3 Ways to Decentralize Management and Boost Productivity
Ever met a company that models its culture on Western ranchers? Now you have.
This article is included in Entrepreneur Voices on Strategic Management, a new book containing insights from more than 20 contributors, entrepreneurs, and thought leaders.
Corporate structures are flattening. One big reason why is that the strict hierarchies of yesteryear are no longer effective for today's fast-paced, tech-driven industries. No surprise then that major companies are shaking up their management styles.
Take the example of Zappos. The shoe company famously runs as a holacracy in which employees self-organize instead of operating within a traditional bureaucratic structure. And Swiss luxury brand Richemont recently announced that after current CEO Richard Lepeu retires later this month, the company will dispense with that position altogether.
Instead, the 20 “maisons” (the brands under Richemont) will report directly to the board of directors, distributing responsibility more evenly throughout that expansive organization.
Startups should take notice of this trend and embrace it. After all, new companies usually operate with constrained resources, always seeking ways to stretch their capital. And specialization is neither cost-effective, nor likely to lead to the best early-stage products. Decentralization, however, encourages collaboration, efficiency and speed.
Specialization is the death of early-stage innovation.
Interdisciplinary integration enables startups to launch and grow quickly. Too often, entrepreneurs fail to build the right teams -- one of the top reasons startups fail. Businesses falter, meanwhile, if they lack versatile employees willing and able to jump in wherever they see a need.
Highly specialized startups also do not go to market quickly. When only a handful of people in a company are qualified to work on product development, the business can launch just one project at a time. However, companies that hire multitalented employees develop MVPs faster, get to market sooner and iterate on customer feedback before siloed startups have even held their first launch.
Strategic hiring, then, can ensure that a startup will use 100 percent of its resources all the time. My company got in on this trend early: Rather than hire a PR pro who deals strictly with media relations, we recruited a communications specialist who fits a variety of roles. A good rule of thumb for startups is that everyone should be able to do everything.
At our company, our culture has deep ties to our rural ranching roots in northern Nevada. And that fact reflects on our work style, as well. Ranchers after all are a self-sustaining bunch who use collective ingenuity to achieve their goals. Any one of them could change a truck tire or set a horse’s broken leg.
This is the kind of interdisciplinary skill set we want our team members to embody, too.
In fact, this "ranch mentality" has driven our exponential growth because every one of our employees is comfortable taking initiative and working wherever needed. Most important, our employees understand their roles within the broader organization and how their work impacts our customers.
Don’t get me wrong -- even we have a loose hierarchy to ensure accountability for both ourselves and our clients. The key is breaking down the walls that keep departments and individuals from working together.
The problem is that employees who work in silos become disconnected from the customer experience, unless they’re working on a customer service team. Software engineers, for example, will build the user interface for their companies’ websites, but rarely do they understand how user interface impacts customer acquisition.
Instead, facilitating collaboration between departments such as engineering and marketing helps employees understand how their work assignments fit together in service of their audiences. Startup leaders can use the following strategies to create decentralized businesses:
1. Rethink structure.
Forget about traditional hierarchies, especially in the early days. There may come a time when a more traditional approach works for an organization, but the startup stage is not it. Hierarchy-induced stress has long been linked to heart disease, among other health issues, and it increases voluntary turnover by 50 percent.
So, avoid these stress-related pitfalls; organize employees into autonomous squads that can work across disciplines.
Foster a sense of equality by encouraging conversations among staff members of all experience levels. My company practices department shadowing, in which founders and executives learn what people are doing throughout the organization.
When the concierge receives visits from the COO, and the VP of marketing sits in with accounting, employees understand that we’re all part of the same team, pursuing shared objectives.
2. Create a team of "intrapreneurs."
Startup employees make the best intrapreneurs. Because they’re involved in so many areas of the business, they have unique views on what types of products will resonate with their markets. Google’s intrapreneurship program, for example, empowers team members to pursue their ideas without getting approval from their bosses.
They can partner with colleagues to explore concepts and potentially create new products for the company.
Cultivate a similar mentality by inviting employees to build new solutions and collaborate with their co-workers on ideas. Trust them to take initiative; don’t require them to get a manager’s green light before acting. Not only will this spur innovation even as the company leaves the startup stage, it will also inspire employee loyalty and enthusiasm.
3. Rally around a common goal.
Shared goals are a great way to bring people together and drive results. And while 75 percent of employers in one survey by Queens University in Charlotte, N.C., rated collaboration as “very important,” 39 percent of employees reported that their organizations didn't collaborate enough.
My own company decided to emphasize sales volume one year, and every department worked toward specific origination goals. Not only did each team's members want to perform the best, they didn’t want to let one another down. No one wanted to be the reason we fell short, so everyone worked harder to ensure we hit the target.
We also created opportunities for cross-collaboration, so different departments could gain insights into one another’s processes as we pursued the goal. People work together best when they understand what’s happening within each department and empathize with the unique constraints and pressures their colleagues experience.
A shared goal helped us foster more empathy and camaraderie between and among groups. We enjoyed our best sales year ever and saw an increase in proactive behavior throughout the company.
In sum, the flattened structure approach enables startups to run on all cylinders at all times. Employees can burn out when working in silos because they feel that the success of a particular project falls on them alone. Alternately, flat teams share responsibilities and energize one another through collaboration. The personal, innovative nature of holacratic startups makes them more agile and better equipped to take on their markets.