The Dark Side of Scaling Up: Will You Want to Live in What You Build?

 

My Stanford colleague Huggy Rao and I devoted seven years to learning about what it takes to scale up excellence in organizations. We studied how leaders and teams build and identify pockets of goodness in organizations and spread such goodness to more people and places -- about the moves needed to grow organizations and to spread superior practices and programs throughout organizations.

We found many splendid consequences of successful scaling: The wealth and jobs created by companies such as IKEA, Google, Procter & Gamble, Facebook, and Starbucks. The needless deaths in U.S. hospitals that were prevented by the 100,000 Lives Campaign between 2004 and 2006 – a successful effort to spread evidence-based practices that was led by a small non-profit called the Institute for Health Improvement. And the thousands of poor children in Africa who are now receiving a superior education (for about five dollars per month) from Bridge International Academies, a fast growing, for profit, chain of nursery and primary schools.

Yet, despite our society's penchant for worshipping such successes, bigger isn't always better. Success is rarely all it is cracked up to be. And our dreams often lose much of their grandeur when they come true.

If you are in throes of a scaling challenge, or plan to tackle one soon, you might try a form of imaginary time travel. Pretend that a few years have passed, that you and your colleagues have achieved your scaling dreams, and that you are looking back from the future. We've found that this "looking back from the future" approach helps leaders and teams with all sorts of scaling decisions. One good question to ask is "Are we happy in the world that we worked so hard to build?"

As we show in Scaling Up Excellence, and this piece on LinkedIn, as an organization grows, whether you like it or not, it will require more hierarchical layers, managers, rules, and (often) annoying administrative processes. It will also become increasingly difficult to maintain personal relationships with all your colleagues (let alone learn their names). The pressures created by a large and successful company or change program often push founding leaders and teams to their limits, require them to do chores that they despise, and to work with people that they find to be bad company. Alas, even if scaling up brings you acclaim and riches, you may be uncomfortable within the walls of your own creation.

Consider this story. About fifteen years ago, I had striking conversations with Mitch Kapor and his wife Freada Klein about their experiences at the Lotus Development Corporation. Lotus began as a small firm that Kapor started with a few friends in 1982. Lotus 1-2-3, the company’s spreadsheet, quickly became the hottest-selling program for the (then new) IBM personal computer: sales hit 50 million dollars in 1983 and jumped to over 150 million by 1984. Kapor didn’t have the desire or temperament to run a big company, so he remained chairman and promoted ex-McKinsey consultant Jim Manzi to CEO. Manzi grew Lotus to over one thousand people by 1985 and stocked it with many “sales types” and “process types” from traditional corporations such as Procter & Gamble, Coca-Cola, and IBM. Kapor and other early Lotus employees enjoyed their new wealth, but many were counterculture types who chafed at the corporate attitudes and trappings that prevailed: “The thrill of the start-up had turned into the drill of a major corporation,” as author Robert Cringely put it.

In 1985, Freada Klein (then head of organizational development) did an experiment that confirmed that Lotus had become a place where its founders were misfits. With Kapor’s permission, Klein pulled together the résumés of the first forty Lotus employees. On most resumes, Klein only altered the employees’ names, but she changed Kapor’s more extensively because his past as a transcendental meditation teacher and disk jockey was known throughout Lotus. Klein explained that most of these early employees had skills the growing company needed, but many had done “risky and wacko things” such as being community organizers, being clinical psychologists, living at an ashram, or like Kapor, teaching transcendental meditation. Then Klein did something sneaky. She submitted all forty resumes to the Lotus human resources department. Not one of the forty applicants, including Kapor, was invited for a job interview. The founders had built a world that rejected people like them.

Kapor stepped down as Lotus’s chairman in 1986 because “it wasn’t my ambition to run a big company. I wanted to do this great product and make a big business out of it. But I didn’t find the positive parts of running this big show to be very gratifying. . . . I like to be left alone to do my own thing. But instead, I was a prisoner of the spreadsheet.” Lotus was eventually bought by IBM for $3.5 billion. Since leaving Lotus, Kapor has spent his time working with small companies and nonprofits, where he feels more at home.

I love Kapor’s story because it has so many lessons. It shows that the people who develop great ideas are often ill-suited to run, or even build, the big companies or programs required to spread and sell them. And, as one wise venture capitalist often reminds me, some of the best entrepreneurs and innovators dedicate their days to starting and building social worlds that they will abhor living in – and, as Kapor discovered, that will never hire people like them!

 

 

This is an edited excerpt from Scaling Up Excellence, which Huggy Rao and I wrote. It was first published at LinkedIn last month. I  heard this story from Mitch Kapor and Freada Klein about 15 years ago, and with their permission, published it in my book Weird Ideas That Work. You can learn more about my ideas from my LinkedIn Influencer posts, Work Matters blog, and Tweets. If you want to learn more about our work on scaling, watch this interview or check out this INC story.

Comments

[Blissbookapp]

Hi Bob,

Thanks for posting this excerpt. So great that we linked to it in our weekly newsletter. If you want to check that out, you can do it on our blog: blissbook.com/blog

Reminds me of what Steve Blank wrote about Tim Cook and Apple: https://steveblank.com/2016/10/24/why-tim-cook-is-steve-ballmer-and-why-he-still-has-his-job-at-apple/

I would argue that Kapor's problem isn't that he didn't want to run a big company, it's that he didn't believe that he *could* run a big company *his* way, so he farmed it out.

[Kenashe]

Great site. I've enjoyed reading through your older posts. Do you have any plans to post more?

[Henrymotyka]

But there is an upside here. In large organization, if you now how to do it, you can have a big influence using your leadership skills. Big organizations can allow you to have contact with a large number of other workers.

[Henrymotyka]

Furthermore, there can be a lot of waste of time in a big organization because of the time spent doing mundane chores and not spent innovating. One of the best ways to run an organization is to get out of your office and away from paperwork. The contact made with staff can be very valuable.

[Henrymotyka]

A great lesson here and one that I learned in the Big 4 where I spent 18 years in an organization that had a flat hierarchy. You learn to make good decisions and to work with others in a structure like that. Because you make the decisions, you do have to upgrade your thinking. But once you work in an organization like that, you find that there is no other way to work. So this blog post is essentially telling us that size has to be managed very well or it can be a problem.

[Walter Underwood]

This is one of the reasons behind the Netflix values.

Some of the founders had started Pure Software. It was swallowed by bigger and bigger fish, eventually IBM, and became a place that that they no longer wanted to work at.