Why reliance on founders hinders an organization’s success
While passion and personal drive are essential, the common denominator of truly successful organizations is structured processes and systems. All projects and tasks are clearly outlined in an accessible knowledge base, keeping employees accountable. However, that is rarely the case for organizations that rely heavily on their founders. In these cases, all decisions and information come from a single source. Additionally, the effort required to document knowledge and establish a system for communicating it is minimal. As a result, the organization’s growth is hampered by relying on a single person for key decisions and actions. This article explores the impact of founder dependency on business growth, learning, and other factors that define organizational success.
How does founder dependence affect an organization’s success?
growth bottleneck
In the early stages, a company typically has fewer products, employees, and processes, so its operational requirements are limited. And as your business grows, these requirements will also increase. As a result, the number of daily decisions will increase exponentially. In companies that rely on founders, the speed of decision-making is directly related to the responsiveness of the founders. Even if it works for a while, as new divisions, products, and markets emerge, significant delays can occur as founders struggle to manage everything at a pace that supports the organization’s growth. For example, a slow decision-making process can affect the speed of development, testing, and launch, so your product may not reach the market quickly enough.
innovation plateau
Start-up organizations are born out of the innovations of their founders. But as the workforce expands, relying solely on the founder’s ideas becomes unrealistic. In fact, this dependence can foster a culture where founders innovate only to the extent that their preferences allow. Not to mention, if employees feel that the only thing that really matters is the founder’s opinion, they may be hesitant to share their ideas. Over time, employees may become less willing to suggest new ideas or challenge founders, leading to a decline in creativity and innovation. As a result, organizations constantly struggle to adapt to market changes and may lose competitive advantage.
knowledge silos
One of the most significant aspects of the impact of founder dependence is seen in knowledge management, or perhaps the lack thereof. Companies that rely on founders don’t really have a system to document and transfer knowledge. The reason is that the founder has all the information, reasoning, and insight and only shares it informally during conversations or while working on the project. This can be particularly detrimental to organizations, requiring employees to build every project from scratch, as there is no prior insight to guide them. Additionally, the only training programs available within organizations are geared toward responding to crises rather than instilling lasting knowledge in new employees.
Financial impact
Don’t overlook the financial implications of founder dependence. In addition to the delays mentioned earlier, the high dependence on founders can make it difficult to attract investment. On the other hand, investors may not fully trust a company that relies entirely on one person’s expertise. What happens if that person resigns or becomes unavailable? On the other hand, if the founder is the only person who can effectively represent the organization, you will eventually hit a scalability ceiling because you won’t have time to engage with enough stakeholders to maintain a steady flow of investment.
Struggling to retain excellent human resources and ensure attractiveness
Companies that rely heavily on leaders may struggle to attract highly skilled employees. The main reason for this is that such companies do not provide a working environment that supports employee development, which is essential for high talent. Professionals who have invested time and energy to grow their skill set won’t want to join a company that doesn’t give them the space to grow, take initiative, and make an impact. Even if an individual at the start of their career decides to accept an offer, the onboarding process alone significantly reduces the likelihood of them staying with the company long-term. A lack of structure to welcome, train, and develop new employees will quickly become apparent and lead to high turnover and turnover.
Impact on corporate culture
The final way that founder dependence impacts an organization is through the organization’s culture. When everything revolves around the founder, employees often change their behavior and mindset to succeed in this environment. The founder’s undisputed influence creates a hierarchy in which those closest to him are considered superior because they have direct access to the “sources of knowledge.” On the other hand, innovation, creativity, and initiative are not rewarded, creating a workforce of “followers” who always have to act on someone else’s instructions. Such a culture is very fragile and unstable. On the contrary, building your organization on a foundation of shared learning fosters a culture of resilient trust that helps you navigate challenges and foster agility.
conclusion
Founder dependence is a natural stage of organizational growth and should not be demonized. However, it is essential that companies break away from this dependence by facilitating the free flow of information and knowledge among employees. If you fail to do this, the effects of founder dependence will quickly become apparent in areas such as growth and scalability, innovation, talent retention, and overall profitability. Sharing the management of your organization with your employees allows you to grow stronger together, opening up new opportunities for each individual and the company as a whole.
