How to survive a “flat management” mutiny

How to survive a “flat management” mutiny

BY DAVID BARRETT, GUEST CONTRIBUTOR 
ON APRIL 14, 2014

Flat management structures are all the rage, and with good reason: innovation is the lifeblood of a startup, and nothing kills innovation like micromanagement. But scaling a flat management structure is harder than it seems. Plenty has already been written about the risks of accidentally creating the stuff of highschool

nightmares, but even if you dodge those bullets you’re in for a little discussed treat: full out mutiny of your team.

Granted, if you do consumer or pure-SMB products, you might avoid this fate. The easiest form of innovation is “scratching your own itch”, and so long as you represent your own idealized customer, more sophisticated innovation might not be needed. But if your product is relevant to mid-market and true enterprise customers, then you will inevitably be faced with a very difficult moment that will shake your company to the core: the moment your first customer 10x larger than you expresses serious interest.

Prior to then, management is actually very easy — superfluous even. Everybody just does whatever feels right, and so long as you are disciplined about hiring smart people who work well in teams, “what feels right” is near enough to “what the customer needs” that there’s little reason to try harder. But scaling your product up to address the needs of a significantly larger company requires addressing needs that your team doesn’t have. This means if you want to get that customer, you need to scratch someone else’s itch. And a purely flat structure is notoriously ill-equipped to handle this. In my experience, it goes down like this:

Sales: “OMG I think customer X will actually buy us, but only if we do Y.”

Engineering: “Even though Y isn’t actually that hard, building it means overcomplicating the product and ruining our culture, so no.”

Sales: “…”

Handled poorly, this can lead to a full blown mutiny where your salespeople feel betrayed by your engineers, your engineers feel sold out by sales, and everyone starts drawing hard lines backed up by serious threats. And because the flat management structure has no… structure, the tools at your disposal to quiet the mob are very limited. It’s a pretty horrible experience, all resulting from the grievous sin of successfully creating something of significant value to unexpectedly large customers.

Having gone through the valley of death and come out the other side (multiple times), here are some common patterns I’ve seen that you might look out for:

Your people are awesome, it’s your structure that sucks. It’s hard to remember this when people start raising crazy and irrational objections to each others’ reasonable (or even obvious) concerns. But never forget that flat management is a conscious choice to not create a well defined, widely accepted vision based on a shared set of complex assumptions. Said another way, flat management is about avoiding the need for agreement on a huge range of issues by just accepting (and indeed thriving) on disagreement: when everybody just does what they feel is best, there’s no incentive to really care if anybody else agrees — or a process to achieve it if they did care. Flat management encourages creative disagreement and, in my case at least, mission accomplished.

Mutiny strikes without warning. What makes this whole circumstance especially complicated is it comes like a lightning bolt, out of the blue. Everything is fine and everyone is happy one day, and then suddenly you’re faced with an unexpected but very significant choice: do we do what it takes to get this larger customer, or not? But even though you didn’t ask to make this decision, you’ve got to make it — and no matter which way you go, people will disagree. Vehemently.

There is no such thing as “status quo”. The fact that you are making this decision indicates that a change has already happened. Yesterday taking on a 10x larger customer was just a hypothetical possibility. Today it’s a realistic opportunity. There’s no undoing that change.

If you don’t take the opportunity, your salespeople will hate you. They spend their every waking moment trying to convince someone to use your product, against all odds. And it’s one thing to try and fail. But to succeed and be denied support? Your best people will quit.

If you do take the opportunity, your engineers will hate you. They spend their every waking moment trying to improve the product as best as they can imagine, no matter how grueling, and how difficult. And it’s one thing to struggle building something they believe in and use. But something they don’t believe in and will never use? Your best people will quit.

The longer you delay, the more everyone hates you. Even those who aren’t especially passionate one way or the other (and these are often your best people), they are passionate about working someplace they enjoy — and nothing about a mutiny is fun for anybody, including the mutineers. Your best people will quit.

Once the mutiny has been quelled, it just happens again. Whether you take or pass on this opportunity, more opportunities will come your way (hopefully). And each time you get an opportunity an order of magnitude larger than the ones before, the cycle repeats.

So what to do about it? I wish I knew. We’ve experienced this cycle about three times so far, and I’m anticipating a fourth as we start engaging our first 100K employee accounts. But luckily, each time gets a little easier, because in practice: this is a great problem to have. The fact that you’re facing this is a sign that your team is great and you are on the right track — and when those things are true, the rest sorts itself out.

Granted, it doesn’t always sort out as well as you’d like: no matter how you decide, some people just can’t get on board and will either leave or need to be removed. But if properly managed, your best people will stay and you will leave the chaos a stronger, more talent-dense, and better team than you entered. Great teams step up to any challenge, and that includes adjusting for new realities.

Because at the end of the day, the whole “flat management structure” you thought you had was actually a mirage all along: there was always a power structure, just not one you formally recognized. Use this opportunity to recognize your best and brightest, lean on them to help you make things right, and like bones forming they’ll get stronger the more weight they carry.

It’s not a fast process: you can’t drink Skele-Gro and get a hardened management structure overnight. (And unless your team has the healing powers of Wolverine — or can’t find better jobs — injecting a structure from the outside is a recipe for instant death.) Just be patient and use your position of authority to clear away the smoke, engage your natural leaders to put out the fires, and slowly step back as they slowly step forward. Over time you’ll graduate from “flat management” to becoming an “agile enterprise” organization that can scratch its own itch and address the critical, repeatable needs of ever-larger customers.

It requires patience and resolve. But the earlier you start on a gradual path of controlled evolution, the better prepared you’ll be for sudden, unexpected revolution.

Editor’s note: This is a guest post by David Barrett, Founder and CEO of Expensify

. The post went through PandoDaily’s usual editorial process. Mr Barrett was not paid for this post.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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