Avoiding the Bureaucratic Death Spiral
In Good to Great: Why Some Companies Make the Leap… and Others Don’t, Jim Collins has a great section on how a bureaucratic death spiral turns exciting, high-potential start-ups into mediocre companies:
Few successful start-ups become great companies, in large part because they respond to growth and success in the wrong way.
Entrepreneurial success is fueled by creativity, imagination, bold moves into uncharted waters, and visionary zeal. [Then] as a company grows and becomes more complex, it begins to trip over its own success — too many new people, too many new customers, too many new orders, too many new products.
What was once great fun becomes an unwieldy ball of disorganized stuff. Lack of planning, lack of accounting, lack of systems, and lack of hiring creates constant friction. Problems surface — with customers, with cash flow, with schedules.
The professional managers finally rein in the mess. They create order out of chaos, but they also kill the entrepreneurial spirit [emphasis added].
Members of the founding team begin to grumble, “This isn’t fun anymore. I used to be able to just get things done. Now I have to fill out these stupid forms and follow these stupid rules. Worst of all, I have to spend a horrendous amount of time in useless meetings.”
The creative magic begins to wane as some of the most innovative people leave, disgusted by the burgeoning bureaucracy and hierarchy. The exciting start-up transforms into just another company, with nothing special to recommend it. The cancer of mediocrity begins to grow in earnest.
How do you avoid the bureaucratic death spiral? You create a culture of discipline instead of a bureaucracy. Collins continues:
The purpose of bureaucracy is to compensate for incompetence and lack of discipline – a problem that largely goes away if you have the right people in the first place [emphasis added].
Most people build their bureaucratic rules to manage the small percentage of wrong people on the bus, which in turn drives away the right people on the bus, which then increases the percentage of wrong people on the bus, which increases the need for more bureaucracy to compensate for incompetence and lack of discipline, which then further drives the right people away, and so forth.
… An alternative exists: Avoid bureaucracy and hierarchy and instead create a culture of discipline. When you put these two complementary forces together — a culture of discipline with an ethic of entrepreneurship — you get the magical alchemy of superior performance and sustained results.
The rest of the chapter is about how to create this culture of discipline. In fact, the whole book is really about that: disciplined people who engage in disciplined thought and then take disciplined action. That’s how you avoid a bureaucracy and create a great company.