When Business turns into Organization

In the last 15 years I have worked with research and consulting firms, Silicon Valley start-ups, large global multinationals, and small to mid-sized companies run by entrepreneurs. I have experienced some as businesses and some as organizations. And this has nothing to do with the size of the company.

Most often businesses begin with a motive of making money. Financial success is high on the agenda of the people who start them.  The entrepreneurs have strong belief in their business model, network well and pick up opportunities coming their way quickly.  As soon as, the business turns out to be profitable, the question of scaling up starts.  And this is where the transition from a “business to an organization” begins.

For some this transition never happens. The transformation of a profitable “business” into an “organization” does not happen automatically with growth. Often I have seen entrepreneurs struggle at this stage. Building an organisation calls for a whole different set of operating philosophy, skills and behaviours.  If one is willing to let go off that which “brought the success”, and be open to unlearn and learn afresh, then organization building becomes possible.

For me, business is in the “here and now”, an organization is in the “long term”. Business belongs to the promoters or the entrepreneurs; an organization belongs to all the key stakeholders. Business is driven by the financial goals and an organization is driven by its purpose and vision. Business success is measured by profit and loss, organization success is measured by its ability to deliver consistently on its commitments to all its stakeholders.

Having worked in many organizations, I have both observed and experienced some of the building blocks towards becoming an organization. An organization is being built when we see these manifesting in the day to day work.

Long term Vision: One of the first signs is that the vision of a business becomes long term. This is not only numbers to be made every quarter but also about where one wants to be in the long term and the nature of the organization one wants become.  More importantly this vision is understood and experienced by every person on the team, which means the presence of a forum to share and discuss. Every time leadership has painted a compelling vision and has allowed the employees to dialogue and “shape” that vision, I have seen in myself and others, the same amount of passion and commitment to the vision as the start-up team.  When this happens, we know the organization building is happening.

Professional Team :  Most entrepreneurs do not make good CEO’s or the best operating managers. Entrepreneurs are creative, they are willing to risk and are driven to pursue their ambition. They can come across as thinking only of immediate goals and operating as individuals. Hence the need to balance this paradigm with necessary expertise in managing finance, operations, people, manufacturing, sales, quality or marketing . When entrepreneurs hire people, without a sense of insecurity, who think differently and bring complementary skills and experience, the business begins to evolve into an organisation with a key foundational pillar in place.

Trust and Delegation: Micro-managing such a professional leadership team, beats the purpose of scaling up. It is natural for entrepreneurs to feel that they are losing control when they delegate, but in order to scale one needs more people to believe in the vision and have the ownership. It is important to put some frameworks in place for decision making, every single thing cannot be going to the top guys for a decision. There will be some failures, but the key is to learn from those and define the framework more clearly.  Businesses which tolerate failures,  learn from them and build further turn into organizations. Some entrepreneurs lack the discipline, skill and the internal strength to give the freedom and the space to their leaders, to do the job for which they are hired for.  While I have experienced this disappointing reality, I have also been pleasantly surprised by some of the “owners” readiness to let go. When I have received responsibility and the freedom needed to perform, I have seen myself go the extra mile.

Information Flow:  When the teams are small everyone knows everything that is happening as they are in some way working together. Often one knows who to talk to, to get what they need. However as the teams scale up it is important to have mechanisms to share information with the larger team. Everyone must receive relevant information the same way. I have seen much misunderstanding among employees, as information is shared in piece-meal basis with different core team members.  Correct information is vital in decision making and leadership effectiveness. Organisations vitality can be easily gauged by the way the information is disseminated among its leadership and its employees. It’s like the pure blood flowing freely providing the oxygen to the cells.

Values and Behaviours:  One of the most important characteristics of a business transforming into an organisation, is the presence of clearly articulated core values. I was part of an organisation which had taken the values and translated them into desired behaviours both on the part of the organisation and the individual. There were also behaviours which were identified as taboos-those that were not tolerated by the organisation. This not only created alignment in the organisation, it also brought about transparency of action. As leadership it is important to be consistent with agreed upon values and behaviours, and they should be applicable to one and all with no exceptions.  Any deviations should be shared and reasons should be transparent. It became clear to me that all being aware and acting upon the values consistently is foundational to building an organisation. Merely displaying Value boards do not instil the behaviours required.

Systems and Processes: For a business to turn into an organization, it has to invest in the right processes and systems.  In a business one can manage many things on his/her own or with a few people. But to scale up, the systems and processes become critical. And to do this, it is very important to think about not just today but tomorrow- keeping in mind the vision, growth plans and most importantly the operating culture. Processes and systems are a mirror of the organizations thinking.  They need to make the work flow hassle free and allow for operations to function without the dependency on any one particular individual. Its then a business begins to grow into an organisation.

It is evident that to turn a business into a vibrant organisation, one cannot use the same methods employed to start the business. There is a need to change the outlook and approach. Changing “business thinking”  to “organization thinking” is really about personal transformation. Entrepreneurs who are self aware and are willing to reflect and learn on every step of the journey can succeed in building lasting organizations. Once again we are reminded that we can only build something outside, when we can change something inside.

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