“What causes organizations to barf on themselves?”

Well-known tech advisor, investor and executive Chris DeVore asked Bob Sutton this question during WTIA’s second Tech in Author event. Sutton co-authored the new book “Scaling Up Excellence” about how large and small companies deal with scaling problems and deal with corporate giants and technology leaders, such as General Motors, Pixar, Facebook, and Google.

After a few chuckles from the audience about barfing, Sutton, who is also an organizational psychologist at Stanford University, explored what causes companies to fail by focusing on four points:

       1.     Bad is stronger than good.

“Study after study shows the 5-to-1 Rule. When bad things happen, it packs five times the wallop than positive ones.” (Sutton also offered the audience great relationship advice: For every bad interaction you have with your partner, you have to make it up with at least five good things.)
At Twitter, for example, the head of engineering encourages more productive discussions by collecting phones in a basket before meetings, clearing away bad so good can happen, Sutton said.

       2.     Not treating scaling as a problem of both addition and subtraction.

As your company becomes bigger, you need to manage your junk. At General Motors, managers eliminated needless complexity. Their research and development operation used to produce 94 reports a year, but now it releases only four.

       3.     What got you here won’t get you there.

This point is especially relevant to entrepreneurs and executives at start-ups. What worked to get you to one place, won’t necessarily work as your venture grows. At IDO, the chief executive officer held a meeting with all 60 employees every Monday at 9 a.m. Initially, the meetings went smoothly, but once the employee count hit 130 it became a complete nightmare. (The company now employs 650 people). The CEO solved the problem by dividing the Monday meeting into a series of gatherings.

       4.     You need a little hierarchy and a little process.

“Entrepreneurs, you do need some structure and process and hierarchy. I’m really sorry!” Sutton said. Most people become entrepreneurs to get away from structure and hierarchy, but unfortunately, Sutton noted, a little of each is needed. When Google’s workforce reached 400, co-founder Larry Page missed the good old days when the company didn’t have any managers. So, he got rid of all the managers. For three weeks, one employee oversaw 120 engineers. It simply did not work.

Check out the entire conversation about how current and future leaders can learn how to “spread excellence from the few to the many.” You can listen to the full audio recording of the event here.

Stay tuned for our next Tech Author event on May 7 with global CEO, innovator, and entrepreneur Derek Lidow.