This is the eighth of nine blog posts examining the elements of Founder’s Mentality: Insurgency, frontline obsession and owner mindset. Here, we look at bias for action, one of the sub-elements of owner mindset.
In companies with high Founder’s Mentality, the heroes are the people who act. They don’t shy away from conflict—nor do they allow themselves to be bogged down in conflicts. They won’t tolerate a bureaucratic answer, especially if it means a customer is kept waiting.
These are just some of the characteristics of companies with high Founder’s Mentality, which we define as those with an extraordinary sense of insurgency, a frontline obsession and an owner mindset. (See the figure below to explore all the elements and sub-elements). The last of these, owner mindset, provides some of the most important antibodies to complexity, creating a culture that ruthlessly cuts costs and complexity and rewards those who act to overcome and destroy bureaucracy whenever it rears its head.
An owner mindset includes three elements: (1) A strong cash focus: Leaders are obsessed with the cash generated by the business, which demands they constantly monitor the gross margin of the business and the SG&A line. (2) A bias for action and speed: Leaders of insurgent companies welcome conflict—if quickly resolved—as a path to the best outcomes for the company and its customers. They won’t tolerate anyone using conflict as an excuse for inaction. (3) An aversion to bureaucracy: Systems, processes and procedures become increasingly necessary as a company grows, but insurgent leaders seek to balance that need for professionalization by making heroes of those individuals who don’t hesitate to buck the systems if it means doing the right thing for the customer. Leaders accept the occasional chaos that may result as the cost of maintaining that balance.
Let’s take a closer look at what a bias for action means.
Mey, a leading spirits company in Turkey and a DM100 member, provides some of the best examples of the bias for action. For about 60 years, the Turkish government ran a state monopoly that manufactured and distributed all raki, the anise oil–based spirit that is the national drink of Turkey. Greece has ouzo, Italy has Sambuca; in Turkey, they drink raki. Turks will sit for hours at their raki table ritual, drinking glasses of raki while nibbling at meze, a collection of small dishes of hot and cold food. When the government decided to privatize the industry in 2004, a set of construction entrepreneurs bought what would become Mey and set to work.
They didn’t know much about consumer goods, but they knew enough to recruit Galip Yorgancioglu as their first employee. He remains the CEO of Mey today. The entrepreneurs bought the company in 2004 for roughly $292 million and sold it to TPG for about $810 million two years later. In 2011, TPG sold it to Diageo for about $2.1 billion. That’s a 10 times increase in value in about 10 years—not a bad value-creation story.
Galip has been passionate about keeping an owner mindset at Mey, especially as it moved from private equity ownership to corporate ownership. Here’s Galip:
“If our team thinks like owners, we know we can retain our speed and agility. To do this, I worry about two things constantly: who I recruit and how our leaders interact to get things done. In terms of recruiting, I’ve learned to recruit the black sheep from blue chips. These are the top recruits from the best companies, but I’ve learned that the right ones for us are rebelling against the bureaucracy and slowness of today’s incumbents. I want the guys that are well trained but desire to shed big company trappings and work more like an entrepreneur.”
In addition to gathering the right team of black sheep, Galip is a massive proponent of the Monday meeting, the time when his leaders can get together and solve issues fast:
“One of the hardest things to do culturally is to make everyone understand that conflict is okay. We build the possibility of conflict into our organizations, and the worst thing we can do is then avoid the inevitable conflict that arises. I want my supply chain team to deliver to our consumers the benefits of ‘sameness.’ I want them fighting to rationalize, to look for scale benefits. And I want my marketing guys to deliver to our consumers the benefits of difference. I want them fighting for new variants, new products. And my job is to make sure that we address the conflicts that inevitably arise when our people are doing their job. One trick I’ve found to do this is what I call double hatting. When we first talk about an issues, I want each person to represent that organizational hat they’ve been assigned. So if you’re in charge of supply chain, fight your corner. This makes sure we get the issues on the table and everyone understands that the conflicts we are raising are conflicts we want. Then I say, okay, now, let’s switch hats. We’re all owners of the business; we now have all the issues on the table. What is the right answer? I now want people to debate the answer on behalf of the whole company.”
Embracing conflict keeps Mey agile. As Galip notes:
“Speed and agility demands fast decision making. Fast decision making demands that we get all the issues on the table and then take the right decision for our consumers and our company. The Monday meeting lets us do that. The whole company knows that we’ll deal with the issues that come up each Monday so they raise any issues that are stopping them from taking action. It’s a social contract, and if we do it right, it ensures that we move faster than our competitors.”
A lot of our discussion within the DM100 is how you keep this bias for action. We’ve explored root causes (for example, a shift in heroes from deconstructionists to clever people or a shift in mindset from “the opposite of simple equals complex” to “the opposite of simple equals advanced”). And we’ve explored solutions. Galip offers the best framework to revive a bias for action: It starts with who you recruit/reward and then demands you embrace conflict in your company, ensuring that conflicts are resolved quickly, including at the Monday meeting.
We have focused here on how you ensure your people can take action, by helping them resolve internal conflicts that inevitably arise as they try to serve customer needs. There is another way to create a bias to action, and that is to declare war on the bureaucratic obstacles to action. We cover this next.
Next up in our series: Aversion to bureaucracy