identity of the company, company's operational direction and synergy with other units of the same company are taken into consideration in unit's decision and operations.
Fast-growing entrepreneurial companies also need to tune their incentive system. The system should encourage collaboration, tight compensation to level of support (e.g. service quality) to other parts of organization, or support achievement of whole organization.
Leadership development and training are effective measures, though less often thought of as mechanisms to ensure compliance and coherence. These help enhance management community, create sense of direction and involve key members from unit management to development of strategy and policies.
Finally, these companies should also facilitate sharing with new generations by reviewing resource allocation agreement more often, recognizing contribution and seniority but emphasizing growth of the company or unit as a whole.
Coordination, Negotiation and Monitoring
To avoid top-down control and interference with management levels below, the companies should facilitate coordination among autonomous units. Related units can be determined by analyzing financial, materials and information flow. Openness and consistency are important in this process to avoid damaging trust.
Another way of minimizing the use of direct commands is negotiation. Company's operational control should start performance-based resource negotiation with units and facilitate negotiation among the units themselves. In entrerpreneurial companies, this process will be less formal than budgeting process in mature companies. To avoid competition and stifling in case of change, these contracts needs to be reviewed often and loosely decoupled from compensation.
Like the other side of the same coin with negotiation, operational sporadic (infrequent) audit, which is not limited to accounting, to make sure compliance and assess effectiveness of policies.
Deliberate Plan to Grow Trust
Sounds theoretical, but trust should be made a part of the culture, once again (this often used to be in the company when it's still small). Management needs to be open and supportive, while accept the fact that they cannot control all the details of the work anymore. The relationship between company and unit management should be more mentoring relationship. Freedom should be given small at first, but increased as far as lower level management can handle the current work. This comes with an important note, though. Since trust is often domain-related and sometimes, past experience may not have less meaning as the environment and business evolve, companies should reassess the domain for trust when there is a significant change.
Finally, I cannot overemphasize the double role of communication. Communication is the basis for interaction, the foundation for organization structure and trust. On the other hand, communication facilitates forming personal relationships, set the basis for trust and help people to navigate a quick-changing environment. Management therefore need to make time for communication, and information system as another means to inform related parties. Like once said by Roberto C. Goizueta, "Communication is the only task a leader cannot delegate".
In conclusion, the tasks that management of a fast-growing entrepreneurial company related to growth and control of an increasing complex environment is three-fold, creating a flexible and lean control system, growing trust and enhancing coherence among its unit. Lack of any one of these, the effort will likely to fail.
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