Paul Graham listens to a speech by Brian Chesky of Airbnb and questions the conventional wisdom on managing companies (or more specifically startups that have started to scale).
As Airbnb grew, well-meaning people advised him that he had to run the company in a certain way for it to scale. Their advice could be optimistically summarized as "hire good people and give them room to do their jobs." He followed this advice and the results were disastrous… The audience at this event included a lot of the most successful founders we've funded, and one after another said that the same thing had happened to them. They'd been given the same advice about how to run their companies as they grew, but instead of helping their companies, it had damaged them…
In effect there are two different ways to run a company: founder mode and manager mode. Till now most people even in Silicon Valley have implicitly assumed that scaling a startup meant switching to manager mode… There are as far as I know no books specifically about founder mode. Business schools don't know it exists… The way managers are taught to run companies seems to be like modular design in the sense that you treat subtrees of the org chart as black boxes. You tell your direct reports what to do, and it's up to them to figure out how. But you don't get involved in the details of what they do. That would be micromanaging them, which is bad.
Hire good people and give them room to do their jobs. Sounds great when it's described that way, doesn't it? Except in practice, judging from the report of founder after founder, what this often turns out to mean is: hire professional fakers and let them drive the company into the ground.
Coming from the likes of Paul Graham and Brian Chesky, hope this is taken seriously by management schools.
I have a slightly nuanced take on this, drawn from leadership trends in government organisations.
Consider the example of an officer who heads a department, a local government or a public sector unit who is passionate and committed to bringing significant change (not those interested primarily in virtue signalling to their political masters as a pathway to a better posting/opportunity). Such officers are like the founders of startups, in full ownership of their roles.
Here I distinguish between such government leaders, and the rest - those who are not only doing virtue signalling but also the median leaders who tend to put in effort but don’t fully own up their roles.
Management 101, as Graham writes, would have it that bureaucratic leaders should clearly define tasks (at most prescribe them in detail), allocate task responsibilities to the senior officials reporting to them, empower them, and let them implement the tasks. Then periodically review them, address co-ordination failures, guide them where required, and use rewards and punishments appropriately. I’m not sure this will work.
The challenge that they face is that at the level just below him/her, there are a tiny few, if any, who are both self-motivated and are bought into the Department’s mission and objectives. Only such people can be entrusted with a task and be expected to take it to its conclusion. All others require varying levels of micro-management.
Such micro-management involves prescribing tasks with their details and constantly monitoring their compliance. It would involve level-skipping to engage directly with their subordinates to give directions (already made to their unit heads) and assess progress, and periodic inspections to directly experience field realities. Finally, it would also involve opening multiple formal and informal feedback channels to assess what’s going well and more importantly, what’s failing.
This routine must be followed with rigour and militant intensity, especially in the initial months of a posting. It’s an almost essential requirement for success within government (and as Chesky says, within private corporations too).
The challenge is with right-sizing this strategy. Not get deep enough and you lose out on valuable feedback and information. But get too much into the weeds and you are lost. This balance varies across organisational contexts and figuring it out will take time, but is time well spent. It’s also required to vary the level of such intense engagement depending on the responsiveness of the reportee officer.
On this, a note of caution is to avoid extending this management strategy to the tiny few direct reportees who are already self-motivated and bought into the vision. That will be self-defeating for multiple reasons. For one, it demoralises the officer and the leader loses a very powerful force multiplier. Worse still, he’s demoralising an organisationally respected individual (as these officers are likely to be) whose impacts will be adversely felt across the department. This will only hurt the leader, and significantly at that.
It’s also a challenge identifying the few self-motivated and passionate second-rung officials. It can often take time. And mission-alignment with such individuals requires the leader to spend time understanding and engaging with them. It’s an investment well worth it.
I’m not sure that management theory can ever teach us something insightful about getting the balance right or identifying the committed officers. Instead, management schools could acknowledge the realities of the field, and clearly propose alternative frameworks like the one described here. It would be up to individuals to choose from among them, and iteratively right-size the strategy to suit their specific requirements.
The practical application of the strategy and its right-sizing is akin to an immersive problem-solving exercise, where you diagnose, choose the framework, and then iterate with it with tight feedback loops to get to the right strategy. It can appear daunting when done first. But once you internalise the process, it’s not as complicated.
The point that Graham makes about management theories and business schools resonates with the point this blog has made on several occasions (see here and here) regarding our excessive (even blind) faith in theoretical experts for practical advice. This turns out consistently bad in areas like macroeconomic policy-making, public policy issues, and, as Paul Graham writes, management. Theory unfiltered by practical considerations generally leaves the system worse off.
A corollary to this is the allure of ideas (among all of us) while discounting their implementability. It’s a cognitive blindspot. It’s all too common for experts offering ideas to address all the ills in the world, with scant attention to the really hard part of the details of their implementation. I blogged here highlighting that no matter how brilliant the idea or policy, what matters is its implementation.
As I have blogged here, it’s a near-impossible task for theoretical experts to appreciate the challenges of practical implementation and the several layers of nuances and conditions required for the application of their theories. The practitioners have no option but to undertake the struggle (as with most other complex problems in life and career) to be able to get the strategy right. It’s just the same for founders of startups or corporate leaders, as it’s for bureaucratic leaders.
They only know management who have struggled long enough with actual management!
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