Author: rogerdun

Litmus tests: are your teams set up well or badly?

This is a post in a series about the 80% Rule for Designing Teams. As a recap, the rule is that “each team should be equipped with the resources and authority to deliver 80% of their mission without outside dependency”.

The last post explained some of the limitations of organizing by function. The main drawback is that in larger companies, a lot of time is needed to manage each other.

For this post, let’s look at what it means to implement the 80% Rule. We’ll again use our example of EdCo, the fictional online education company, and the Primary School Team.

The team should be mostly self-contained

Suppose the Team’s mission is “deliver the best online Primary School courses in the country”. It should contain developers, course designers, marketers, and almost anything else needed to deliver the mission.

There are two major advantages to organizing by mission, rather than function.

  1. Reduce time spent coordinating managers of functional teams (more here).
  2. Team members are experts about the customer. This expertise is the difference between getting the details exactly right and just approximately correct.

These two advantages yield a third advantage: agility. In rapidly responding to competitor action or new insight, a self-contained team with knowledge and resources can act without spending weeks on buy-in and education.

So why is the Team only 80% self-contained and not 100%? Because it’s expensive to eliminate all dependency. For example, payment systems tend to be costly to build. The Primary School Team is better off using the system built by a central Payments Team.

But the point here is that dependency is the exception rather than the rule.

Missions should be clear and about serving a customer

“Mission” is a key word in the 80% Rule. We define it as being about serving customers. There are two kinds:

  1. Real customers: the people who pay the company’s bills. Success is revenue, market share, customer satisfaction, etc.
  2. Internal customers: other teams within the company. Success is internal customer satisfaction (or even internal “revenue” earned by the team)

For example:

  • The Primary School Team: serves real customers and is primarily measured by revenue
  • The Payments Teams: serves internal customers and is primarily measured by internal customer satisfaction

Why not measure the Payments Team in terms of processing speed, chargeback rates or uptime?

While these metrics are important for the team to manage aspects of what they do, they are too narrow for the primary measure and can drive the team to do the wrong thing.

Teams should not have conflicting missions

Conflicting missions is a special kind of hell. For example, let’s say that the Primary School Team is targeting a customer segment that loves using XYZ payment card. XYZ charges a high commission and is slow to process.

Now pretend that the Payments Team has a poorly defined mission: process payment transactions quickly and cheaply. What happens? Many meetings. Resistance and heel-dragging. Uncertainty and blockage of Primary School’s initiative. And eventually an escalation involving a couple C-level execs.

The net result is expensive man-hours get burned, the Primary School team is a few steps behind competitors and everyone involved has a bad taste in their mouth.

Now pretend that the Payments Team had a well defined mission: provide payment services to the different education teams with satisfaction as their main measure. What happens here? A few meetings to ensure understanding and agree budget. And then everyone does real work.

Even if the Payments Team has reservations about what the Primary School Team is deciding, they don’t block them. With clear missions, decision-making rights (and responsibilities) are clear too.

Litmus tests: have you set up your teams well?

Here are two questions to ask yourself about your teams.

1. Is the team in-question regularly bottlenecked by other teams? If so, it doesn’t have the necessary authority or resources.

2. When there is a disagreement between teams, is it clear which team is ultimately responsible for the decision? If they’re arm wrestling or escalating to senior managers, then their missions are probably unclear and conflicting.

If you find yourself on the wrong side of the test, don’t despair. It means there are some potential organizational wins in front of you.

GS Dun works with existing companies to launch and build new ventures. Our name is short for “get sh** done”, so while we can talk the talk, we prefer to keep our meetings short and just get on with it.

Organizing by function creates overhead you don’t need

This is a post in a series about the 80% Rule for Designing Teams. As a recap, the rule is that “each team should be equipped with the resources and authority to deliver 80% of their mission without outside dependency”.

In this post, let’s take a look at why organizing by function might be problematic. Upfront, I want to acknowledge there are situations when it is a good idea. We’ll cover these later.

For now, let’s take a fictional startup called EdCo, which sells online courses for primary school kids. On day 1, the team is made up of a business guy, a techie, a learning expert, and a marketer.

Functional organization makes sense in the early days

As EdCo finds early success and hires 10 more people, it makes sense to group these people by function. The developer needs more help, so he hires someone. They form the start of the Engineering Department. The marketer brings on another pair of hands, which is the start of the Marketing Department. And so forth.

At this stage, the dominant organizational principle is function – and it works. The company is small enough that working relationships across functions are strong. Everyone essentially has the same mission.

Many companies stick with the same template as they grow

The issues of organizing by function appear as the next 500 employees are hired. By this point, EdCo has branched out into offering courses for secondary school, university, and adult education.

Since EdCo is still organized by function, the Primary School Marketer doesn’t sit next to the Primary School Product Manager or Ops Manager. He’s sitting next to the Adult Education Marketer. And they report into the Chief Marketing Officer.

While there are some benefits to organizing primarily by function, those benefits are outweighed by the costs.

Organizing by function = constant lobbying and coordination across teams

Question: if EdCo is organized by function, how are they successfully selling their courses for primary school children?

Answer: a lot of meetings and process.

Fred is the head of the Primary School business. Fred’s problem is that his software developers sit in one department, his course designers in another department, his product managers in another, marketers in another, etc.

Therefore he spends his time lobbying the heads of the different departments. They need to buy-in. They need to agree a process. And as they move through this process, he needs to coordinate across the teams, so one team doesn’t bottleneck the other. The logistics get so complicated that he hires a project manager.

Life within a functional department is like juggling balls

Let’s look at the other side of it. Life isn’t particularly straightforward for Anne, the Head of Engineering. As a “cost centre”, Anne is told to keep costs down. But Fred is actually pushing for more people.

And Fred is the easy one. Matthew, Vidya, and Francis are other business unit heads, asking every month for more people. There are too many demands! Not everyone can get priority. Who wins? Who loses?

Anne’s logical response is to setup hurdles to limit demand from Fred and others. Write me a business case! Get sign off from 5 people! Stick to the process!

And because it’s taking up so much time to run these processes, she hires a manager or two as well.

No one is truly responsible

EdCo may say that Fred is responsible for the Primary School business. But without real authority over the people needed, is he really responsible? The University business might have a crisis, causing Anne to pull a couple key engineers away from Primary School, which in turn misses its targets. Who’s responsible? It’s no one’s fault. It’s the system’s fault.

There has to be a better way

Entire man-hours get sunk into managing each other. And no one really controls the outcome. It’s a bit soul destroying – to put so much energy into solving issues of our own making.

Now imagine putting that energy into serving customers. Solving their problems, not your process. Outmaneuvering competitors.

This isn’t just the stuff of five person startups. It’s how larger companies should be. They just need to organize differently.

GS Dun works with existing companies to launch and build new ventures. Our name is short for “get sh** done”, so while we can talk the talk, we prefer to keep our meetings short and just get on with it.

Setting up teams to get sh** done: the 80% Rule

Years ago, I was stuck in a long-ass meeting. The sort of big company meeting with a dozen people sitting around a long table. I was both bored and frustrated. “We have a lot of smart people in here – and we’re not going anywhere.”

The meeting might euphemistically be called “building consensus”. But really it was teams butting heads, pushing their agendas. And it was a waste of time and talent.

But how could we avoid it? Isn’t regular impasse an inevitable part of large company life?

No, it isn’t inevitable. After many years working with companies big and small, it is clear to me now that organizational structure is at the root of these deadlock situations.

The problem is organizing by function. Consider that the toughest challenges for any company are multifunctional. Organizing by function leaves no one with enough control to tackle these situations. It’s like the separation of powers in American government. While this is great for preventing acts of tyranny, it is crap for a company taking actions of decisiveness.

Rather than organize by function, companies should organize by “mission”. This means setting up teams based on serving customers, external or internal. And making them mostly self-contained.

To put it more succinctly, here’s the 80% Rule for Designing Teams.

Each team should be equipped with the resources and authority to deliver 80% of their mission without outside dependency.

Think back to the last time your company faced an urgent situation: Christmas sales season, a major product launch, a PR disaster. Everyone likely got together, regardless of their team, and pulled together.¹ The key organizational ingredients were that a) everything needed to tackle the problem was in the room and b) there was a clarity of purpose at that moment.

Best of all, there was probably a bit of thrill, despite the pressure and stress. That was the thrill of getting sh** done.

The aim of the 80% Rule is to make sure you and your teams feel that thrill every day.

The next several posts in this blog will explain this in more detail.

  1. Organizing by function creates overhead you don’t need
  2. Litmus tests: are your teams set up well or badly?
  3. Functional organization can sometimes be good for you
  4. Summary: responsibility and authority should sit together

¹ Or maybe they didn’t, the company went under and you’re now looking for a job. Ouch. My sympathies.

GS Dun works with existing companies to launch and build new ventures. Our name is short for “get sh** done”, so while we can talk the talk, we prefer to keep our meetings short and just get on with it.

Picking a name for your business

I’ve gotten into discussions with two different entrepreneurs about the names of their businesses. I’ve spent a ridiculous amount of time on this in the past, so hopefully this post can save others time in the future.

Pick a name that makes you, the founder(s), feel good.

We’ll go through some more considerations on picking a name below. But ultimately it is a subjective decision. It will become part of your identity. Pick something that you will be proud of. Undecided? Sleep on it. Literally take a few nights and eventually one of your options will stick to you.

You don’t need to rely on the name alone to carry the brand.

The name never shows up in isolation. It shows up next to marketing creative. It is defined by the customer’s product experience. It’s part of a PR story. The name is only one piece of what defines your brand. In fact, there are many instances where the name is misleading (“Pizza Express” and “Carphone Warehouse” are two great UK examples). So don’t force the name to convey the greatness of what you’re doing. It’s like having a child and naming her “Super Awesome Kid”, because if you just name her “Sarah”, she might not be awesome.

What kind of name do you want?

I think of names coming in four different categories. As an exercise to get your creative juices flowing, you may find it helpful to think up of a name in each category.

  1. Neutral name. A quick scan of my LinkedIn feed yields some: GroupM, Pentagon, Avollio. I have no idea what these companies do, nor do I get an emotional feeling from them. This isn’t bad. They’re blank slates that you can turn into what you want.
  2. Name with connotation. Example: Accenture. It’s a made up name that doesn’t obviously point to what they do. But it has some sort of connotation.
  3. Name with service. Examples: Betfair, Covestor, Insight Venture Partners. These are names that obviously point to the service they provide.
  4. Name of person. Examples: Dell, McKinsey. You put a name on it, so it’s personal. I associate this approach with professional services firms, but it doesn’t have to be.

Again, there’s no right or wrong approach. Some might say that for a new business, #3 is the best approach. Or that you should go with something that is catchy. I’d say again, in the grand scheme of things, the meaning of your brand will come from the service you provide, so go with what speaks to you.

A checklist to avoid pitfalls

Here are some checkpoints that might tell you your name is problematic.

  1. Pronunciation check: write the name down on a slip of paper and ask several friends to say it back to you. If they have can’t immediately say it out loud, then scrap the name. Difficulty saying it = difficulty remembering it.
  2. International bad work check: dream of the countries that you might enter in the next 5 years. Do the pronunciation check with your friends from those places. And ask them about connotations. If you want to be extra anal, pay attention to regional differences (for example, English and Spanish differ on each continent) – just in case the name turns out to be slang for “anal”.
  3. Google check: run it through Google. Is your chosen name coincidentally the name of Mexico’s biggest drug cartel? Probably best to avoid.
  4. Domain name check: check if the URL you want is taken. There are a lot of URLs being squatted upon. If you love your name enough, you can go ahead and try to make an offer. Your domain name provider will probably provide a service for making anonymous offers.

Avoid name consultants.

I’ve been in situations where satisfying stakeholders meant engaging high-priced brand consultants to come up with names. Don’t do it. Take whatever budget you might spend on the consultants and use it to take the founding team out for a good meal and drinks. You’ll come up with five better options for a fraction of the cost.

Should I localize my name?

Lastly, if you’re thinking of a new name because you’re launching your business in a new territory, I would resist the urge to change the name. The reason is that if you’re building out a truly global business, your marketing money (especially brand spend) will go further with a single name: above-the-line spend, SEO, PR, and other creative assets. Think about global brands. They don’t “translate” their name locally, because again, the meaning comes from the company’s service and marketing, not just the name. Even if you have a pronunciation problem, it is easier to allow for local pronunciation rather than to change the name entirely (e.g. Hyundai is a good example).

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Ultimately, you should pick something that you feel proud to call yourself. Chances are, you’ll literally end up wearing it.

My favourite hiring tips

Hiring for a new venture is like hiring for a startup. The team is small and the future uncertain. Every team member needs to wear multiple hats. Given this, here is my take on traits to look for in a new hire (almost irrespective of the role).

1. They show progression.

“Progression” is more than just a string of promotions. I think of it as:

  • Stepping outside of one’s comfort zone
  • Being entrusted by others with greater responsibility

Someone who has repeatedly taken on scary challenges has the emotional and learning ability to handle the surprises of new venture life. They aren’t just running on their “expertise”. Their CV probably shows changes in roles, industries or perhaps even career.

However, they might be hopping for the wrong reasons. This is why they should also show signs of greater responsibility. Someone they worked with trusted them to do more. “Greater responsibility” is context-specific, but some examples are taking on more people or being assigned the more difficult challenges. This may be evident from the CV, but probably only becomes really clear in an interview.

2. They have done excellent work in the past.

I’ve studied different languages over the years, having bounced around Europe a lot. But I have one major problem: I ramp up quickly and then stall. A multilingual friend pointed out that with languages, once you master one, mastery of another is easier. The skills of mastery are somewhat transferable.

Doing excellent work is like learning a language. Do it once and it’s easier to do it again.

Just to be clear, excellent work doesn’t have to be a deliverable like a design, piece of code, or document. It might be a skill, such as sales or leadership.

How to find out about their excellent work? Ask them. I sometimes ask people about work that they are most proud of. However, having recently read this great blog post, I think a better variant is “I’m interested in learning more about how you get stuff done. Can you tell me about the best project or piece of work you’ve ever done?”.

In their storytelling, there are three things to listen for:

  • They have the ability to judge their own work. While external feedback is valuable, an inner voice is essential. A designer should have a sense of whether his solution is clunky or elegant. A brand marketer should have a feeling for whether the creative will be memorable or is bland. Probe on this one. How did they know it was going well/badly? What sort of details told them so?
  • They have figured out how to improve it. Nothing starts off as excellent. When they realized something was not up to standard, how did they overcome obstacles and fix it?
  • They have passion. This is the juice that fuels the above points.

3. They can explain complex things to a six year old.

Niklas Sundbaum, a fantastic CTO I’ve worked with in Sweden, taught me one of my favourite lessons in hiring: they should be able to explain complicated things to a non-expert. (Denzel Washington’s character also teaches a similar lesson in Philadelphia.)

Although every field has complexity, the core concepts can be sketched on a sheet of paper. Explaining something simply from their domain is actually a sign of solid understanding.

If you’re hearing jargon and buzzwords – and they can’t clarify it – take it as a red flag. They won’t know what’s really driving their part of the business. And they definitely won’t know how to relate to yours.

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So there it is: my favourite tips for hiring. Whether you use them or not, remember that the world of new ventures will throw a lot of curveballs. Just make sure the people you hire to stand with you can catch a few along the way.

Six easy pieces: the essentials of setting up a new venture

Once again, pretend you’re the CEO of an established company. You want to launch a high-risk, high-reward business. Maybe it’s based on a new product. Or entry into a new country or region. Whatever it is, how should you set it up?

Here’s my simplified “six easy pieces” (the title is an homage to Richard Feynman):

  1. Pick “founder(s)”
  2. Give them autonomy, not dependency
  3. Let them handpick a couple of your people
  4. Tell your existing teams to have an open door, but they don’t call the shots
  5. Kick the new venture team physically out the door
  6. Establish some rules for governance

Let me explain each of these in a bit more detail.

1. Pick founder(s)

Of course, you need founder(s) who will have the right mix of vision, specialist skills and general management talent to push it forward. But in a new ventures context, it’s important to have founder(s) who will identify with the venture, and not feel like they are still just employees of your company (the “mothership”). They should feel like the venture is their baby and be irrationally passionate about it.

2. Give them autonomy, not dependency

It’s common for the mothership to make promises to the new venture. “We’ll do your product, your operations, your X, your Y, etc. You don’t need much cash. We’re being really efficient!”

This is a recipe for slow death – or in the best case scenario, a huge amount of middle management discussions. “Efficiency” often ends up meaning shared resource pools in which the new venture has to compete against mothership teams. It will lose. Losing means bottlenecks and loss of agility. And loss of agility for a new venture is death.

At one venture I worked on, environments were controlled by a shared infrastructure team. Our releases would sit on the shelf for weeks, because mothership business units always ended up taking priority for release slots. We were about as agile as a block of wood.

For any critical aspect of its business, the new venture team must be free of dependency on the mothership. So rather than giving them shared resources, give them:

  1. Cash! Enough budget to be a standalone entity. If it makes sense to get something from a mothership team, then it can use the cash to buy that in.
  2. The autonomy to solve their needs in whatever way they see fit. If the mothership team doesn’t deliver what’s needed, the new venture team needs to be free to solve it another way: hire its own team, find an external partner or supplier, etc.

3. Let them handpick a couple of your people

The new venture should have a couple of your best people because a) existing expertise is how your new venture can beat others and b) the new venture needs strong informal relationships into the mothership organisation at multiple levels. Let the new venture handpick at least a junior level superstar with a couple years in the mothership.

A high-performing graduate once joined my new venture team, after he had about a year of experience. Not only was he an excellent marketer, he knew every back door for getting something done with different teams in the mothership, because he knew the other graduates in the company. And for him, it was a great development opportunity to dive into the deep-end.

The team that loses the superstar will probably protest. They will feel pain. But for them it’s not a matter of life-or-death. And let’s face it: high-performers need new challenges to stay.

4. Tell your existing teams to have an open door, but they don’t call the shots

You want your new venture to be able to use the mothership as a competitive advantage. But you don’t want to kill its agility.

You achieve this balance by establishing some clear ground rules for the new venture and mothership teams.

  1. The mothership teams should have an open door for advice. Good advice is easy to give and immensely valuable to receive. If the new venture wants a few hours or even a day, give it to them.
  2. The mothership teams should be open to selling services into the new venture. If the new venture needs something from a mothership team, they should negotiate a commercial agreement. An explicit agreement sets expectations and allocate resources to fulfill those expectations. Just as importantly, it takes relatively little management time. The alternative is constant lobbying, which easily turns into a full time job for managers.
  3. The mothership teams don’t call the shots. The head of marketing does not get to determine the marketing plan for the new venture. The UX specialist does not get to sign off on the design of the next feature. This kind of “control creep” means the new venture becomes as agile as a block of wood.

5. Kick the new venture team physically out the door

Out-of-sight is out-of-mind. And this can be a good thing. By their very nature, new ventures are doing something different. And these differences will easily trigger seemingly minor, but very disruptive questions and comments from mothership people. “Why this brand positioning… This feature seems strange… My son thinks we should do XYZ differently…”

The new venture team knows the importance of keeping people onside, so it will stop and reply. And stop to take meetings to explain. And after a while, the hours turn into real management overhead and a subtle pressure to avoid doing things too differently.

The ideal solution is to get an office down the road. Close enough for new ventures and mothership people to meet for a coffee when needed. But far enough that the new venture isn’t disrupted by “parachute management”. It also fosters the tight-knit bonds and culture needed to become a high-performing team.

6. Establish some rules for governance

The mothership needs to maintain some form of oversight of the new venture and its management team. The trick is doing it without imposing unnecessary overhead.

In one example, the new venture has a board made up of senior level execs and its clear what kind of decisions need to be taken at the board level. This is clean and straightforward as a form of governance.

In another example, the new venture is effectively subject to the control of different teams and managers: finance, audit, HR, security, etc. Often these managers are aiming to minimize downside risk, rather than capture upside. This type of control makes sense for an established company like the mothership. But for a new venture, it just reduces agility.

Conclusion: set up the new venture to maximize agility

If you’ve read this far, you can probably tell that I’m a big believer in agility. For a high-risk, high-reward business like a new venture, rapidly experimenting and responding to new insights and events is the lifeblood of finding success. And large organizations tend to be terrible at agility. So as the CEO of the mothership, when setting up a new venture, think about how to keep the management overhead down and the talent up. In other words, maximize agility.

Org for new ventures matters. A lot.

Imagine you’re the CEO of a large established business. You’re considering launching a new venture based on Product X. It’s risky, but it could be the key to future growth. So what would you think about?

You might focus on the product and service. Is it innovative enough? Do customers want it? Or you might focus on the business case. What’s the forecast? Scenarios? Investment level?

But among these questions, the one that is usually under-considered is organization. And yet it may be more critical than the other questions being debated.

This might be surprising for anyone that knows me. I’m not traditionally an “organization guy”. My background is in strategy, insight and product. But having worked on a range of new ventures and startups, I’ve seen organization come up time-and-time again, as a critical factor. It determines team cohesion, velocity and agility.

“Organization” in this context means a few things, such as:

  • The talent working directly on the new venture
  • How the new venture team works with others at the wider company (both for execution and oversight purposes)
  • The culture of both the parent company and the new venture

To put it into perspective, just look at the startup world. Early stage investors focus very heavily on the team. Who are they? What’s their track record? Do they together form an effective team? The opportunity and plan could be “right”, but investors will back out if the team is wrong.

The org question for new ventures is even more complex than it is for startups, because it involves two entities. And the consequences of the org question are greater. Getting it right means having the best of both worlds: startup agility and large company resources. Getting it wrong means being another failed venture, crippled by bureaucracy and large company indecision.

In future postings, I plan on sharing thoughts on these org questions in more detail.

But for now, if you’re a C-level exec thinking about launching that new thing, ask yourself if you’re focusing on the org question at least as much as an early stage investor focusing on a startup team. If not, the venture may be handicapped before it even gets off the ground.

This is a blog about new ventures

“New ventures” is admittedly a vague term. While it includes startups, my main interest here is in new businesses launched by existing businesses. These might be geographical expansion businesses. Or businesses based on new products or services. But the main characteristic here is that it’s a venture. It carries a reasonably high level of risk that makes it different from just an incremental scaling up of an existing business.

This is all based on my experience in having worked numerous times on exactly doing this – launching new businesses for existing businesses. And also working in big corporates and running my own startups. But it’s a big world out there and I look forward to hearing about others’ experiences.

Anyway, let’s get this conversation started…