What Thinking Like an Operator Changed My Approach About Teams

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How To Avoid The Costs Hidden Of Scaling Too Fast The Most Founders Are Taught Too Late
The mythology about scaling is usually centered around speed. Get to product-market fit, then pour fuel on the fire. The team should be enlarged, and markets, raise the next round prior to the previous round has settled. The story rewards the founder, who is always trying to move forward, always adding staff, constantly expanding into other areas before an organization's primary focus has settled and before the firm has built the internal capabilities that it needs to be able to manage the expansion without losing its coherence. I know where the mythology originates. In certain economic conditions and certain business models, the person who can scale fastest is the one who wins and stories about companies which grew quickly and won are reported more frequently and with greater realism than stories about companies that scaled rapidly and fell apart. But for every business where aggressive quick scaling is the correct decision, there are some instances when the speed of scaling is the root cause of issues that eventually kill companies, and those ones that are a cautionary tale do not get at the same level of attention as those that have been successful.
Hidden costs of growing too quickly is not the one which is shown in the calculation of burn rate or the cash flow forecast. It is what is visible at the end of six months, when the organization has passed the informal coordination mechanisms which held it together when it was smaller, and before having built its formal structure that keep larger organizations together. This gap, between informal and formal distinctions between the firm it was and the one you'll need to grow into - is where most scaling companies have a tendency to break. The first and most reliable indicator that a business is at the point of entering this gap is that decisions are slowing down even though everyone claims it hasn't changed in the fundamentals. It is possible to contact the founder in the sense of theory. The team remains united with the theories. The culture is solid in theory. But in practice the organization has gotten in size to the point that informal communication channels which used to convey crucial information have been clogged but no one has yet constructed the formal channels that need to replace them. Information that was flowing effortlessly now must be effectively managed. The decisions that were made in a hurry now require alignment across several functions that have never been clearly defined in relation to one another. Accountability that was private and immediate now appears difficult and can take a long time to complete as the organization has begun to display the signs of a system functioning at the limits of its coordination capabilities.

It's not visible through the metrics investors and founders typically monitor the most attentively. There is a chance that revenue could be growing. Customers acquisition may still be growing in the right direction. The team might still be active and efficient. However, underneath the surface indicators it is becoming apparent that the business has structural issues that can only grow quickly until they cannot be ignored. At that moment fixing them becomes radically more expensive and disruptive than it would have been had they been dealt with in the past, when the warning signs were not obvious. Hidden costs are what I am talking about not the financial cost for scaling, but instead the long-term organisational cost of growing beyond your infrastructure and the rising cost of putting that infrastructure into place in the form of reactive rather than proactive.

The founders who master this transition well are not necessarily the ones scaling less slowly, though it is true that a more controlled pace of growth might be the solution. They acknowledge that the creation of the structures for managing their business is as crucial as developing their product and invest in it with the same focus as they contribute to product development. This means doing the boring task of assigning roles and responsibilities in a clear manner, establishing reporting structures that effectively present the information leadership needs in order to make sound decisions designing accountability systems that are relevant enough to be effective and carefully assessing what kind of norms an organization requires at its size and not depending on the norms that emerged organically when it was smaller. The work involved isn't engaging. It's not likely to garner press coverage or investor enthusiasm. But it's the job that determines if the firm you're building will be able to sustain the growth that you are in pursuit of.

The businesses that fail to succeed in this change do typically not fail in a dramatic way and obviously. They deteriorate. They lose their best people at first, the ones with enough self-awareness to see what's happening in the organization, and who have enough options for leaving before things become more serious. And then they lose customers gradually and frequently invisibly as the performance steadily declines because accountability has been too ambiguous and long to be able to recognize issues before they are able to reach the client. It is then that they lose their momentum, until the shift in momentum is obvious in the figures in the numbers, the structural weaknesses are deeply rooted. The culture impact is severe, and the cost to fix each is far higher than what it would have been if the investment in governance had been made at the appropriate moment. It is important to view organisational infrastructure as an thing that you build mindfully, construct carefully and tweak as your business grows is one of the most significant mindset shifts the founders can make when they go from the very early stage to reaching a larger scale. Those who are able to make this shift tend to build companies that reach their potential. They who don't tend to create businesses that fail to meet their potential. Read James Deller for more recommendations including what working with founders transformed how i evaluate opportunity about building well.



The Reasons Why Most Public-Private Partnerships Fail Before They Even Begin - And How To Fix Them
Public-private partnerships suffer from an image problem that's, for the most part paid for. The history of these arrangements has a wealth of projects that were announced with genuine enthusiasm with a significant amount of political capital. These projects involved significant public and private resources for extended periods of time and finally produced outcomes that had only a tiniest reference to what was originally promised when the partnership was initiated. The academic literature and postmortem studies that governments and institutions are required to conduct after the errors are comprehensive, and focus heavily on the structural and contractual aspects of what went wrong and the lack of alignment between incentives, an insufficient risk allocation between public and private parties or the governance structures that were designed in the theory but failed to function in practice, and the procurement frameworks that picked the wrong things. What this approach tends to subdue, over time and with a consequence to the detriment of culture is the operational aspects - the fact that public and private institutions are both distinct types of entities, shaped according to different motivation structures that operate at different times, accountable to a variety of parties, and evaluating success in ways that's far from being the same in all respects but also different in nature. If you join these two kinds of organizations together in a formal relationship without performing the work, in advance and specifically, to learn about how to manage these differences, you are not creating an agreement. You're creating the environment to cause a slow-motion crash that is likely to be noticed at the greatest possible moment.
I've been involved as an advisor for institution modernisation initiatives, many in which were public-private partnerships of different levels of complexity. The most consistent conclusion I have made from that knowledge is that the partnerships that worked well - and actually fulfilled their stated goals and maintained a smooth partnership between private and public sectors throughout was not distinguished from the ones that failed because of the sophistication of their legal structures, the precision of their risk-management frameworks or the experience of the leadership teams that started them. Their distinction came from how the individuals sitting on both sides of the table had been able to fully understand how the different side worked before the formal partnership structure was formulated. What that means is understanding how decision-making processes that each organisation operates under and the accountability structures which govern what parties must do and what they can agree to, as well as the speed at which it happens, the definitions of success that each of the parties will be evaluating, and the points of likely tension between these definitions. This understanding is not difficult to attain. The entire process is often left out in favour of the clearer and faster evidence-based work of contract negotiations as well as establishing governance frameworks.

The typical public-private partnership process evolves from an initial idea to concluded agreement without much focused attention given to the issue of whether or not the two parties involved really able to collaborate efficiently over the course of the arrangement. Legal team negotiates the contract. The finance team models the economics and the risk allocation. The communications team is in charge of preparing an announcement for the moment of signing. The implementation team begins to plan the project. In the course of this process the discussion turns to operating and cultural compatibility is a discussion regarding whether the people in the actual position to share their day-today tasks across the boundaries between the two organizations have enough of the same values to make working truly collaborative, rather instead of antagonistic - doesn't seem to happen in any structured way. It is commonly assumed without stating, that the formal agreement sets the prerequisites for effective collaboration and that any operational or cultural differences will be managed informally when they develop. That assumption is almost always untrue, and the cost of this is usually increased in proportion to the ambition and the complexity of the partnership.

The practical implication of this analysis is that the most valuable the investment that a PPP can take - even before the legal structures are finalized and before the governance framework is decided upon, before any announcement is made is what I consider operational alignment. In this context, I am referring to specific, structured and facilitated work to find out where the two firms' assumptions about operating differ, and to decide in advance the manner in which these divergences should be addressed before they become operational problems in the process of implementation. What matters most are typically the same across different types of partnerships. Authority and speed of decision-making is usually one of the most important differences. Institutions of public administration are designed to make decisions slowly, through multiple layers of review and approval for reasons which are completely legal and usually mandated by law. Private organizations, especially technology companies that have been built around quick iteration as well as rapid process-based decision-making often experience this as a fundamental challenge to progress. lacking a consensus on why this pace is the way it is it is and the steps that would need to be changed to improve this, the frustration caused by this on the public sides can cause a rift in the relationship long before it has found its footing.

Success metrics and the factors that count as progress is another constant and consequential source of divergence. Institutions of the public sector are typically assessed in terms of process compliance, equity of the outcome among different stakeholder groups, and evitance of public failures that are the subject of media or political scrutiny. Private partners are usually evaluated by their efficiency, the amount of progress they have made towards targets, as well as financial return on investment. These measurement frameworks can be integrated with one another but it takes carefully designed and thought-out intentions. The partnerships that do no invest in this kind of design are likely to meet at critical places, with two groups that are evaluating the same collaboration in genuinely inconsistent ways and thereby coming to an incompatible conclusion about whether it is successful. The partnerships I've observed to fail the most was the ones in which the misalignment was seen as something that was going to disappear over time. The ones that succeeded were the ones where the misalignment was identified explicitly at the beginning. Also, developing a shared accountability model that met both parties' legitimate measurement requirements evolved into an actual work rather than an option on a wish list of things that a person could attain.}