Book review: The Founder’s Mentality by Chris Zook & James Allen
How to overcome the crisis of growth
The Founder's Mentality
Chris Zook and James Allen
Harvard Business Review Press
Most companies that achieve sustainable growth share a common set of motivating attitudes and behaviours that can usually be traced back to a bold ambitious founder who got it right first time.
Maintaining that spirit is the key to long-term success but it’s a path only a few companies stay on.
These successful firms share the ability to foster deep feelings of responsibility in their managers and employees in contrast to the majority of organisations where engagement levels are low.
This successful frame of mind, which abhors bureaucracy and champions the customer, provides the title to this book which the authors suggest is one of the most undervalued secrets of business.
The founder’s mentality consists of three traits: an insurgent’s mission, an owner’s mind-set and obsession with the front line.
Such traits can be found in companies where the founder is either still in place or where the spirit, mind-set and modus operandi of the founder remains.
The authors, both executives at the consulting firm Bain, have studied companies in more than 40 countries over a decade and present evidence that this actually makes a measurable difference.
Looking at data since 1990, they suggest that the returns to shareholders in US public companies where the founder is still involved are three times higher than other companies.
The most consistent high performers, in fact, exhibit the attitudes of the founders four to five times more than the worst performers.
Maintaining the founders’ mentality is a real challenge as firms grow, a path well documented here.
Problems include increased organisational complexity with new processes and systems and a dilution of the sense of urgency and mission.
Nokia, the firm that dominated the mobile phone market in the 1990s, is cited as a case in point.
At its height it sat on the top of the one of the biggest growth markets in the world with a pile of cash to invest.
However, rather than thinking like an insurgent and ploughing ahead at pace, it distributed large dividends to shareholders and used its cash to buy back its own stock. Apple, Samsung and later Google stole a march on it.
While a particularly dramatic one, this is no isolated example, according to the authors. The converse is also true too and the book features a number of stories of companies that at one point seemed to have no hope but were revived by leaders who effectively re-founded the company from the inside.
This is all happening at a much faster pace than heretofore. It’s estimated that new companies that reach Fortune 500 scale are doing so twice as fast as those who did so just two decades ago and a significant survey of executives quoted here says that well over half across a wide range of industry expect that their main competitor in five years’ time will be a different one than it is today.
Overcoming the predictable crisis of growth is achievable is the message here. Being able to listen to the right messages is a key ingredient. It’s important to have access to intelligence and dissenting voices on the front line.
Great leaders don’t wait for crises to happen before they take action. They also model good behaviour. How a leader’s time is allocated is important and it has symbolic importance, as Intel’s founder Andy Grove has observed.
Vision is important and it gets blurred as organisations grow. Stated missions can easily dissolve into generic, un-inspirational statements of corporate ambition, leaving employees with no clear idea of what their company strategy is or indeed what makes it special.
This is a very thoughtful and assured exploration of a key challenge that faces all organisations as they scale that will interest founders and those concerned about the long-term health of their organisations.