This post looks at some predictable organizational changes as businesses grow. And it describes why these changes can be so difficult for top leaders and teams.
A Confederation OF Partners To Single Top Leader and Team
Many businesses begin as loose confederation of partners. In these loose confederations, no single partner has sufficient authority to determine incentives, team culture or roles. The default decision-making style is consensus.
Then a significant downturn in performance happens. As a result, the partners realize that one person needs to be the leader. And, they realize to make this happen they need to grant executive authority to a single leader. This choice to submit to a hierarchy can get especially complicated if there are partners who are both owners of a business and employees within that business.
Start-Ups To An Effective Top Leader and Team
Other businesses begin as start-ups run by gifted entrepreneurs. In the classic book, the E-Myth, or Entrepreneurial Myth, Michael E. Gerber suggests that most of these businesses are not started by entrepreneurs who set out to build a strong business but by technicians who enjoy the hands-on work. He then shows the kinds of disasters that occur when these leaders are unwilling or unable to develop into managers -- that occur when these leaders are unwilling to put the needs of the business above their own physical or psychological comfort.
Business Team To An Enterprise Team
As they evolve, many businesses begin with a single focused business line and then expand into multiple businesses lines. As this happens, the top team must evolve from a business leader team to an enterprise leadership team. An enterprise is a portfolio of business lines, which share resources.
However, to make this happen, the top leader must learn how to delegate business leadership responsibilities to team members as they shift their focus to enterprise leadership responsibilities. This transition can get especially complicated if the top leader is also the top rainmaker for a business. In my experience, top leader-rainmakers can find it challenging to move from a more tactical sales focus to a more strategic enterprise strategy focus.
An Enterprise Team To A Higher-Performance Organization
As they evolve, enterprises grow and become more complex. As this happens independent businesses and functional silos can develop. As a result, innovation can slow and costs can rise. To get the enterprise to the next level requires creating those conditions, which will force enterprise team members to work more interdependently. This requires investments in leadership and team development.
However to make these investments stick, the top leader also has to begin to focus on their own development as a leader, In accordance with the law-of-the- lid, the top leader must put the needs of the enterprise above their own physical and psychological comfort.
The law-of-the-lid states that a team culture and business model can never sustain a level of performance higher than the level of thinking and acting of the top leader. This is because team culture flows in the direction of hierarchy. And team culture determines the kinds of business models that are and are not sustainable.
Mergers and Acquisitions
Enterprises often grow by acquiring businesses and then integrating teams. Mergers and integrations can be especially difficult for CEOs.
First, there can only be one CEO after a merger so if both stay one will need to accept their other as their boss. Second, the CEO who remains CEO often has to make the jump to leading a larger organization, while delivering the expected returns on the merger to their board.
Please add your comments. What kinds of organizational changes have you seen or experienced? What was the impact on the top leader and top team?
Here are some interesting links: