How Does Your Role As CEO Change As Your Company Grows?
150.
Remember this number because 150 turns out to be a pretty important number for organizational development.
150 is called Dunbar’s Number (read Malcom Gladwell’s Tipping Point for more). 150 is considered the maximum number of people that can work together with personal relationships. So when your organization grows beyond 150, the theory is you have to split your organization into two groups.
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Then you split your organization into three groups when your organization gets to 300 people.
CEOs need to be aware that their ability personally influence company culture diminishes as the organization grows to 150 employees and beyond.
There are two ways CEO’s can react to their diminished cultural influence:
A. The bad way: You can increase the number of rules in the company.
The natural reaction to a company’s growth is increasing the rules. Increasing the rules gives you feeling you are still in control.
But increasing the number of rules comes with a price. The downside to increasing the number of rules is you anger a large percentage of your team.
“Why are you punishing me?” The team says. And that's when your culture starts changing. Instead…
B. The right way: You can be like Netflix’s Reed Hastings.
Hastings cultural manifesto (read: Culture) is a must read for any CEO building a startup.
Hastings believes you should be actively fighting your urge to increase the number of rules in an organization. And Hastings believes you should be pushing decision making down in the organization.
Hastings’ concept is simple, but extremely difficult to implement. You have to fight your natural impulses for control.
But the payoff is huge if you can pull off the trick Hastings has pulled off. You will:
- Keep your company culture intact for longer, and…
- You will reduce turnover, and…
- You will have a faster, more nimble organization
I saw the contrast between the Netflix way and the "more rules way" in my tenure's at Maxim and Micrel.
Maxim's CEO, the late Jack Gifford, tended to be against the idea of having unnecessary rules. Gifford delegated authority to his team, and he kept himself heavily involved.
The result was a flat organizational structure that moved really fast. Decisions were made quickly and the quality of the decisions was good.
Contrast this with my Micrel experience. Micrel was a direct competitor of Maxim's. The CEO had rule after rule for just about everything.
It was stifling. The silliest rule was, "Coming to work, ready to go." This meant that employees weren't supposed to eat breakfast (or any meal) at their desks.
Worse yet, the CEO actually wanted us to enforce this silly rule. I just ignored it.
But that was the company culture. There was a new rule every time there was a mistake.
You can guess which company was more successful. Maxim still exists with revenue of ~$2B/year. Micrel was sold in 2015 with revenue of ~$200M/year.
That's why we went the Netflix route when I started my own company. We never regretted it. For more, read: Why Your Startup Culture Is The Key To Your Company's Success
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