Becoming Systematic, NOT Bureaucratic: A Roadmap for Avoiding the Entrepreneurial Crisis

Becoming Systematic,
NOT Bureaucratic:
A Roadmap for Avoiding the
Entrepreneurial Crisis
Ed Powers
Service 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

Hitting the “Wall”
START-UP


START-UP

INITIAL GROWTH


START-UP

CRISIS!

INITIAL GROWTH

~ 50 Employees
$1M-$5M Revenue

•
•
•
•


Slower sales
Key staff defections
Quality and delivery issues
Greater stress!

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

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

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

Systematic vs. Bureaucratic
• Systematic
An approach that is well-ordered, repeatable, and
uses data and information so learning is possible.

• Bureaucratic
A 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)


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.


Fundamentals for Success
• People
• Planning
• Execution
• Learning


• People
• Planning
• Execution
• Learning

Jim Collins
Get the right people on the bus …
and the wrong people off the bus.


• People
• Planning
• Execution
• Learning

Jim Collins
Dwight D. Eisenhower
Plans are nothing.
Planning is everything.


• People
• Planning
• Execution
• Learning

Jim Collins
Plans are nothing.
Larry Bossidy
Execution is … rigorously discussing how’s
and what’s, tenaciously following
through, and ensuring accountability.


• People
• Planning
• Execution
• Learning

Jim Collins
Plans are nothing.
Larry Bossidy
Execution is … rigorously discussing how’s
and what’s, tenaciously following
through, and ensuring accountability.
Peter Senge
The only sustainable competitive
advantage is an organization's ability to
learn faster than the competition.

Strategic Management Systems
Leadership

Environmental
Awareness

Planning and
Review
Continuous
Improvement

System of Measures

People

Work Systems

Results

Hendricks and Singhal Study
100%
90%
Award Winners

80%

Control Firms

Percent Change

70%
60%
50%

40%
30%
20%
10%
0%
Operating
Income

Sales

Total
Assets

Employees Return on
Sales

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

Return on
Assets

Essential Practices
Practice

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


Example Dashboard
BUSINESS FUNDAMENTALS PROGRESS TABLE
Owner: Ed Powers
Key Bus. Process: Member Services

Revision: 4.0
Target, Goal & Limits

RED
ITEM
Review GREEN YELLOW
1.0 Delivery
1.1 30-DAY Overall Occupancy
Monthly <65% 65-70%
>70%
1.2 90-DAY Overall Occupancy
Monthly <50% 50-60%
>60%
1.3 Avg. Utilization (nts/cert yr)
Quarterly <30
30-34
>34
1.4 Cancellation Rate
Monthly <15% 15-20%
>20%
2.0 Responsiveness
2.1 Monthly Escapes Workload (Calendar Year) Monthly <=240 241-300 >=301
2.2 Monthly Over-time Hours per planner
Monthly
<5
5-10
>10
3.0 Quality
3.1 Overall Satisfaction
Monthly >4.75 4.5-4.75
<4.5
3.3 IRS Planner Scores
Monthly >4.87 4.76-4.86 <4.76
3.4 Service Recovery Percentage
Quarterly <2%
2-3%
>3%
3.5 Service Excellence Scorecards Overall
Monthly >90% 85-90%
<85%

Entity: Private Escapes
Dept.: Operations
Q1
Q2
Q3
Q4
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

52% 65% 67% 58% 48% 62% 62% 62% 46%
60% 54% 52% 50% 53% 53% 45% 40% 40%
26.8
23.7
24.0
28% 21% 25% 15% 13% 14% 13% 11% 9%

45%
40%

179 212 241 200 190 216 237 230
3.25 5.18 5.25 7.50 3.56 5.54 8.85 3.7

Dec
53%
61%

12%

49%
49%
23.3
10%

205
3.44

210
1.25

224
4.85

219
3.15

4.70 4.83 4.78 4.80 4.81 4.81 4.82 4.79 4.82
4.84 4.93 4.96 4.95 4.95 4.94 4.93 4.95 4.95
2.1%
1.3%
2.1%
90% 92% 92% 88% 86% 91% 87% n/a 89%

4.86
4.97

4.87
4.94
0.8%
93%

4.85
4.95

93%

Escapes1shared documentsOperations[Ops BFTs 2007.XLS]BFT

A “Balanced Scorecard” comes from:
• Financial and non-financial metrics
• Leading and lagging indicators
19

12%

93%

Essential Practices
Practice

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


Example Performance Management System
Position Requirements and Goals
Description
Company

Performance Review

Results
Function

Individual

Development Plan
Objectives
Tasks
Timeline


Strengths Opportunities

What’s a Good Roadmap?


Start-up Genome Project
• 2011 study of 3,200 start-ups
• UC Berkeley and Stanford
• 90% of start-ups fail, due primarily to selfdestruction 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


Linkage to Start-up Genome Findings

Source: http://blog.startupcompass.co/tag/lean%20startup

Linkage to Start-up Genome Findings

Process
Management

Enterprise
Metrics

Value
Propositions

Value
Propositions
Source: http://blog.startupcompass.co/tag/lean%20startup


Typical Early Stage Roadmap

2. Financial Reporting

1. Business Plan



3. Value Propositions


1. Business Plan


5. Hoshin
4. Enterprise Dashboards



1. Business Plan


8. Leadership Process
7. Process Improvement
6. Process Management

5. Hoshin




1. Business Plan


11. Strategic Scenarios

10. Performance Management
9. Strategic Planning

8. Leadership Process
7. Process Improvement
6. Process Management

5. Hoshin




1. Business Plan


Prune the Tree

Less is More!

• 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


Ed Powers
Principal
Service Excellence Partners
ed@se-partners.com
970-235-0078


Becoming Systematic, NOT Bureaucratic: A Roadmap for Avoiding the Entrepreneurial Crisis

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