BusinessWeek thinks that “Seth”-based firms are great

19 Comments

• ady

  February 17, 2008
  9:30 am

  One guy = greater risk

  More guys = lesser risk

  but then they say NO RISK NO GAIN
• start-up

  February 17, 2008
  2:19 pm

  IMHO, it’s not really off-the-mark and you can’t discredit it.

  When you are building a company there are different stages that you go through. When you are starting up you need to take decisions, move ahead, make mistakes, rebound and move ahead again. When you have some stability you need to delegate and grow even more. When you have reached a certain point, you need to find some heirs; groom them to take your place.

  However, you start your company as one-person or at max two persons. Beyond that, you will probably break-up before you get to do anything. Even in two-person ownership teams, someone has to take all the decisions. Arguments are fine, but one person has to be in-charge. This is what this article basically says that one person has to be in-charge.

  Also, depending on the capability of the person, it’s not really high risk. In fact, more the decision makers, more the risk of breaking up the company.

  Lastly, been there, done that so I know even lots of amazing star people can’t translate into success; as compare to one-person with mediocre skills, which gives your company a direction and translates into spectacular success!

  Osama, you company is also “your” vision basically (yes, you have amazing good people around you but who calls the shots?), isn’t it? Or for that matter Jawwad Farid’s or Monis’s rr lots of other successful “good” firms out there? I guess other theories come when you need to make your company a “great” company (transformation from “good to great”, which btw is a good book, if you get a chance).

  Lastly, “Seth” businesses are also good. Look at the billion rupees trading businesses in Karachi e.g., all ‘memon’ businesses. So i know it’s unfashionable to be in a “Seth” business, but that’s exactly how most of ours as well as businesses in “west” work. Even Warren Buffet is a kind of seth
• Osama A.

  February 17, 2008
  2:47 pm

  No, my company is certainly not like that, so please dont assume it to be – like I said in my post about CDF we’ve only been able to attract brilliant people because we let them take CDF forward on their own merits, and they are.

  The vision we set for some of our initiatives has came from extensive customer relationships, usability tests, pilots and more. Then we got a buy-in from our managers and stakeholders and then even the employees in general to ensure that we collaboratively create a goal to be excited about.

  Even after starting to execute on the plan we continually allow people to shout at the management with new ideas and concerns about the plan.

  To me, it makes no sense to ask people to associate themselves with CDF unless we allow themselves to be a part of the firm.

  The way we’ve built CDF is to (1) hire people with complementary skills that complete each other — i.e. each person can do ONE or TWO things better than anyone else in the firm and (2) Let them be the full decision-makers and owners of those areas and (3) allow them to explore ways of expanding CDF’s expertise in those areas as long as its done in a financially viable way.

  Now, I know this distributed buy-in can usually take longer than a single-guy-decision shop. But rather than give up because its longer, we focused on using IT tools and a process that enables this buy-in in a surprisingly quick amount of time and also stores that context for new people to join the conversation.

  I wont comment on Jawwad or Monis’s setup, but from what little I’ve seen in Jawwad’s setup the secret of their success is also a distributed buy-in from the entire 30+ force for each significant decision.
• Osama A.

  February 17, 2008
  2:50 pm

  This is why I frequently tell people I meet – “Here’s the person who makes all the decisions here, I just make pretty powerpoints”
• start-up

  February 17, 2008
  3:44 pm

  Osama, don’t get me wrong here. One-guy company is about setting the ‘tone’ of the organization and the direction. Of course, the project managers are supposed to manage the projects, architects are supposed to create architecture, sales guys/gals are supposed to do sales etc etc. It’s about who sets the “direction”. Who decided to create CDF and give freedom to the employees so as to create an award winning product? Same goes for Jawwad? Who created the highly successful strategy of rozee and then secured second round of funding? Certainly not Rozee’s PM

  What are discussing right now is one-person company versus more partners, more decision makers. Not talking about the lower level execution of the direction top-man/woman gives.

  In any case, my personal experience and statistics show that THE only way to create a successful organization is to have ONE boss
• Osama A.

  February 17, 2008
  4:09 pm

  Thats what I’m trying to explain – at CDF the people set the direction.

  We’ve adjusted our direction or entered into new ones a number of times based on input from the people who are closest to the particular industry / domain / opporunity. The key is to be able to do this without creating nervousness in operations and without losing focus – basic SCM.

  Since I oversee the activities it gives me a natural vantage point to have the bigger picture in mind, but its presumptious for me to say that that means I set the direction.

  I’m talking more about having no “higher” and “lower” levels of execution – running a democratic, flat team.

  Before you say it – National Instruments is a 250+ completely flat organization – the CEO and three others have the 250 people under them directly.

  There’s also plenty of other case studies from within Apple, Microsoft, Hallmark, Sony and others where some person in a “lower” level team set the direction of the entire organization.
• start-up

  February 17, 2008
  4:44 pm

  This is an interesting discussion, and I am free this Sunday (no skiing) so I’ll give some more thoughts on this

  “Flat” organizations was first promoted in 1940s by James C Worthy, and then there have been numerous proponents of bottom up hierarchies. The key idea is to have as few intervening levels between staff and managers as possible so that the well-trained employees will directly be involved with decision making and hence will be more productive.

  Now the problem is that “flat” hierarchies usually work well within ‘small’ organizations. Especially when frequently financial decisions are involved, flat hierarchies don’t really work. I don’t know about National instruments, but Microsoft is certainly not a flat organization. In fact it’s pretty well known for its slow beauraucracy (one of the reasons it’s still catching up to “Internet”), same goes for Apple and Sony etc. As far as CDF is concerned, I am sure it’s a pretty flat organization and things are going well; but then again it’s a small organization and in smaller organizations, flat hierarchies can and do work.

  We are currently working with a 5 Billion Euro media giant in Europe. They are divided into 300 smaller companies running various magazines, TV channels, Internet portals etc. Now, on one level this may appear to be a strategy to have as flat of an organization as possible, as each of these smaller 300 firms are entitled to their own budgets and decision making. However, the overall strategy is set up the big bosses. Also as soon as these smaller companies are successful they are managed by the bigger bosses. So it’s basically a way to simulate innovation in smaller teams but when they are ready, they are assimilated back into the big organization.

  Of course, there can be numerous case studies that can take you either way. My bet would always be on a one-man team to produce results rather than a flat hierarchy organization. I think it’s simpler, more effective, and in the long run more successful. But then again, different businesses have different requirements and different business owners have different philosophies. I personally think flat organizations are hard to grow but then again, a charismatic leader can always put together people who can all work together like a well-oiled machine and produce great results.
• ady

  February 17, 2008
  10:23 pm

  It’s not that in one-guy setups, the only one involve in decision-making process is that one big boss. I think, there are some other executives who are there to provide aid to the decision-making in those setups. But, the Big boss have the final say.

  You can’t have more than one captain of the ship. I wonder, what is the case in CDF?
• Osama A.

  February 17, 2008
  10:36 pm

  I think I’ve already explained the CDF position… I can understand its hard to understand because no one else in the local industry may work that way, but it doesnt change what we do.

  At CDF everyone who is responsible for an area has the final say in that area – this is based on operational vantage points that each person has.

  The common mistake is when people believe that operations cannot be structured in a flow-based system — that they have to be divided functionally as a necessity.

  Flow-based systems are based on vantage points – if a particular activity starts at one end and will be released from the other end, anyone can choose to stop the process if they are not satisfied with the current results.

  Considering this, my vantage point and role at CDF is to absorb industry trends to identify future market needs and future customer expectations and look at our work from that POV.

  That doesn’t mean that its a “final say” by any definition.

  Again, I understand that most of the businesses in PK run with a big boss having a final say, so its ok if CDF seems like an anomaly – that doesnt mean we’re misaligned with how the world works.
• Osama A.

  February 17, 2008
  10:42 pm

  The other very important thing to understand when discussing things like these is to never assume that there is only one way to run the world.

  Just because you may have seen IT Organizations made up of a mix of PMs, Team Leads, Techs, Testers and more has no bearing in saying whether or not that model is “good” or a “best practice” of any sort.

  I’ve been consulting on operations re-engineering and SCM for a decent while, and our structure is based on SCM best practices applied to knowledge-centric work.

  In addition, we’re a product-focused company so by default our organization will be structured incredibly differently from your avg PM + Tech Leads + Coders etc.

  As a pet peeve, I wish more small software CEOs understood the importance of getting out of the “CEO with 8 coders under him and perhaps a PM or Sales person” paradigm.
• start-up

  February 17, 2008
  10:59 pm

  Osama, actually I see your point, and I do think that it may work well for you. However, when you say one person has a final say that doesn’t mean final say in EVERYTHING. For example, whether to use Amazon services or a server farm, Flex or Silverlight, Php or rails etc., obviously the CEO doesn’t make any decision here. It’s about setting the direction, which is by your definition, your role as well (i.e. identifying trends, future market needs etc.). If yours isn’t the final say then faced with two compelling arguments, which way do you go? Or whose way do you take especially when you have limited resources, budget, opportunities and time?

  I hear a lot of hype about being ‘product’ focused as opposed to being ‘services’ focused or as some put it the lowly offshore outsourcing development. The fact is, at the end of the day your product is also just the ‘service’ your provide to your customers.

  As opposed to what you wish about CEOs to understand, I think most of the CEOs already understand that their job is to ensure they create value in the marketplace, earn a decent living for themselves (shareholders, in this case since they are the only ones so them), and make their companies profitable. If that means creating a flat hierarchy, by all means they should, but if that means that there should be proper hierarchies with everyone’s roles and tasks defined, then that’s the way it should be.

  Also your way of thinking isn’t really out of the box. I know someone really close who started out like this and then changed the model to the more traditional model (got experienced top management and middle management) and now is doing really well, Masha’Allah.

  I think that we as companies are like armies and are organized as such too. Everyone in the team has his role and task and is expected to deliver. At the same time, we have redundancies so that if something happens to someone or someone leaves we continue to provide support to our customers and keep products’ schedules on the respective time-lines. Our job is to beat the competitors (whether they are with our products or our services) in the value they add versus the value we add.

  I also think that at the end of the day, it’s not really about the fancy management jargons, models or processes. It’s about which company is more successful, who is able to create more value for their employees (and their families), their customers and their shareholders.

  Lastly, come to think of it “Seth” organization isn’t the one that has one-leader. It’s the one which refuses to change its mode of business with the changing circumstances. In our times, it generally refers to organization that wants to keep the operational costs to minimum and maximize the profits.

  My many cents
• sami

  February 18, 2008
  12:38 am

  osama

  i don’t think this article is about the one guy being a “saith” – the “one guy” in an IT company would be a techie, in a construction company would be a civil engineer etc.

  you need a “one guy” to set the tone of things, to give space to his employees, to let them take initiatives and of course, to take the blame when/if the shit hits the fan

  pakis suck when it comes to a group of ppl running companies – lots of paki companies tanked just because the 3/4 paki guys who were incharge decided to argue over something and then decided to go their own seperate ways – this is what happened in ET, Islamabad

  a one-guy company in which the one-guy is the domain expert as well, are always successful
• start-up

  February 18, 2008
  1:54 am

  Sami,

  An IT company headed by a techie isn’t guaranteed to be a successful firm. You can make consulting business as techie heads (in IT, Law, Engineering, Accounting etc); however, a business has more things to it e.g., marketing, operations… which in a big enough business means more than the pure ‘domain’ experience. The head has to understand the business for sure, that’s a core requirement, but he doesn’t have to be the domain expert. He just has to understand the business, and see what value it adds to the customers. So he has to have great execution ability meaning he should have ability to get team members to deliver a product, some members to market and sell it, some members to manage the finances etc., and he keeps everyone together and with all stats, jargon, data, changing enviroment, makes sense of everything and sets a strategy and a tone of things.

  This is what the above mentioned article is about.

  Pakistani companies tanked not because they are run by 3 or 4 people and also not because they argued and “hence” went their own ways. They “tanked” because they didn’t have one person who decided everything and set the strategy. You can multiple equal share partners, but unless you have one decider who everyone accept as a leader, you can’t go anywhere. You have to accept right and wrong decisions and let things go, until of course, you decide to draw a line.

  What Osama is saying is that the entire organization should be flat where people get to choose their own direction rather than one person dictating it to them, which in his opinion is a Seth organization.

  I am beginning to believe that the reason people romanticize flat hierarchies is same as the reason they like ‘socialism’. A leader-based organization is the one where the leaders inevitably pisses off people; and a flat organization potentially shows people a dream of ‘controlling their destinies’, being part of the ‘entrepreneurial spirits’ etc. etc. I think you should let an organization grow as a flat hierarchy organization, and sooner or later you’ll run into a civil war. Here I have no statistics to back me up – it’s just an opinion

  Osama, on the bright side, I’ve dedicated a good part of my skiing-less, boring but sunny Sunday to an interesting activity i.e. commenting on greenwhite!
• ady

  February 18, 2008
  3:34 pm

  Ah, now I understand, Osama is of the opinion that organizations should be run as teams where leadership is shared, but I think, in the longer run, this system is not workable.

  Teams are good for projects, but where business operations & other routine work is involved, it’s difficult to sail smoothly with that setup.
• Osama A.

  February 18, 2008
  4:35 pm

  Gents,

  1- How do you expect to scale your company if you believe a one-person decision maker is good? Have you scaled beyond 100 people yet? Even if so, how long did it take you?

  2- If I asked you to triple your workforce and enter three new regions within 6 months could you do it as a single-person decision-maker? Or would you rather have three experts from those regions decide how to make decisions since they are closest to those areas?

  3- How can you be a domain-expert of anything as a single-person? Thats an oxymoron. Pick a domain – YOU cannot alone OWN the ENTIRE spectrum of that domain. Lets take banking – are you a banking expert? Telecom? SCM? Risk Management? Experience Design? Individual and Team Productivity? Insurance? Credit Analysis?

  Can you honestly know the full spectrum of a domain even though 10-20 firms in the entire value-chain make up that spectrum? Seriously we cant be THAT overconfident.

  4- If people arent able to get a shared-buy-in from autonomous empowered leaders in their company, it doesnt mean the SYSTEM is wrong, it means YOU lack the management capacity to make it work.

  SHARED systems are incredibly scalable operations but they need professional pragmatic managemnet, as well as a system that enables all different perspectives from multiple stakeholders to be considered and merged into a joint vision and strategy.

  Consider comments like “leaders invariable pisses people off” and the “3/4 paki guys decided to argue over something” and that already indicates environments where no system exists to support shared vision creation.

  Dont blame the method, blame the madness.

  5- My core argument is that all over the world, this concept that “I am greater than you” just doesnt exist. Heirarchies aren’t built because of social importance but rather based on how much liability individuals are willing to take on their decisions.

  A “Designer” isnt better than a “Coder”. A “PM” isnt better than a “Designer”. A “Sales” guy isnt better than a “Marketing” guy. A “CEO” isnt better than a “regional manager”.

  Operations are based on vantage points – its based on how much detail an individual person chooses to process to add a perspective on ideals. A CEO by definition is placed in a place where he will be able to see (1) the exact activities everyone is performing across the board internally and (2) the types of activities happening outside in the world in the value-chian that they operate in.

  This is just a natural consequence of the fact that he might end up attending the most conferences where such things are discussed. If PMs were sent to those conferences, then THEY would have that vantage point.

  If there are 5 major decision makers in a firm, they dont have to ALL attend EACH conference – thats highly inefficient. But if they each choose a vantage point that works for them, and one person chooses the “bigger picture” vantage point, it DOES NOT mean that the “bigger picture” person is the “CHIEF” and must call the shots.

  The Apple iPod wasnt a result of Steve Jobs thinign up something brilliant as a direction but a freelancer / entrepreneur who wrote up concept papers to discuss where the music industry was heading. That person had the “bigger picture” vantage point, and a system was created whereby apple and that person could work together.

  So again, just because people aren’t able to create professional systems that allow them to scale doesnt mean the ONLY way of working is to remain 20-50 person small teams where indivduals control all parts of the decision-making process.

  @Ali(startup) – Yes a CEO wont be deciding whether or not PHP should be used, but the same argument can be extended to whcih business lines to enter into – other people may be more skilled at analysing individual industries for the company (because they might be closer to those indsutries than the CEO).

  The “Seth” mindset is “If I personally dont understand the dynamics of an industry, then we just wont enter into it… we will only always ever do whatever I personally know how to do very well”.
• Osama A.

  February 18, 2008
  5:05 pm

  Some more thoughts.

  1- The primary responsibility of the CEO is to Increase the Valuation of the FIRM. It is NOT to “ensure he gets good returns for himself and shareholders”.

  If a small “low-level” person does an experiment that immediately generates huge benefit for the FIRM, then its a very wise idea to make that “low-level” person the CEO. This happened in the case of Hallmark, when a small marketing experiment turned into Hallmark’s single biggest retail sales day in its history. The person responsible was made into the CEO.

  Thus whoever increases the valuation of the FIRM as a primary responsibility should be a CEO, not someone who’s worrying about himself.

  2- Part of the process of increasing valuation could include building the CAPACITY of the internal environment whereby many different people from sales, marketing, product management, strategy and others are able to then worry about generating adequate returns for the shareholders.

  The decision-making on RETURNS is invaribaly distributed – if marketing, supply and PMO decide to build a new product for a new niche market the CEO has nothign to do with that decision.

  While the CEO might be involved in building this internal capacity, even this is typically off-loaded to the COO function.

  The CFO, COO, and other functions are primarily responsible for returns to shareholders.

  3- One of the comments said ‘I know from experience that lots of amazing star experience doesnt translate into success’.

  This isnt a fault of those amazing star people, nor of the model, but the fault of hte CEO for not creating an enabling environment where these people CAN create measurable success.

  This fault of the CEO can include poor process development, but it can even be as simple as his people-skills and ability to allow someone else’s opinions to count, or the lack of an ability to generate a shared-buy-in of vision and strategy.

  Some of these comments have proven my point – any place where “three leaders different on strategy and went off on their own ways” shows a lack of a shared-buy-in system.
• Start-up

  February 18, 2008
  11:57 pm

  Osama,

  A few answers:

  1- How do you expect to scale your company if you believe a one-person decision maker is good? Have you scaled beyond 100 people yet? Even if so, how long did it take you?

  Been there done that (almost). Took 2 years to create and implement the strategy! Come over to our place sometime!

  2- If I asked you to triple your workforce and enter three new regions within 6 months could you do it as a single-person decision-maker? Or would you rather have three experts from those regions decide how to make decisions since they are closest to those areas?

  If you asked me to triple our workforce in 6 months, I’ll firstly ask.. “umm but why?”:) And if you could prove to me that it made business sense then yes, I’d take a decision, push it through and make sure all concerned people got all resources to make it happen! That’s how we do things

  Extending the argument …

  We hire consultants/experts when required, but then again they do what they are asked to do, the CEO take the final decision on strategy and direction. Yeah, someone can suggest a cool new product/idea etc., and if it makes sense it would be implemented otherwise it’ll be dropped.

  Regarding CEO’s job, well, when you increase profits, good-will, and the brand value; the valuation automatically increases. So it’s the same thing. Valuation refers to the value a potential buyer would be willing to pay. We aren’t working for potential buyers. We are working for ourselves – to lead a good, comfortable life and provide the same to other shareholders and employees. Who cares whether there are buyers or not!

  In the end I think I still don’t agree with flat hierarchies (I’ve a right to my difference of opinion, right?) especially as we’ve done reasonably well without it and I see other people doing well without it too.

  Also at the end of the day, “probably” in all firms like hallmark etc. you can really trace the decision making to one person. People contribute their parts but decision is made by ONE person – that’s how a system, country, armies, companies work. People take their independent decisions in their own domains, but overall decision making is with one CEO/President/Chairman:) I realize that there may be ‘some’ companies out there that are doing well but then you can’t really correlate wellness to flatness in hierarchy, I don’t see statistics in support of this. It’s just another theory which may or may not work. Though, Insha’Allah, it’ll keep on working for you.
• Start-up

  February 19, 2008
  12:03 am

  Osama,

  Regarding decision about business lines etc., it depends on the size of the firm (depending on profits not the head-count). If you are big, you’ve lot of cash in the bank; you would invest in different lines of business, savings as well as products. If not, you’d focus in the direction that you’ve chosen for the company unless circumstances change or you either realize yourself or are made to realize that a different line would be better.

  I guess that’s how most (100%) businesses work – at least as far as I’ve personally seen.
• ady

  February 19, 2008
  1:56 am

  I’m learning alot, reading your guys’ series of arguments.

  Osama, Please tell me, does the CEO has the power of VETO in the setups you are talking about.

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