An Open Letter to Mark Zuckerberg and Larry Page — Action Steps to Avoid or Turn Around a “Great to Good” Slide (Part 2 of 2)

Excellence matters, and technology advances so fast that the potential for improvement is tremendous. So, since becoming CEO again, I’ve pushed hard to increase our velocity, improve our execution, and focus on the big bets that will make a difference in the world. Google is a large company now, but we will achieve more, and do it faster, if we approach life with the passion and soul of a startup. — Google CEO Larry Page

With these powerful words, Google’s CEO Larry Page demonstrates that as Google grows in size, it must take actions in order to maintain its speed and startup-like attributes. If he fails, Google will slide into what I call “the Great to Good downward spiral.” It has already happened to notable firms like Kodak, Xerox, AOL, HP, 3M, Sears, MySpace, and Yahoo. In part 1 of this article I covered the 25 factors that can be used to identify if your organization is already in a bureaucratic slide. This Part 2 covers potential action steps that corporate leaders can take to prevent a slide at newer firms or to turn it around at more established firms.

20 Action Steps for Stopping or Preventing a “Great to Good” Slide Into Mediocrity

Although many of the actions that leaders need to take are simply the opposite of the 25 “slide identification measures” contained in part 1, there are other additional actions that can allow a firm to remain “start-up like” throughout their growth. Some of these actions may initially seem harsh or aggressive, but like a cancer, strong remedies are required to kill the insidious components of a bureaucracy. If these recommended actions sound familiar, it is because they frequently mirror the critical success factors of a performance culture. The recommended actions are broken into three categories.

Strategic goal and role setting actions
Actions to increase innovation, speed, agility, and change
People-management-related actions

Strategic Goal and Role-setting Actions

Set a goal to create a performance/innovation culture — The first step is to set a clear corporate-wide strategic goal and provide an accompanying set of expectations that your organization will use to become and then maintain its status as a performance and innovation culture.Corporate leadership must make it clear that no matter what size your organization is, they want it to be “startup like,” which means being a first-mover leader, having disruptive products, and dominating any marketplace that you enter. In order to reinforce that expectation, leaders, managers and employees must be measured, recognized, and rewarded on their performance, speed, and innovation, rather than effort and seniority. In addition, rather than a vague target, leaders should set and communicate a fixed expectation for a “rate of improvement in results” each year (e.g. 12%). And this “results improvement goal” must apply to every individual, team, and organizational unit, so that every employee will fully understand the need for innovation, speed, and agility. This is because you simply can’t succeed with the imbalance that occurs when half of the organization is moving at market speed, while the other is improving at a bureaucratic rate.
Assign the executive committee the role of overseeing a startup approach — Everyone in the organization needs to accept responsibility for avoiding a slide into a bureaucracy; however, the executive leadership team needs to take ownership of implementing and maintaining an integrated approach. Its first step should be making maintaining startup-like agility one of its primary goals and a part of the bonus criteria. It needs to accept the role of monitoring the organization’s status and reporting it to the CEO and the stakeholders. It may be important enough to include in the annual report (Facebook included it in its IPO prospectus).
Create a startup/bureaucracy dashboard — In order to avoid a gradual slide, executives, managers, and employees need to be constantly aware of where your firm currently stands on each of the key startup vs. bureaucracy measures. The summary results for each manager should be distributed on a quarterly basis in a ranked list so that everyone will know the leaders and the key offenders.
Calculate the dollar costs of bureaucratic behavior — Knowing the impact on the bottom line must be a key driver in any successful effort, because unless they know the impact on corporate revenues, executives are liable to put off decisive action. Leaders must work with the CFO’s office to estimate the dollar impacts on corporate revenues as a result of a loss of speed, agility, and innovation.
Put limits on overhead functions — Everyone must realize that the role of overhead functions should be to find a way to expedite and allow managers and innovators to do what is needed. However, because few overhead leaders accept that role, the growth in the size and the power of overhead functions has been a major contributor to the creation of a bureaucracy. So executives need to set a ceiling on the percentage of the budget that can go to these functions. In addition, the rewards and success measures for these overhead functions must be changed. They need to be measured and rewarded based on how operating managers rate them as supporting and directly contributing to (rather than inhibiting) an increase in speed, agility, risk-taking, collaboration, and innovation. Leanness and a limit on excessive rules, approvals, policies, and prohibitions must be continually assessed. In order to limit the proliferation of overhead programs, each function should be required to drop their lowest-ranked program or service every two years.

Actions to Increase Innovation, Speed, Agility, and Change

Build speed, impatience, and acting with urgency into the organization — In today’s business world, it’s not the big that eat the small; it is the fast that eat the slow. The old adage is simply wrong: speed doesn’t kill, slow kills. Moving fast does increase error rates but moving too slowly guarantees that you will not be a leader in the marketplace. In order to set the appropriate speed target, executives must monitor and then match the speed in which the fastest competitors (especially startups) move. Many firms try developing a sense of urgency or they use so called “change agents,” but in order to guarantee success, you have to go further and focus on the required actions and behaviors. Indicators of organizational speed, like the number of approvals, the hierarchical levels, the time spent in meetings, and the rate of innovation should be monitored. Identifying speed-related best practices and critical success factors requires benchmarking the fastest-moving internal teams and functions, as well as a great product-testing process. Executives must set “stretch goals” when setting deadlines, but leaders must educate managers and employees on how to move fast while still minimizing errors. And finally, how individual employees act with urgency also needs to be assessed and rewarded.
Develop a fast learning and sharing capability — The most important corporate competency may be rapid learning and the ability to use that learning because it drives innovation and speed. If you’re going to lead an industry, no employee can be exempt from fast learning. Startups thrive because everyone is responsible for continuously remaining on the leading edge, and their small size makes sharing learning and best practices easy. Faster learning is difficult when you go first and innovate, because there are few to benchmark against and learn from. If you want to remain “startup like,” don’t create a large corporate learning function. Instead concentrate on enhancing individual informal learning. One learning speed facilitation tool to consider is identifying and then sharing “how the best learn” (where you let everyone know the learning approaches and the sources that the very best performers use). Organizations also need a social-media-type approach to ensure that rapid sharing occurs across the organization. Another recommended tool is individual development budgets, so employees can own and drive their own learning. Because slow learners are a drag on fast learners and teams, they must be fixed or released. Incidentally, leaders should consider all major failures as learning opportunities, so they must require “failure analysis” so that errors are not repeated.
Improve decision making speed — There are few things that indicate that you are a bureaucracy more than slow risk adverse decision-making. If you’re going to maintain the shortest time to market in the industry, the amount of time it takes to make major decisions must be tracked against a standard. Managers must be trained on how to make decisions with less-than-perfect information. In addition, you must identify those that make slow decisions and those that put up barriers and excessive approvals that restrict fast decision-making.
Build obsolescence and scalability into everything — In a fast-changing world, every product, tool, approach, and process eventually becomes obsolete. In a bureaucracy, there is a high tolerance for the status quo, so years might go by before anyone realizes that a process has become obsolete. In order to ensure continuous renewal, every major product and internal process, tool, program and approach needs to include a “use by date” when the process must be reengineered or abandoned. In addition, every plan for a new program or tool must include the development of a next-generation process which will be capable of replacing the original design. And finally, every new program must be built to be scalable, so that it can continue to work as the organization grows dramatically in size.
Identify barriers to innovation, collaboration, and productivity — Most leaders already take actions to increase innovation, collaboration, and productivity. Even though speed requires streamlining, few managers take the time to identify and eliminate restrictive barriers, even though eliminating barriers has an immediate impact and an extremely high ROI. Because these “barriers” are often informal, they sometimes creep in without being noticed. What is needed is a proactive approach which uses manager and employee surveys, as well as metrics, to identify these hideous barriers. In addition, individuals who are responsible for creating these barriers need to be fixed or released. Because collaboration is critical for innovation, there should also be measures of process integration, the degree of cross-functional collaboration, the level of cooperation, and whether there are organizational silos.
Make innovators, game-changers, and pioneers heroes, not managers — At startups, everyone knows the value of innovators. However as organizational size grows, there is a tendency to instead make those with formal titles and power the most admired. So it takes a major effort on the part of senior leaders to counter this tendency and instead to recognize, reward, and communicate to all the incredible impact of innovators, game-changers and pioneers. Making heroes of innovators not only increases their rates of innovation but it makes everyone want to become one. There is a tendency to give innovators formal titles but this burdens them with administrative responsibilities. A superior approach is to instead let them select their own team members and to allow them to operate with some degree of autonomy on a project (for at least one year), while receiving management level pay.
An external competitive focus — When organizations are successful over a long period of time, there is a tendency to become arrogant and to adopt a “groupthink” mentality (i.e. no one can compete with us). In order to limit this arrogance, everyone needs to adopt a competitive focus and to continually do competitive analysis. Organizations need to continually compare themselves to the products, services, speed, agility, innovation, and results produced by first-movers, startups, international firms, and rapid growth firms in related industries. Leaders need to ensure that their employees also use their competitors’ products and services in order to fully understand their capabilities and weaknesses.

Facebook CEO Mark Zuckerberg’s thoughts — “The Hacker Way is an approach to building that involves continuous improvement and iteration. Hackers believe that something can always be better, and that nothing is ever complete. They just have to go fix it — often in the face of people who say it’s impossible or are content with the status quo. Hacker culture is also extremely open and meritocratic. Hackers believe that the best idea and implementation should always win — not the person who is best at lobbying for an idea or the person who manages the most people.”

People-management-related Actions

Fix bad managers — It’s not the buildings or the equipment that become obsolete in bureaucracies, it’s the people management practices. A significant amount of the organization people management problems emanates from bad managers. With rapid growth, it’s only natural that some individuals without management training will be rapidly promoted into management. But a large percentage will fail as managers but few firms are willing to acknowledge when they made a mistake. Leaders need to be aware that nothing negatively impacts hiring, retention, motivation, productivity, and innovation more than a weak manager. To counter this hideous problem, there must be a formal “bad manager identification program,” coupled with a metrics-driven approach that rapidly fixes, demotes, or releases weak managers. In order to avoid creating “little dictators,” the role of a manager must also shift, so that they become influencers and coaches more than those that give orders.
What you measure and reward drives behavior — In a startup, it is obvious to everyone what is important. However, as an organization gets larger, it’s common to overly rely on the corporate culture to communicate your message about the importance of performance, innovation, speed, and calculated risk-taking. Because, “what you measure and what you reward … gets done,” your cultural message must be unambiguously reinforced on a daily basis through your measurement, reporting, and reward processes. Providing significant differences in rewards is critical because if employees receive almost the same rewards for playing it safe as they do from innovating and taking risks, many will eventually settle into the “playing-it-safe mode.” And finally, transparency in reward criteria can make it crystal clear what is really important, and widely reporting the ranked performance of managers by name can help to increase internal competition.
Release the evildoers quickly — A consistent indicator that your organization is in trouble is a high level of tolerance for bureaucratic behaviors. Like a bad apple in a bin, these bureaucrats frustrate your innovators and top performers. As a result, executives should proactively identify those who exhibit bureaucratic or political behavior and as well as those that use “the culture” as a weapon to slow change. Because it is extremely difficult to “fix” employees who love rules, policies, approvals, and the status quo, rather than relying on the traditionally ineffective performance management process, these bureaucrats, along with weak managers and poor performers, need to be quickly released. Rather than going through all of the legal issues related to a formal firing, a superior and faster approach is to simply bite the bullet and pay these individuals to leave before they can do more damage. Rapidly releasing evildoers also sends a message to everyone else that you simply won’t tolerate bad, blocking, political, or bureaucratic behavior.
Getting managers to pay attention to great hiring — When your organization is growing, you have no choice but to add employees through recruiting (or acquisitions). Just like in sports, if you have the ability to attract great employees and managers, that alone will keep you near the top. Fortunately, one overhead function that has proven its high ROI is recruiting. Executives at both Google and Facebook, for example, already know the power of recruiting and as a result, they generously fund it. But a major problem occurs when hiring managers hinder recruiting when they give hiring a lower priority (because they perceive that it has a delayed impact on their results). You can minimize this problem by directly measuring and rewarding hiring managers for their number of quality hires that benefit the entire firm. In addition, managers must be provided with powerful data-supported recruiting tools like modern employee referral programs that are tied to social media efforts. That means that just like when you were a startup, every manager and employee must accept their role as a 24/7 “talent scout.”
Focused retention is a superior approach — Your success will invariably attract external recruiters who will attempt to pull away your very best. Rather than diluting your efforts by trying to retain everyone, your retention effort should be prioritized and focused on high-impact key employees who can’t be replaced. Managers must own retention but they can’t be expected to excel at it unless they are provided with powerful data-supported retention tools. These tools should include helping managers identify who might leave, why they might leave, why they stay, and what are the most effective personalized approaches for keeping key employees.
Internal movement and development must be accelerated — As firms get larger, cross-functional and cross-business movement naturally slows. To make matters worse, managers frequently learn to hoard their talent because it may improve their short-term results. A superior approach is proactive internal movement, where an internal recruiting team facilitates the rapid and accurate placement of employees, in order to increase productivity, development, excitement, and retention. This effort should be supplemented by a “project marketplace” that makes everyone aware of virtual and part-time projects which serve the dual purpose of getting work done as well as broadly exposing employees. Managers must also be measured and rewarded for developing and then releasing talent to other functions and business units.
Great assimilation is required to maintain your culture — When startups grow, they almost always do so partially through acquisitions. In order to ensure that these newly acquired employees (as well as new hires) don’t rapidly dilute your culture, a strong data-supported assimilation program must be developed. Acquired individual employees must also be measured on their level of acculturation and those who miss the mark must be fixed, released, or isolated.
Individual motivation and management — In smaller startups, leaders routinely managed to the personality and idiosyncrasies of individual innovators. This personalized treatment maximizes excitement, because these key individuals are provided with the right set of motivators and the management style that fits them perfectly. As organizations get larger, however, it obviously becomes increasingly difficult to personalize your motivation and management approach. An alternative method is to target your motivation and excitement approach only on your key employees and innovators. Start by having their manager survey or interview them in order to identify their key motivators, excitement factors, and turnoffs. Also consider asking for their help in identifying the most effective way to manage them and then make sure that their manager adapts their style in order to maximize their performance. If you have the time and resources, you can also survey every employee and simply ask them for their preferences in motivation, communications, scheduling, and the most effective way to manage them. Obviously managers can’t meet every individual need but a few small steps alone may be a major motivator.

Yahoo’s CEO Scott Thompson’s thoughts — There’s a lot to do and that’s why I can’t stress enough that we all need to focus on getting stuff done. Getting stuff done is short hand for eliminating bureaucracy and barriers so we can all innovate as fast as our customers and the industry requires. That’s pretty fast.

Final Thoughts

For over 30 years, I have been researching how once-great firms slid to the point where they can only be called lumbering giants. Many management experts have concluded that as an organization grows in size, it’s impossible to avoid transitioning into a bureaucracy. The exact opposite is true; organizational atrophy can be stopped. Becoming a bureaucracy is much like gaining weight; most do gain weight as they age, but the causes of the weight gain are identifiable and fixable. Firms like Apple, Starbucks, and Wal-Mart demonstrate that it is possible to remain agile. The solution simply requires deliberate data-supported actions that unfortunately, are often completely off the radar of many CEOs and HR leaders.

To me it is sad how so many firms struggle to regain their former greatness by trying what seems like fruitless approaches including revolving CEOs, large-scale layoffs, reorganizations by the dozen, drastic cost-cutting, and even trying to make money through patent lawsuits or sales. But in my analysis, all of them miss the mark completely because they don’t directly address the factors that keep a bureaucracy alive. Bureaucracies are a lot like weeds, they will survive until the end of the world (or the firm) because no one takes the time to identify and fiercely counter the strengths that allow them to thrive. Many replacement CEOs focus on strategies and product lines that make business sense, but they all too often fail because they simply can’t be successfully implemented because of their firm’s strangling bureaucracy that systematically kills new approaches, innovation, speed, risk-taking, and agility.

My summary advice to Mark Zuckerberg, Larry Page, or any other CEOs struggling with this potential slide from startup into a bureaucracy comes in three parts. First, realize that the downward slide is not inevitable and that it is possible to dominate your industry for decades (i.e. Apple). Second, understand that there are real measurable indicator factors that can show the degree which your firm is no longer “startup like” and whether you are becoming a bureaucracy. And third, realize that there are many management actions that can, when implemented, reverse any slide and return your organization back to the performance culture that it once was. And finally, my goal was simply to get leaders to begin thinking about a more systematic approach to fighting this heartbreaking and disillusioning slide. I don’t claim to have all the answers but I hope that in this article I have provided enough of them to at least get you thinking in a new direction.

Note: Comments, questions, and especially additions are encouraged. Entered them into the comment section following this article on ERE.net or send them directly to Dr. Sullivan at JohnS@sfsu.edu.