The level of formal process in an organization is a pretty esoteric topic that I haven’t seen discussed very often, or in very much depth. Yet I believe it is critically important to any CEO looking to grow a company, particularly a software or hardware technology-based company.
The reason I believe it is so important is that, in aggregate, how process-oriented your company culture is effects every nook and cranny of company operations. Oftentimes, however, senior management doesn’t even explicitly think about how much process they want governing company operations. More often than not, this part of the culture grows in a random and haphazard manner, driven by unforeseen key events that shape the level of process in different areas of the company. Sometimes this level of structure/process varies dramatically by department. In these cases, managers below the senior executive level usually are driving department cultures that may or may not end up being very process-oriented, depending upon their own operating styles. The key takeaway here is that process levels often aren’t being driven strategically, but occurring tactically or even haphazardly. This is usually a mistake–here’s why I think so.
Why process levels are so important in software & hardware companies
In technology companies, in particular, the level of processes can play a key role making or destroying your business. There are three reasons that I feel there should be much more sensitivity in high tech companies to process levels:
- The rapid evolution of technology and technology markets
- The need to innovate if you want to thrive in technology businesses
- The necessity and difficulty of constantly ‘taming” new technology
A low process software company example
I’ll use as an example a recent experience with a client to illustrate my point. The client is a small but growing software company. They have in their culture a high level of chaos, as is common with many growing, young software businesses. The company was bootstrapped and grown out of what started as a service business, and possesses very little in the way of corporate controls or processes.
On the positive side they are very responsive, fast-moving and innovative, able to capitalize on changes in technology and inefficiencies in the market. These are very important qualities in an startup software company, particularly one of the thinly capitalized variety. These “nimble” attributes are the very reason they’ve been able to crack through the very early stage that kills many startups, and has allowed them to grow and thrive.
But there’s a flip-side to this type of unstructured, low formal process corporate environment, however. This company lacks the discipline that is required to “stick to the plan”. Indeed, there is very little planning going on to begin with – let alone “sticking to that plan”! This operating style fits great in the segments of the company where innovation is critical, such as conceiving new products. But in other areas where a more disciplined, structured approach is important, operating this way often leads to performance which may be much lower and in this company is a drag on company results. While a low-process culture is excellent at conceiving and quickly prototyping new products, my client’s follow-on releases often come out much later than planned. QA is not a formal function for them and as a result the initial new releases and documentation are lower quality than they could and indeed should be. The website has very little formal oversight and is littered with a lack of consistency, broken links, old content and grammar & spelling errors. We’ve worked on correcting these problems — carefully — without killing the very environment that is enabling success. It’s tricky to fix without “throwing the baby out with the bathwater”.
This company is just one example; and of course the level of process needed to run IBM optimally is fundamentally different from that of an early stage software startup. In your particular company, it may be very important to have a high level of formal process in one department–and just as important to minimize the level of process in another. This may be quite different altogether in other companies.
So how do you know that you need to adjust your level of process in a strategic sense? Here are a few guidelines to get you thinking about where your process level stacks up vs. what may be optimal:
Your competitors are beating you to the punch
This is a common sign that you are bureaucratic and process-oriented relative to your market. While there may be good reasons for the processes you have installed, being consistently behind in responding to market needs can have a very negative effect on your growth prospects.
You are constantly releasing “flawed” products into the market
This is the converse to the first point above. It usually indicates you are moving too fast, with too little process and structure in product development, QA and release. Maybe in Marketing/Product Planning as well. In truth, the end results of this approach is usually worse that being beaten to market.
Employees are complaining about so much formal process
I always listen to what individual-contributor employees are saying; they are the “canary in coal mine”, often a leading indicator of issues that later show up in your financial statements. The caveat here is that these types of complaints can also indicate a hiring problem. Make sure you’re not hiring people who’s operating style just aren’t a good fit with the way the company wants/needs to operate.
Employees are complaining about the lack of process controls
The converse to the point directly above is when employees are complaining about how much chaos exists in the company. While the point above about watching for hiring mismatches rings true here as well, this is often the time you need to take a hard look at adding some structure to how you operate. Most of the time employees personally prefer less process to more. If they’re crying for more you’re likely to have a REAL problem.
There’s no “chaos” in your organization–and little innovation as well
I have a rule of thumb when it comes to pricing new products: if no one is complaining about price, you probably are leaving money on the table. My “chaos corollary” is similar: if there is no chaos in your operations that folks are complaining about, you probably have created an environment so process-oriented it will stifle your innovation and resulting revenue.
Generally speaking, I have a bias towards a little less process and a bit more chaos in software and hardware companies. Often excessive process is just a bad band-aid covering up poor hiring practices. Nothing allows you to minimize process – while maximizing productivity – like a strong, responsible, empowered group of employees. Creating the environment to hire and retain highly responsible people generally leads to a company getting done everything it needs to, with a good level of innovation to boot–while keeping formal process to a minimum.
I recommend holding off adding new processes until you absolutely have to, because going the other direction is much more difficult. But in fact, it’s important to have the proper balance if you want your company to function optimally. Analyze what the proper level of structure and process is not just for your company overall, but within each discrete operating segment of your business.
There you have it–my view on how to analyze and instill the proper amount of formal process for your company. What’s your view on this topic? Post a comment to expand the discussion.
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