becoming systematic, not bureaucratic: a roadmap for avoiding the entrepreneurial crisis
DESCRIPTION
Most start-ups face an entrepreneurial crisis when they reach about 50 employees. Becoming systematic, not bureaucratic, can avoid this crisis and accelerate early growth.TRANSCRIPT
© 2011 Service Excellence Partners
Becoming Systematic, NOT Bureaucratic:
A Roadmap for Avoiding the Entrepreneurial Crisis
Ed PowersService Excellence Partners
Revised October 2013
© 2011 Service Excellence Partners
About….Ed Powers
• 26 years in operations, quality, sales, marketing, and consulting
• 12 years at Hewlett-Packard• Operations leadership in 5 early-stage
companies and 3 start-ups• Examiner, Baldrige National Quality Award• Rocky Mountain Performance Excellence
Examiner and board member• Lean Six Sigma Black Belt
© 2011 Service Excellence Partners
Hitting the “Wall”
Series1
START-UP
© 2011 Service Excellence Partners
Hitting the “Wall”
Series1
START-UP INITIAL GROWTH
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Hitting the “Wall”
Series1
START-UP INITIAL GROWTH CRISIS!
~ 50 Employees$1M-$5M Revenue
• Slower sales• Key staff defections• Quality and delivery issues• Greater stress!
© 2011 Service Excellence Partners
Examples
Sources: Edward Lowe Foundation; A. Davila, G. Foster, and N. Jia “Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator” California Management Review, 459, May 2010
© 2011 Service Excellence Partners
Causes
• Span of control exceeds Founders’ reach• Degradation in alignment, communication,
and coordination between groups• Insufficient knowledge on how to grow and
scale … leading to an entrepreneurial crisis
Sources: Edward Lowe Foundation; A. Davila, G. Foster, and N. Jia “Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator” California Management Review, 459, May 2010
© 2011 Service Excellence Partners
A Need for Structure
“The evidence in our study supports the association between growth and the presence of management systems… Having no systems (chaos) is as damaging to a company as having too many (bureaucracy); and startup companies more often suffer from the former rather than the latter.”
Sources: A. Davila, G. Foster, and N. Jia “Building Sustainable High-Growth Startup Companies: Management Systems as an Accelerator” California Management Review, 459, May 2010
© 2011 Service Excellence Partners
Systematic vs. Bureaucratic
• SystematicAn approach that is well-ordered, repeatable, and uses data and information so learning is possible.
• BureaucraticA system of administration marked by officialism, red tape, and proliferation.
Sources: “Criteria for Performance Excellence 2011-2012,” Baldrige Performance Excellence Program, NIST; Merriam-Webster (www.m-w.com)
© 2011 Service Excellence Partners
The Challenge
Is it possible for companies to be systematic without becoming bureaucratic?
YES! Provided senior executives add just enough structure at the right time, right place, for the right reasons, and prune the system to keep proliferation at bay.
© 2011 Service Excellence Partners
Fundamentals for Success
• People• Planning• Execution• Learning
© 2011 Service Excellence Partners
Fundamentals for Success
• People• Planning• Execution• Learning
Jim CollinsGet the right people on the bus … and the wrong people off the bus.
© 2011 Service Excellence Partners
Fundamentals for Success
• People• Planning• Execution• Learning
Jim CollinsGet the right people on the bus … and the wrong people off the bus.
Dwight D. EisenhowerPlans are nothing. Planning is everything.
© 2011 Service Excellence Partners
Fundamentals for Success
• People• Planning• Execution• Learning
Jim CollinsGet the right people on the bus … and the wrong people off the bus.
Dwight D. EisenhowerPlans are nothing. Planning is everything.
Larry BossidyExecution is … rigorously discussing how’s and what’s, tenaciously following through, and ensuring accountability.
© 2011 Service Excellence Partners
Fundamentals for Success
• People• Planning• Execution• Learning
Jim CollinsGet the right people on the bus … and the wrong people off the bus.
Dwight D. EisenhowerPlans are nothing. Planning is everything.
Larry BossidyExecution is … rigorously discussing how’s and what’s, tenaciously following through, and ensuring accountability.
Peter SengeThe only sustainable competitive advantage is an organization's ability to learn faster than the competition.
© 2011 Service Excellence Partners
Strategic Management Systems
Continuous Improvement
Results
Environmental Awareness
Leadership
Work SystemsPeople
Planning and Review
System of Measures
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Hendricks and Singhal Study
Operating Income
Sales Total Assets Employees Return on Sales
Return on Assets
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Award Winners
Control Firms
Per
cen
t C
han
ge
Source: K. Hendricks and V. Singhal, “The Impact of Total Quality Management (TQM) on Financial Performance: Evidence from Quality Award Winners” DuPree College of Management, Georgia Institute of Technology, March, 2000
© 2011 Service Excellence Partners
Essential PracticesPractice What it is What it does
Value Propositions
Refined statement of target customers, benefits, and costs/tradeoffs
Sharpens and simplifies the product or service to the most important attributes to design, market, sell, and deliver
Enterprise Dashboards
Interlinked system of metrics for each manager
Focuses management and staff on the most important activities and results
Hoshin Kanri Japanese breakthrough planning, deployment, execution, and review system
Focuses and aligns the entire organization on a short list of goals and strategies
Process Management
Definition and documentation of key workflows and their relationships to key metrics
Uncovers disconnects and identifies improvement opportunities
© 2011 Service Excellence Partners19
Example Dashboard
GREEN YELLOW RED Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1.1 30-DAY Overall Occupancy Monthly <65% 65-70% >70% 52% 65% 67% 58% 48% 62% 62% 62% 46% 45% 49% 53%1.2 90-DAY Overall Occupancy Monthly <50% 50-60% >60% 60% 54% 52% 50% 53% 53% 45% 40% 40% 40% 49% 61%1.3 Avg. Utilization (nts/cert yr) Quarterly <30 30-34 >341.4 Cancellation Rate Monthly <15% 15-20% >20% 28% 21% 25% 15% 13% 14% 13% 11% 9% 12% 10% 12%
2.1 Monthly Escapes Workload (Calendar Year) Monthly <=240 241-300 >=301 179 212 241 200 190 216 237 230 205 210 224 2192.2 Monthly Over-time Hours per planner Monthly <5 5-10 >10 3.25 5.18 5.25 7.50 3.56 5.54 8.85 3.7 3.44 1.25 4.85 3.15
3.1 Overall Satisfaction Monthly >4.75 4.5-4.75 <4.5 4.70 4.83 4.78 4.80 4.81 4.81 4.82 4.79 4.82 4.86 4.87 4.853.3 IRS Planner Scores Monthly >4.87 4.76-4.86 <4.76 4.84 4.93 4.96 4.95 4.95 4.94 4.93 4.95 4.95 4.97 4.94 4.953.4 Service Recovery Percentage Quarterly <2% 2-3% >3%3.5 Service Excellence Scorecards Overall Monthly >90% 85-90% <85% 90% 92% 92% 88% 86% 91% 87% n/a 89% 93% 93% 93%
BUSINESS FUNDAMENTALS PROGRESS TABLE
Target, Goal & Limits
Revision: 4.0Q1
Entity: Private Escapes Dept.: OperationsOwner: Ed Powers
ITEM
24.0
Review
1.0 Delivery
Q3Q2 Q4Key Bus. Process: Member Services
26.8 23.7
2.0 Responsiveness
23.3
2.1% 1.3% 2.1% 0.8%
\\Escapes1\shared documents\Operations\[Ops BFTs 2007.XLS]BFT
3.0 Quality
A “Balanced Scorecard” comes from:• Financial and non-financial metrics • Leading and lagging indicators
© 2011 Service Excellence Partners
Essential PracticesPractice What it is What it does
Process Improvement
Systematic problem solving method (Lean, Six Sigma, PDCA, etc.)
Addresses root causes to ensure maximum results and permanent improvement
Leadership Process
Definition of the organization’s Mission, Vision, and Values
Creates alignment and engagement throughout the rank and file
Strategic Planning and Review
Definition of 3-5 year goals, strategies, and major investments.
Ensures the organization effectively manages long-term change
Performance Management
Three documents that define key tasks, outcomes, and continuous learning for all employees.
Provides context, focus, and encourages learning and development
Strategic Scenarios
Listening posts and triggers to modify the strategic plan.
Increases organizational agility by quickly responding to market shifts
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Example Performance Management SystemPosition Requirements and Goals
Company Function Individual
Performance Review
Development Plan
Results Strengths Opportunities
Objectives
Tasks
Timeline
Description
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What’s a Good Roadmap?
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Start-up Genome Project
• 2011 study of 3,200 start-ups• UC Berkeley and Stanford • 90% of start-ups fail, due primarily to self-
destruction and not competition• Founders who learn are more successful • Marmer Stages define phases of development
Source: M. Marmer, B.L. Herrmann , E. Dogrultan, R. Berman, “Start-up Genome Report Extra on Premature Scaling,” March, 2012
© 2011 Service Excellence Partners
Linkage to Start-up Genome Findings
Source: http://blog.startupcompass.co/tag/lean%20startup
© 2011 Service Excellence Partners
Linkage to Start-up Genome Findings
Source: http://blog.startupcompass.co/tag/lean%20startup
Value Propositions
Enterprise Metrics
Value Propositions
Process Management
© 2011 Service Excellence Partners
Typical Early Stage Roadmap
1. Business Plan
2. Financial Reporting
© 2011 Service Excellence Partners
Typical Early Stage Roadmap
1. Business Plan
2. Financial Reporting
3. Value Propositions
© 2011 Service Excellence Partners
Typical Early Stage Roadmap
1. Business Plan
2. Financial Reporting
3. Value Propositions
4. Enterprise Dashboards
5. Hoshin
© 2011 Service Excellence Partners
Typical Early Stage Roadmap
1. Business Plan
2. Financial Reporting
3. Value Propositions
4. Enterprise Dashboards
5. Hoshin6. Process Management
7. Process Improvement8. Leadership Process
© 2011 Service Excellence Partners
Typical Early Stage Roadmap
1. Business Plan
2. Financial Reporting
3. Value Propositions
4. Enterprise Dashboards
5. Hoshin6. Process Management
7. Process Improvement8. Leadership Process
9. Strategic Planning10. Performance Management
11. Strategic Scenarios
© 2011 Service Excellence Partners
Prune the Tree• Focus on fewer customer
segments• Simplify your product• Review no more than 10
metrics at any level• Pursue only one major
breakthrough each year• Run the entire company on 10
pieces of paper• Send single page reports• Conduct no more than one
standing meeting per week• Reduce sign-offs
Less is More!
© 2011 Service Excellence Partners
Ed PowersPrincipal
Service Excellence [email protected]
970-235-0078