mercanix

Death By Growth

There is no easy way to say this, organizations don't scale well using traditional management practices. In fact, the returns on productivity for adding more people are actually sublinear; which means adding a person doesn't get you a full person's contribution. Just listen to what Geoffrey West, Distinguished Professor and Past President of the Sante Fe Institute has to say about it:

"After buying data on more than 23,000 publicly traded companies, Bettencourt and West discovered that corporate productivity, unlike urban productivity, was entirely sublinear. As the number of employees grows, the amount of profit per employee shrinks. West gets giddy when he shows me the linear regression charts. "Look at this bloody plot," he says. "It's ridiculous how well the points line up." The graph reflects the bleak reality of corporate growth, in which efficiencies of scale are almost always outweighed by the burdens of bureaucracy. "When a company starts out, it's all about the new idea," West says. "And then, if the company gets lucky, the idea takes off. Everybody is happy and rich. But then management starts worrying about the bottom line, and so all these people are hired to keep track of the paper clips. This is the beginning of the end."
The danger, West says, is that the inevitable decline in profit per employee makes large companies increasingly vulnerable to market volatility. Since the company now has to support an expensive staff -- overhead costs increase with size -- even a minor disturbance can lead to significant losses. As West puts it, "Companies are killed by their need to keep on getting bigger."

TalentAsProfitDriver.png

As the graphic, excerpted from a McKinsey study, illustrates exactly what West and Bettencourt found. As companies grow, their profit per employee drops. Yes, these are very large enterprises. Does this occur on a smaller scale? Our first-hand experience working with enterprises as small as 25 would indicate it does.

The next obvious question is how can you contain the "burdens of bureaucracy" so growth doesn't kill your organization? If so, how?

Something to consider as you grow your team or enterprise.

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Our (Short) Story

 

I'm often asked what mercanix does and why we started the company. As usual, I flip the question around and answer the second part first. Because we think it's more important that people know "why" rather than the "what." The what part may change over time, but the why never will. And we also don't believe people buy products or companies as much as they support ideas and other people who share their values. Some call this buying "meaning." We certainly don't come to work every day because we're building a product. We spend our working hours trying to create value for others and making lives a little better.

We started mercanix because we're not satisfied with how "work" gets done today. So much of an organization's potential - and the people who work there - is squandered each and every day because of very avoidable, sub-optimal practices. If you've ever had the good fortune to feel the magical flow of high-performance teamwork, at work or at play, you'll know how things can be. Most of the time though, we don't experience how it can be at work, but rather how it is. We'd like to be able to help tip the balance toward what can be instead.

So, how do we know so much about the right way to do things? We don't. We rely on what we consider to be the best, evidence-based management science that is properly peer-reviewed and tested in the real world. That doesn't guarantee the generalized practices we've built into our tools are perfect; far from it. We keep refining, iterating, learning and adapting to what we and our customers experience. And we do our best not to include practices or approaches in a prescriptive way, but rather in a way that supports good practices without forcing you to do things one particular way. This requires ongoing attention, research, innovation and creativity.

We consider ourselves primarily Software Tool and Die Makers. Yes, we invent and design software tools, but we spend the majority of our time building and refining our original ideas and designs to create better and better tools.

What's a Tool and Die Maker? (excerpt from Wikipedia)

"Tool and die makers are a class of machinists who work primarily in toolroom environments—sometimes literally in one room but more often in an environment with flexible, semipermeable boundaries from production work. They are skilled artisans (craftspeople) who typically learn their trade through a combination of academic coursework and hands-on instruction, with a substantial period of on-the-job training that is functionally an apprenticeship (although usually not nominally today). Art and science (specifically, applied science) are thoroughly intermixed in their work, as they also are in engineering. Mechanical engineers and tool and die makers often work in close consultation. There is often turnover between the careers, as one person may end up working in both at different times of their life, depending on the turns of their particular educational and career path.

What we do is to build software tools that help people and their organizations realize their potential while getting them where they want to go. We recognize we won't be able to help enterprises that have no interest in adopting high performance work practices. Hopefully, we can help organization's that are committed to giving and getting the best from their people and crowd-out competitors that are not as respectful.

If we can help increase the effectiveness of organization's that are mindful, respectful and people-centric we will have added value. That may strike some as corny, unrealistic, or unreasonable but there it is.

Mike

 

 

 

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