How NOT to run a business

The Wall Street Journal has an article on How Bosses Stay in Charge. It describes how not to run a business. In this downturn, businesses have an opportunity to bring in very qualified people that they would otherwise not have a shot at. There is no such thing as overqualified. For a refreshing contrast, see this post. Relevant excerpt:

Phil Eagan recently reminded me of an investor meeting we did early in Viking’s history with one of our largest and most astute investors. I was asked about the commitment of Viking’s founders. I assured the investor that I was committed to our business. I also said that I believed that businesses must choose one of two paths. In the first path, the organization exists to serve the needs of the founders. In the second, the founders exist to serve the needs of the organization.

In the former, the founders maintain control. While they may delegate tasks, they make the key decisions. The founders may hire talented people to support them, but turnover will inevitably result as these individuals realize the limitations of their careers.

In the second path, the founders continually ask who in the organization is best able to fulfill each responsibility, without regard to title or tenure. As the talented new employees demonstrate their abilities, the founders will invite these individuals to share in the organization’s decision making process.

There is an irony in how these two paths are perceived by investors and other outside constituents. In the path where the organization revolves around the founders, constituents will take comfort in the perceived stability of the organization that, they believe, results from the consistency of the founders’ roles. But, I believe an outsider will underestimate the instability that exists at the levels below the founders.

In contrast, on the path where the founders exist to serve the organization, outsiders may perceive a level of instability. They will periodically be confronted with news that a founder has changed his role, ceded responsibility for some decision making, potentially reduced his work load or, possibly, left the organization altogether. However, if the organization has attracted talented individuals, helped to develop their skills and judgment, and established a process in which an individual’s merit determines the level of responsibility given, then the organization likely will endure. I believe Viking is this type of organization. I fully expect that, in the years to come, all of you will prove me right.