The worst process leading to the destruction of the company and the appropriate "constraint" to avoid it

ByChris Potter

Companies that initially started up on a scale of several people will gradually grow and scale up the company, but in the process of expanding it may encounter various problems. After experiencing a startup company in Silicon Valley, now a person who operates venture capital has blogged on the blog about a mistake that a rapidly expanding company tends to commit based on his own experience and how to deal with it.

How to Ruin Your Company with One Bad Process - Ben's Blog

"A number of start-up companies fall into a trap, and it is" to make a mistake in the budget setting process "that will adversely affect that business," said Ben Hollowitz, a well-known venture capital firm in Silicon Valley Andrysen Horowitz "Mark AndreisenHe was founded with Mr. It is also known that the company has invested in companies like Facebook, Twitter, Skype and gained a big return.


Mr. Horowitz and Andrésen have previously been a company that provides outsourcing of hosting and website management services to companies "LoudcloudEstablishment, after amending the business style later changed the company name "Opsware"Hewlett-PackardHe sold at $ 1.6 billion at the time (about 180 billion yen at the time), and has been recognized as a well-known venture capitalist of Silicon Valley.

Mr. Horowitz is such a blog about the pitfalls that startup companies tend to fall into on the basis of their own experiences because it has sometimes gone into confusion by not being able to cope with rapid growth in the past I am telling you.

At the stage when Loudcloud got a sudden success, there was a time when we could not cope with companies that wanted to use services, Mr. Horowitz took various initiatives to solve the problem. At the company, we set up a target goal first, develop a mechanism that can objectively judge the progress of each project unit, and estimate the necessary budget and personnel in each unit for execution of each project, I was going through the process of deciding the final business plan and budget. Horowitz classifies the process by stage as follows.

1: Set goals to grow the company
2: Divide goals into stages and clarify the responsibility of each team
3: Specify concrete numerical targets from subdivided targets
4: Establish necessary personnel plans for the numerical targets
5: Estimate necessary budget
6: Compare plan with industry standard
7: Optimize from a global perspective
8: Implement the plan

At first glance it is simple and clear, as a company's business plan, it is a process that shows the appearance in an extremely straightforward manner, but Mr. Horowitz recalls that "I have driven my company on the verge of collapse" and found that he had a big problem I am clarifying.

One of the major reasons is that at the stage of setting numerical targets for each teamGamificationMr. Horowitz recalls that it took in the method of Mr. Horowitz to have each team battle excessive budget amount. It is said that it is a failure to have each team fight "to plan the biggest possible organization creation", but the idea that "such a thing can not happen in our company" Mr. Horowitz pointed out that the risk is "if anyone alone participates in this dispute, the surroundings gradually get caught".

BySteven Vance

By making the business plan into a game, the conflict between each team will be further sharpened. Each team competed to expand the scale and obtain business approval from the leaders, "If we can not increase sales by 500%, we can not win the battle with other companies and slide down from No. 1 Techniques such as shaking the uneasy material to the story that it will not be able to hire good talent, lower price competitiveness, become obliged to decline product power, and fall into a negative spiral " It will become rampant.

And as these plans have been approved, it is also a potential problem for the team to spread awareness that "planning gives budget" will spread. Furthermore, the scale expansion itself has affected the morale of the staff. As the morale declined as "The top of the house has cut down on budget, you should have found a new job" as a result of the reduction of the plan, and as a result it will continue to invest more and more budget, It seems that we have arrived at the result that corporate culture is lost.

Mr. Horowitz pointed out the series of flows and pointed out that "having not set appropriate constraints at the budgeting stage" was the biggest problem.

Mr. Horowitz says that the principle effective in establishing constraints is "to preserve the cultural unity of a company". Mr. Horowitz talks that rapid growth is leading to the destruction of corporate culture, "If we expand more than twice the scale over the course of a year, corporate culture will start to stagger, no matter how an excellent employee education program is held." Indicates the scale as a guide. Especially in engineering department and marketing department compared with sales team this principle is very important to say. And that this principle will appear more clearly as the scale becomes bigger. For example, it is not a big problem for two companies to expand to eight people, but when 50 companies rapidly expand to the scale of 200 people, this phenomenon will definitely occur. .

Based on these facts, Mr. Horowitz talks about the following items, which is important for protecting corporate culture: "Constraining constraints."

·Increase rate of corporate activity(Run rate increase): It is important that it is not simply "spend increase". Restrict the increase (expansion) rate which will increase next fiscal year compared to the same period last year's results
·Profit and loss: When raising revenue, set target values ​​in terms of both profit and loss
·Expansion rate of engineering division: The expansion rate of the engineering department should not exceed twice per year, unless it acquires another company and operates it in another organization
·Balance between engineering department and other departments: It is important to balance the engineering department with other departments

Based on this item Mr. Horowitz advocates that the following process produces good results.

1:First, set the maximum executable budget amount, and then reduce it from 10% to 25% as necessary. In this way, it is possible to set in advance the margin when the business expansion is necessary.
2:Distribute the budget amount according to the ratio deemed appropriate
3:Budget negotiation with each department
Four:We will comply with promoting projects according to target values ​​and encourage each department to achieve results within budget
Five:Further, if it is judged that the achievement can be expanded within the appropriate range by putting in budget, the margin of the budget secured by process 1 is input

Horowitz says that these processes are important in promoting business development according to height. While Horowitz said, "Human factor sometimes spoils the logic," although he may be opposed to saying, "It is somewhat to make restrictions on business" We propose that giving appropriate constraints is effective in achieving the goal.

in Note, Posted by darkhorse_log