Founders. VC’s. Private Equity Houses. People Leaders.
How many of you have a focus on organisational health and effectiveness?
What do Founders want from their organisation? Many want to create a legacy, achieve status as the best, and some want to achieve maximum financial return by driving revenue growth as efficiently as possible (headcount/investment) as quickly as possible. Most founders and CEOs are busy with a myriad of critical and important activities and trying to manage evolving investor sentiments while also maximising operational efficiencies and maintaining strong performance.
Without a strategic and commercial people team, who is accountable for overall organisational health and effectiveness? And what does this mean for your organisation?
Organisation Effectiveness is maintaining how your organisation is set up for success, which includes understanding how your operating model will drive commercial excellence and enable your people to flourish long-term, directly impacting your organisation’s ability to achieve its goals and objectives. The health of any organisation of any scale and size must implement and educate on ways of working from a top-down perspective. This should include establishing well-defined goals and objectives linked to the overall success of the business. Setting out governance in decision-making and internal financial accountability will ensure the proper controls that lead to maximum productivity. Two very important things to remember are organisational effectiveness is not just structure. Secondly, the glue which holds ways of working together is dependent on the leadership team’s effectiveness (leadership effectiveness we will unpick this separately).
Pre and post-investment, where do we often see time and investment spent?
Pre-investment: Founders focus on the product (Prototype/MVP), traction and investment. This is a huge task, and one does not often see the amount of time being sapped by selling, defining, and maintaining just strong BAU performance. Pre-seed Founders end up becoming accountants and salespeople.
Post-investment Whilst we are seeing investor behaviour and attitude shift and focus on more sustainable growth, which sees a business scale but either remains or returns to profit as quickly as possible. We still see a tendency in business building to jump out of a plane and put the parachute on the way down (we see this more with US companies), often leading to over-hiring, miss-hiring, and a less effective organisation. Now the plane jumping can be an unspoken game plan which can be to become as big as possible as quickly as possible (build to exit, not build to run), to land grab, increase the barrier to entry and wrestle for the best valuation. Get this wrong, or should there be a market or economic shift, we will see layoffs as a consequence of this game plan. Therefore, despite the rhetoric of being a people-first org, it can be very much the opposite; HR is pizza, policies and performance to the Founders (operational), and recruitment is getting people hired as quickly as possible.
Often in the early stage and hyper-growth, we see dysfunctional and chaotic organisations due to a few symptoms:
- If you hear phrases such as “well, we are a start-up” or “we are a scale-up”, these can often be excuses for chaos and believing this fosters more agility; because “we are agile”, more dynamism and creativity, and therefore, not investing early enough in certain areas which are of strategic value, such as organisational effectiveness. Why is this? There is a missing understanding of the topic itself and a lack of capability and maturity in either the founder, leadership or investors. Perhaps they believe in having ticked this box or have previously attempted, but the people and talent leader is more operational vs strategic and commercial. Here we are not saying strangle the dynamism of the business by too many processes and standards. Whether you choose to define it or not, your company has an operating model from day one, and you should understand and optimise it as early as possible.
“Chaos stems from high growth without building the right foundations and focusing on the pace of growth over and above quality. There is a balance. Investing in the right level of process (building blocks) to allow for scale is worthwhile. This feeds directly into the operating model decisions.” – Janie Links, Strategic People Advisor – Founder, High Calibre People.
“Startups often confuse order for “bureaucracy” – order provides boundaries within which there are degrees of freedom” Kristy Rutter, Group Strategic Investment Director at Lloyds Banking Group.The Operating Model Canvas is a book MossKind recommends to get started.
- Another one we hear very often is; “we are Founder-led” here, we have to accept workarounds for poor or irrational behaviour because, well, they are the Founder. This is where the Founder either needs to become more self-aware and perhaps invest in a really good coach but also take the time to get under the skin of the business, or sometimes they will have to extrapolate themselves from the detail and start to lead without being so hands-on.
- When organisational effectiveness is lacking from the founders, it is often delegated or picked up separately as an action by the incoming functional leaders (CTO, Chief Product etc.); be careful here for two reasons; delegating operational aspects of the business in the early stages can lead to dealignment of vision (especially when the vision may still be “defined” and poorly articulated from a founders head) – dealignment can lead to conflict stagnating the ability to grow. Secondly, you are entering into a game of company Rubix cube. What is this, “might you ask?” Each incoming functional leader is handed the operational responsibility to set up their function how they desire; ways of working (individual operating model), tools, org design, hiring etc (be careful of process purists here who care more about the process being exact vs what is best for the company). The functional leader cares more about their colour on the cube and getting this colour block complete; some may care about one or two more, especially if a user-centred product company. The Product Leader will want engineering and design to interact and engage well. Whilst this is okay, who is thinking about the overall Rubix cube and its effectiveness – total model thinking? Over time as the company gets bigger and bigger – what do you get? You guessed it……silos “Well-designed organisations with underlying systems add processes enable decision making and execution” – Kristy Rutter, Group Strategic Investment Director at Lloyds Banking Group
Steven Bartlett once said all companies are actually recruitment companies because your ability to attract and retain people is what will allow you to compete or not. We agree, but you must also invest much earlier and continuously in organisational effectiveness and not when you are 500 people or greater.
Although it is improving, we typically see talent acquisition sitting separately from the strategic discussion and having little input into organisational effectiveness; in talent acquisition, we are still focusing on the wrong metrics, such as time-to-hire, which can drive the wrong behaviours (“bums on seats”). We are still utilising third-party agencies or internal talent acquisition functions to mainly provide the organisation with an operational service which more akin to a Deliveroo/Talabat/Uber Eats type service; taking and understanding an order (x roles to fill), matching the order and deliver it as cost effectively as possible; Talent Acquisition needs to swim further up the value chain (another topic to be unpicked separately).
In the organisational effectiveness discussion, strategic and commercial people and talent leaders are not always in the room when they should be; and this is where we see Founders, functional leadership or perhaps management consultants bridging the gap without the right experience and coming up with what is required and determining ways of working, leading to some of the consequence shared earlier.
No longer can talent/people and organisational effectiveness be disconnected from one another. This is like a gardener only caring about the seeds and not the soil or vice versa. A gardener cares for both, as should all leaders. MossKind see’s an organisation as the soil and people as the seeds. The soil must be right and enriched for our seeds to flourish and achieve maximum potential. Organisations can not just throw seeds into the soil and hope they flourish. We must continuously understand, invest, scrutinise and enrich the soil as early as possible. Change is constant, and growth is optional. Be the gardener and invest earlier in your soil!
- Invest much earlier and continuously into organisational effectiveness (your soil).
- There are degrees of freedom.
- Embody the professional Gardener.
- Be mindful of the company Rubix cube game.
- Bring in a strategic people leader far earlier, not an operational one (advisory if full-time is not an option).
- VCs may wish to acquire this capability and offer it to the portfolio as a value add. This will require a strong feedback loop in place between the Founders and the VC outside of the Board meeting cycle.
- Start learning about organisational effectiveness.
Richard Nolan, Chief Operating Officer & Chief People Officer
“Business leaders continue to place a greater focus on maximising the impact and returns from their people’s investment, and achieving operational excellence will always remain at the forefront for leaders to achieve.
The world of work is continuing to evolve at breakneck speeds, triggered by the current economic climate, labour shortages, technology, and changes in social norms (to name a few), with expectations of leaders continuing to grow, expanding the remit of CEOs / Founders which now requires them not only to acquire and nurture talent but they now need to be storytellers, energising people with a clear sense of purpose to drive and maintain performance.
Achieving organisational excellence requires cohesion between a founder’s aspirations and the employees being taken on the journey. This typically will be achieved by having a clearly defined purpose, which is translated into a working operating model, bridging core financial goals with culture. Typically this would be underpinned by various frameworks which aim to attract, nurture and retain talent while also achieving the commercial aspirations of the business.”
Andrea Smith, VP of People
“Consider what will drive organisational excellence and the commercial state of the business required through different organisational development phases, be it growth, sustainability or cost-effectiveness.
Setting up defined principles in the early stages will prevent the need to unravel functional growth misaligned with the overall structure and guide the operating model and org design through to a scalable existence.
The operating model should also appreciate that people want to understand their role, what is expected of them at each stage of organisational effectiveness, and how their contribution fits into the overall business achievements. Everyone should be on the critical path to establishing a few really good objectives that will have the most impact”