I’m in Kuala Lumpur, writing this blog by the light of the daily afternoon thunderstorms. We just finished our inaugural Developing Market 100 meeting, which brought together an exclusive group of founder-led companies from emerging markets. These companies have each gone through a period of 10x growth and aspire to another period of 10x growth—always a formidable challenge. As one member put it: “We don’t have a growth issue, we have a sustainable-growth issue.”
All of these companies are facing directly into what we call the westward winds—the forces of complexity that work against fast-growing companies as they approach scale. One of the stiffest: Their revenue is growing far faster than their talent.
One key to scaling with a limited supply of talent is to unburden crucial frontline people so they can remain focused on customers as the company’s footprint expands. But as we debated strategies to address this core issue, one dilemma emerged clearly: How do you simplify these core customer-facing roles without dumbing them down or “destroying” them?
The leaders of the DM 100 companies are extremely frontline oriented. They understand that their job is to:
- Define clearly the job of the “kings”—the frontline leaders empowered to run the P&L and deliver products and services to the customer
- Recruit and develop more kings
- Constantly support and unburden these kings so they can do more with limited resources
There are several ways to free up the kings so they can focus most intently on the customer. These include:
- Taking away back-office responsibilities by creating shared service centers so the kings can focus externally
- Pulling away other parts of the king’s job that can better be done centrally. Straightforward examples of this would be duties related to the supply chain or R&D. More controversial examples might be pricing or marketing (see my Embrace Conflict post).
The key debate among the DM 100 participants focused on which non-back-office responsibilities can be pulled back from frontline leaders without disempowering them or hobbling their ability to serve customers. During the meeting, participants created four useful rules of thumb.
1. Free the kings of these responsibilities:
- Truly administrative jobs. These are purely internal, mundane jobs that could be done by others, requiring no real business judgment or need for customer input. Giving them to others simplifies the king’s job and lets him or her expand more important customer-related responsibilities.
- Transactional jobs. These are jobs like payroll, invoicing and receivables-chasing that might involve external customer activities but are largely transactional. This also simplifies the king’s job.
2. Ensure that kings remain responsible for activities that:
- involve the customer and require business judgment
- help the king develop the next generation of kings by helping these mentees with their customer skills and business judgment
- help the kings develop as trusted and experienced general managers
3. Carefully consider the risks and benefits of centralizing certain scalable jobs.
- This is a much smaller list of jobs that might involve business judgment or customer activity, but would clearly benefit from companywide scale. In most cases, these involve supply chain and basic R&D; in others, they might include pricing and marketing. The decision to centralize these jobs is something each company will need to debate vigorously.
- It is not clear that pulling back these activities simplifies the king’s job—in fact, he or she might have to spend more time coordinating with the central office to ensure that generic decisions meant to benefit the company as a whole don’t hurt specific customers. Given this risk, there has to be a significant strategic benefit to centralizing these activities. And it has to be made absolutely clear that the group leader is managing that activity as a support function to the king (versus a bureaucrat aiming to create a central empire).
4. Understand that the development of trusted kings almost always trumps the benefits of centralization. This is the key insight. During the fast-growth period of these companies, it is critical to empower the kings of the business and give them all the tools they need to do their job locally. It is also important to simplify the job by peeling away administrative and transactional activities. Equally, these jobs must be where future leaders are developed—the kings must keep control of decisions involving customers and must keep decisions that help them develop their business judgment.
After rethinking the role of the kings in his organization, one of the DM 100 CEOs concluded he had to reconfigure his HR strategy. “We can only scale through adding kings,” he explained. “But kings are so hard to recruit. Before this meeting, I felt the only way to add more kings was to dumb down their job—make it easier so I could hire more junior, less-experienced people. Now I realize that would be a disaster. My new task is to work with the kings of my business to agree [on] how we can simplify their jobs—taking away all transactional, administrative activities.” He added: “I will let them decide, because if they are having fun at the job, they will help me find more people to join them on their adventures.”
What’s clear is that helping existing kings grow and reach their full potential involves some calculated risks. To some degree, it means “overempowering” the kings by increasing their responsibilities for working with customers and developing the next generation of leaders. But it also requires freeing them up to focus on these crucial responsibilities. The combination simplifies the job—but it also enhances it.