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Posted by on Jan 28, 2014 in Business, Culture, Featured, Leadership, Social Era, Strategy | 4 comments

The Flat Revolution: What Makes Today So Different From 1958

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Want to know the main reason that people start companies? And I don’t just mean to say this is number one by a percentage point or two. Not hardly. This is number one hands down, far and away – it’s not even close. Formally or informally, I’ve interviewed company founders my entire life, which is to say for decades now. Hundreds of founders at least, though I’m fairly confident the real number is actually in the thousands. And again and again, some variation of this is what they tell me drove them to leave the comfort of the well-trod career path to start their own company:

“I loved everything about my former employer – the actual work I did, the supportive relationship I had with my boss, my friendships, the customers. I would have stayed for life. But leadership had a painful lack of vision. The culture was truly risk-averse, which killed innovation again and again – I watched it happen, and finally, I even experienced it myself when they shot down the project I was working on. The company itself made staying there impossible.” So said a friend I have here in Naples, Florida, who asked to remain anonymous.

My friend left that company, and took a huge risk with his family’s welfare to start his own firm. He and his wife quit their country club and traded in their nice cars for a used station wagon. They gave up their annual family vacations to resorts in Hawaii and the Caribbean.  They stopped eating out. They completely bootstrapped their business. My friend, a research scientist by trade, forced himself way out of his comfort zone to make his own sales, which he tells me did not go well at first. It was an uncomfortable couple of years.

Why would anyone make this choice? There’s a very good reason, but it’s not the reason you’d expect.

My friend told me this as we sat on the patio of his ten million dollar house overlooking one of the most exclusive bays in the world. He smiled and pointed to his neighbor’s yacht, remarking that it had more cabin space than the apartment his family moved into when they had to sell their house to make payroll for his struggling firm in those early years. And as I soaked our current surroundings in, I couldn’t help but think that I knew why he took the entrepreneurial leap.

“You knew one day you’d strike it big, though, didn’t you? Isn’t that why you set out on your own?”

Without any doubt, the primary reason people start companies isn’t to strike it rich on their own; it’s because they’re driven to leave by the inflexibility of their employers.

His gentle smile broadened into an uproarious laugh. “Are you kidding me?” he said. “There’s no way I thought that! We never would have left our secure middle-class lives to chase after riches! No way. I would have stayed at that company forever. I left because I couldn’t take the mind-numbing red tape of my employer anymore. The bureaucracy drove me out.”

This is what I’ve heard again and again from business founders. It’s what I experienced myself, when I pitched the language school where I worked on a new product for their students. And so I know, without any doubt, that the primary reason people start companies isn’t to strike it rich on their own; it’s because they’re driven to leave by the inflexibility of their employers.

Why did I choose 1958 in particular for the title of this post? That’s the year Bill Gore left DuPont to found W.L. Gore & Associates, makers of Gore-Tex.

He left for the same exact reason my friend in Naples left his employer: the bureaucracy drove him to it.

Bill Gore loved his work at DuPont, and his coworkers, and his boss. He and his wife were financially comfortable, and they were completely satisfied – in a material sense. But he couldn’t take all the red tape forced upon him by the company’s innovation-squashing processes. In Bill’s experience, the company’s bureaucracy had grown into a place where good ideas went to die. So finally, he left.

Today, Gore is surely the most-studied “flat” organization in the world, which is to say that they have no management hierarchy (not even any titles), no soul-quashing bureaucracy, and innovation flourishes – as do profits. DuPont is still a thriving multinational; all these years later, they haven’t strangled themselves on their own red tape. But I have to wonder if the stockholders wouldn’t have preferred to have Bill Gore’s lucrative innovation remain in-house.

Now, let’s address the rest of this post’s title: what is so different today from 1958? In 1958, most big companies were hierarchical and siloed and process-ridden and bureaucratic and… and today most big companies still are. Executives and B-school professors have been studying Gore for decades; they also studied the other flat organizations that have sprung up since, like Morning Star, and Menlo Innovations, and Brazil’s Semco, and a company Mark Babbitt and I feature in our upcoming book A World Gone Social called VALVe. None of these companies or their flat peers keep any secrets about how they do it or why you should, too. Indeed, Morning Star even launched its own nonprofit, The Self-Management Institute, to teach the flat way more effectively.

Flat as a way of running a company is an outlier and a freak show, you might surmise, and that’s never going to change.

The number one remark that proponents of flat (non-)management make about all this studying by their old-school peers? That these executives go back to their pyramid-shaped companies and don’t change anything. I’ve even spoken to change consultants who have become disillusioned and somewhat bitter over the whole lack of change going on.

Flat as a way of running a company is an outlier and a freak show, you might surmise, and that’s never going to change. There is no difference between today and 1958 after all. Too many careers of too many powerful people are tied up in the Industrial Age way of doing things to ever move from bureaucracy to flat, the cynics think (and some actually say).

Ah, but here’s the difference between today and 1958: we’re in the Social Age now. Companies can’t afford to pay the “management tax” – the cost of upkeep for a bureaucracy – when their competitors are not. As more and more flat organizations are founded and thrive, we’re edging toward a tipping point, where flat will go from weird to normal. Speeding that are the employees, truly connected for the first time in human history, who are able to compare notes on sites such as glassdoor.com and say to their peers in flat organizations, “Wait a minute, you actually love your company?” and “Are you trying to tell me you really have no boss? And you’re treated like an adult at work? You aren’t just punching a clock and tuning out at work, like I am?”

And perhaps most importantly to any company’s success, employees are asking their friends in flat orgs, “Are you honestly telling me that ‘entrepreneurialism’ and ‘innovation’ aren’t just words on a wall at your company, but actual values practiced daily by everyone who works there?”

As more and more flat organizations are founded and thrive, we’re edging toward a tipping point, where flat will go from weird to normal. Speeding that are the employees, truly connected for the first time in human history

Bill Gore left what was to him, an intolerable bureaucracy, and founded his uber-successful flat company because he felt driven to do it. That was way back in 1958, in the deepest depths of the Industrial Age. The Industrial Age is over. The management practices and underlying philosophy that worked so efficiently in that bygone age held on long after our economy had transitioned from industry to information. But finally it died. It died on September 15, 2008, the same day as Lehman Brothers – the same day that we pitched headlong into The Great Recession.

What we’re experiencing right now is the death throes of Industrial Age management. And also the early infancy of what is replacing it. Those infants are thriving. And more are being born every day.

Welcome to the Social Age! It’s a wonderful, exciting time to be alive, isn’t it? So much more thrilling than 1958.

 

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Image credit- scusi / 123RF Stock Photo

 

Ted Coiné

Ted Coiné

Keynote speaker. Author of A World Gone Social: How Companies Must Adapt to Survive. Three-time CEO. Chairman and Founder of Switch and Shift. Ted Coiné is one of the most influential business experts on the Web, top-ranked by Forbes, Inc., SAP Business Innovation, and Huffington Post for his leadership, customer experience, and social media influence. Ted consults with owners, CEOs and boards of directors on making their companies more competitive by making them more human-focused. He and his family live in Naples, Florida.

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  • http://www.thindifference.com/ Jon M

    Some very valid points, Ted. The Social Age is an encouraging one in which the view is “flatter” because the layers are removed and there is a more clear view ahead. These are exciting times! A few decades ago, Re-engineering the Corporation stirred up a lot in how companies can be run more efficiently by focusing on customers and aligning processes and work to cut through the layers. Now, with social technology and enhanced ways to collaborate, the flattening continues and is better supported.

    • http://www.savvycapitalist.blogspot.com TedCoine

      Thanks Jon – and that’s an excellent point about collaboration technology enabling workers to get important projects done without an intermediary with a title to bridge the gaps between silos.

      It’s not going to happen without a whole lot of resistance from those with something to lose, though. I just read a post on HBR by an executive coach who had quite a number of good reasons why Zappos’ move to Holacracy isn’t going to work. He may be right in that case – who knows? But I found it interesting that this man, with a very-firmly-vested interest in his clients’ positions in organizational hierarchies, could not find one example of a successful flat company as a counterpoint to his argument.

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  • ruthschwartz

    Great test case Ted,
    Flat is spread much wider than we think.
    That said, I believe that people have four reasons (you covered two) to strike out on their own: Cash and Control, plus Challenge and Creativity. What flat gives us is support for two more: Connection and Collaboration. Viva the flat world.

    • http://www.savvycapitalist.blogspot.com TedCoine

      Ruth, you are so right! Personally, I have a need to create stuff. I can do that within someone else’s organization, or I can do that on my own. I’m absolutely happy either way. I think a lot of entrepreneurs start like me, stymied by their employer so they think, “Okay, I’m going to do it on my own.” How often do companies miss out because they’re too quick to say no?

      Oh, and challenge? If it’s easy, why bother? ;)

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