As a business school prof, I can with some authority say that managerial conventional wisdom can’t be boiled down to to ”hire good people and let them roam freely”. If this is what VCs thinks constitute good management, I’m sure they are up for a rude awakening.
What Graham describes as founder mode is what business school profs would call management mode, that is, trying to put together an organization that responds to key events in the environment (cybernetics is one way to go, culture and politics are other ways of understanding how to define ’key,’ ’events’ and ’environment’ for organizational action).
As an aside, invoking Jobs as a management guru is a Rorschach test. Do you mean sociopathic Jobs running people into the ground developing the Mac, somewhat more mature Jobs putting Apple on track (while still occasionally running people into the ground) or Pixar Jobs, who, indeed, hired excellent people and let them roam freely (perhaps too freely in some cases)?
I think the “tech industry” (construed broadly) actually does have a bigger problem with “ professional fakers” than many other industries. Look at “Blockchain”, “The Metaverse”, and “AI” (by which I mean LLMs)—three whole fields/fads composed entirely of fakers, just in the last decade!
Near the end of your post, the peabrain said Sears Roebuck. They did not have a John Birt. There must be hundreds of similar examples of the Sword of Creative Distruction that hangs over all enterprises.
Aren't management consultants, when hired at the right time, an "aldegonic signal"? It seems to me that that is one of their main purposes in complex organisations.
to my mind the arrival of consultants would be one way in which the central system responds to the signal, but I guess that at a different level of organisation, the arrival of some guys from McKinsey in your branch office would indeed be a good indication that something was happening that required immediate action
I get the impression that bringing in outside consultants is a mechanism for ignoring internal information. The cossacks work for the tsar just as the consultants work for upper tier management. When upper management doesn't like the signals it is getting, there is nothing like a high pay, high prestige consultant as an excuse to pretend the signal can be ignored or used as excuse to do any old random thing.
As a former high prestige - and current mid to low prestige - consultant I disagree with this somewhat. There are 'ignore these morons, you are entirely correct' projects but they are less common than other kinds.
The most typical case is the reverse- the consultant goes in, listens to the lower level guys, tries to work out which of their ideas make sense, and then presents those as recommendations to the senior management, with appropriate evidence & contextualisation. The staff sometimes complain that the consultants pinch their ideas (although I always aim to give full credit so the client knows who has good answers next time), but it's the very opposite of just agreeing with management. And actually figuring out which idea should have priority and explaining why it makes sense in the context of where the whole company is at is a skill which the regular managers often lack.
The other common type of project is 'this other company did this and it worked for them'.
A final kind of project I often do is one where you untangle what strategy the management have in their heads but can't articulate. I'll try to translate it into a form they can share with other people, with some evidence. This looks like the first kind of project, the 'ignore the morons' kind, but I'm not necessarily recommending their strategy, I'm just documenting what it is (which makes it much easier for other people in the organisation to actually argue with the damn plan).
I regularly point out (and said in the book) that if a company is in a situation where the staff know exactly how to solve a problem, but they don't have any way for this knowledge to be communicated to the level of the organisation where decisions are made, then what they have is **a management problem** and they shouldn't get cross when someone whose profession is the solving of management problems comes in and provides that necessary link.
I’m a small fish in a small pool in the consulting ecosystem—technical/IT consulting for cultural heritage organisations—and the ‘untangle what management have in their heads’ phase occurs in most of the projects I do, even if that’s not the on-paper scope of the work. What’s in their heads isn’t even necessarily wrong, they often just lack the narrow domain knowledge of their employees and the technical (and often domain) knowledge of the external consultants to articulate it clearly in ways that can be acted upon in a plan that has a chance of success.
I should qualify this having worked as a consultant and hired consultants myself. Hiring outside consultants is just one of many mechanisms upper management can use to ignore important signals.
"C-level execs, as a class, include some of the most skillful liars in the world."
This reminds me of my favorite theory on business management by Venkatesh Rao, the Gervais Principle.
"Sociopaths, in their own best interests, knowingly promote over-performing losers into middle-management, groom under-performing losers into sociopaths, and leave the average bare-minimum-effort losers to fend for themselves."
Thanks for this, Dan! A more thoughtful and sympathetic take on the PG's essay than I had initially been willing to give it. I think a key cybernetic element here remains the idea of system capacity, and a lot of my initial negativity on "founder mode" is that, even for founders, the level of micromanagement the essay seemed to imply as reasonable will ultimately saturate the capacity of the CEO at *some* scale, whereafter things get suboptimal pretty quick. I see your take as "it's very reasonable that these short-circuit communication channels that bypass hierarchy exist so they can carry important, timely information when needed," but the other implication is that you can only use as many of those channels as you have capacity to interact with at any one time, so a founder/CEO needs to have the wisdom to know how many they can use, and in the likely event that there are more channels available or demanding attention than capacity to use them, one needs the good judgement to prioritize them appropriately. Feels like a common "founder syndrome" failure mode as companies scale is the inability to prioritize/prune the "short-circuit" links to increasingly distant points in the org-chart.
very interesting points and I think I'm going to do a return post on this to expand. (any suggestion that I am going to keep on posting until someone invites me to a nice meal in San Francisco is scurrilous!).
my intuition is that my critique of outsourcing is that it places an information barrier usually without paying enough attention to how important signals are going to be transmitted across that barrier. so I think that certain kinds of founders are going to find the hiring of professional managers to be a similar kind of information barrier.
which might mean that the basic problem is going into "manager mode" at the operational level while the higher level bit (what Stafford calls the metasystem) is still weak because it has to be contained in the head of one or two guys.
As a business school prof, I can with some authority say that managerial conventional wisdom can’t be boiled down to to ”hire good people and let them roam freely”. If this is what VCs thinks constitute good management, I’m sure they are up for a rude awakening.
What Graham describes as founder mode is what business school profs would call management mode, that is, trying to put together an organization that responds to key events in the environment (cybernetics is one way to go, culture and politics are other ways of understanding how to define ’key,’ ’events’ and ’environment’ for organizational action).
As an aside, invoking Jobs as a management guru is a Rorschach test. Do you mean sociopathic Jobs running people into the ground developing the Mac, somewhat more mature Jobs putting Apple on track (while still occasionally running people into the ground) or Pixar Jobs, who, indeed, hired excellent people and let them roam freely (perhaps too freely in some cases)?
I think the “tech industry” (construed broadly) actually does have a bigger problem with “ professional fakers” than many other industries. Look at “Blockchain”, “The Metaverse”, and “AI” (by which I mean LLMs)—three whole fields/fads composed entirely of fakers, just in the last decade!
fair point although most of these fakers are fake founders rather than fake managers
Near the end of your post, the peabrain said Sears Roebuck. They did not have a John Birt. There must be hundreds of similar examples of the Sword of Creative Distruction that hangs over all enterprises.
Wonderful, thank you.
Aren't management consultants, when hired at the right time, an "aldegonic signal"? It seems to me that that is one of their main purposes in complex organisations.
to my mind the arrival of consultants would be one way in which the central system responds to the signal, but I guess that at a different level of organisation, the arrival of some guys from McKinsey in your branch office would indeed be a good indication that something was happening that required immediate action
I get the impression that bringing in outside consultants is a mechanism for ignoring internal information. The cossacks work for the tsar just as the consultants work for upper tier management. When upper management doesn't like the signals it is getting, there is nothing like a high pay, high prestige consultant as an excuse to pretend the signal can be ignored or used as excuse to do any old random thing.
As a former high prestige - and current mid to low prestige - consultant I disagree with this somewhat. There are 'ignore these morons, you are entirely correct' projects but they are less common than other kinds.
The most typical case is the reverse- the consultant goes in, listens to the lower level guys, tries to work out which of their ideas make sense, and then presents those as recommendations to the senior management, with appropriate evidence & contextualisation. The staff sometimes complain that the consultants pinch their ideas (although I always aim to give full credit so the client knows who has good answers next time), but it's the very opposite of just agreeing with management. And actually figuring out which idea should have priority and explaining why it makes sense in the context of where the whole company is at is a skill which the regular managers often lack.
The other common type of project is 'this other company did this and it worked for them'.
A final kind of project I often do is one where you untangle what strategy the management have in their heads but can't articulate. I'll try to translate it into a form they can share with other people, with some evidence. This looks like the first kind of project, the 'ignore the morons' kind, but I'm not necessarily recommending their strategy, I'm just documenting what it is (which makes it much easier for other people in the organisation to actually argue with the damn plan).
I regularly point out (and said in the book) that if a company is in a situation where the staff know exactly how to solve a problem, but they don't have any way for this knowledge to be communicated to the level of the organisation where decisions are made, then what they have is **a management problem** and they shouldn't get cross when someone whose profession is the solving of management problems comes in and provides that necessary link.
I’m a small fish in a small pool in the consulting ecosystem—technical/IT consulting for cultural heritage organisations—and the ‘untangle what management have in their heads’ phase occurs in most of the projects I do, even if that’s not the on-paper scope of the work. What’s in their heads isn’t even necessarily wrong, they often just lack the narrow domain knowledge of their employees and the technical (and often domain) knowledge of the external consultants to articulate it clearly in ways that can be acted upon in a plan that has a chance of success.
I should qualify this having worked as a consultant and hired consultants myself. Hiring outside consultants is just one of many mechanisms upper management can use to ignore important signals.
"C-level execs, as a class, include some of the most skillful liars in the world."
This reminds me of my favorite theory on business management by Venkatesh Rao, the Gervais Principle.
"Sociopaths, in their own best interests, knowingly promote over-performing losers into middle-management, groom under-performing losers into sociopaths, and leave the average bare-minimum-effort losers to fend for themselves."
https://www.ribbonfarm.com/2009/10/07/the-gervais-principle-or-the-office-according-to-the-office/
Thanks for this, Dan! A more thoughtful and sympathetic take on the PG's essay than I had initially been willing to give it. I think a key cybernetic element here remains the idea of system capacity, and a lot of my initial negativity on "founder mode" is that, even for founders, the level of micromanagement the essay seemed to imply as reasonable will ultimately saturate the capacity of the CEO at *some* scale, whereafter things get suboptimal pretty quick. I see your take as "it's very reasonable that these short-circuit communication channels that bypass hierarchy exist so they can carry important, timely information when needed," but the other implication is that you can only use as many of those channels as you have capacity to interact with at any one time, so a founder/CEO needs to have the wisdom to know how many they can use, and in the likely event that there are more channels available or demanding attention than capacity to use them, one needs the good judgement to prioritize them appropriately. Feels like a common "founder syndrome" failure mode as companies scale is the inability to prioritize/prune the "short-circuit" links to increasingly distant points in the org-chart.
very interesting points and I think I'm going to do a return post on this to expand. (any suggestion that I am going to keep on posting until someone invites me to a nice meal in San Francisco is scurrilous!).
my intuition is that my critique of outsourcing is that it places an information barrier usually without paying enough attention to how important signals are going to be transmitted across that barrier. so I think that certain kinds of founders are going to find the hiring of professional managers to be a similar kind of information barrier.
which might mean that the basic problem is going into "manager mode" at the operational level while the higher level bit (what Stafford calls the metasystem) is still weak because it has to be contained in the head of one or two guys.