Organizational success practices are hindered by founder dependency
While passion and personal drive are essential, a common denominator in truly successful organizations is their structural processes and systems. Every project and task is clearly defined in accessible knowledge bases, giving employees accountability and initiative in their work. However, this rarely applies to organizations that rely heavily on their founders. In these cases, every decision and piece of information comes from the same source. Furthermore, minimal effort is being made to establish a system for documenting and transferring knowledge. Consequently, organizational growth suffers because important decisions and actions depend on one person. In this article, we will discuss the impact of founder dependence on business growth, learning, and other factors that explain organizational success.
How does founder dependence affect organizational success?
Growth retardation
In the early stages, businesses have limited operational needs, as they typically have fewer products, employees, and processes. Then, as businesses grow, so do these needs. And with them, the number of daily decisions increases exponentially. In founder-dependent companies, the speed of decision-making is directly linked to the availability of the founder. Even if this works for a while, as new departments, products and markets emerge, there can be significant delays as founders struggle to manage everything at a pace that supports organizational growth. For example, products may not reach the market quickly, as a slow decision-making process affects the speed of development, testing and launching.
Innovation Pluto
Startup organizations are created by the innovation of their founders. However, as the workforce expands, relying solely on the founder’s ideas becomes impractical. In fact, this dependency can foster a culture where innovation only goes as far as the founder’s preferences allow. Needless to say, if employees feel that only the founder’s opinion really matters, they may be discouraged from sharing their ideas. Over time, employees may stop proposing new ideas or challenging the founder, which can lead to a decline in creativity and innovation. As a result, the organization will constantly struggle to adapt to changes in the market and may lose its competitive advantage.
Knowledge of silos
One of the most important aspects of the impact of founder dependency can be seen in the management of knowledge, or perhaps the lack thereof. Founder-dependent companies don’t really have a documentation and transfer system. This is because founders have all the information, reasoning and insights, and will only share them informally during conversations or when working on projects. This can have a particularly negative impact on the organization, forcing employees to build each project from scratch, because they don’t have prior insights to guide them. As a result, the only training programs available within the organization are designed to deal with crises rather than create lasting knowledge in new employees.
Financial impact
The financial consequences of founder dependency should not be overlooked either. In addition to the delays we’ve mentioned, a high level of dependence on founders can make it difficult to attract investment. On the one hand, investors cannot fully trust a company that depends entirely on the expertise of a single person. What if that person drops out or becomes unavailable? On the other hand, if only the founder can effectively represent the organization, they will eventually hit the scalability ceiling, as they will not have time to engage with enough stakeholders to maintain a steady flow of investment.
Struggling to retain and attract top talent
A company that relies heavily on its leader may struggle to attract highly skilled employees. The main reason for this is that such companies do not provide a work environment that supports the development of employees, which is essential for high potential. Professionals who have invested time and energy in developing their skills won’t want to join a company that doesn’t give them room to grow, take initiative, and make an impact. Even if individuals in the early stages of their career decide to accept a job offer, the onboarding process alone will significantly reduce their chances of staying with the company long-term. The lack of structure to welcome, train and develop new hires will become increasingly apparent, leading to instability and high turnover rates.
Impact on company culture
A final way in which founder dependency affects an organization is through its culture. When everything revolves around the founder, employees often change their behaviors and mindsets to succeed in this environment. The founder’s undisputed influence creates a hierarchy where those closest to him are seen as superior, as they have direct access to the “source of knowledge”. Meanwhile, innovation, creativity and initiative go unrewarded, creating a workforce of “followers” who must always base their actions on someone else’s direction. Such a culture is extremely fragile and unstable. Conversely, building an organization based on shared learning fosters a resilient culture of trust, which helps to better navigate challenges and navigate agility.
The result
Founder dependence should not be a villain, as it is a natural stage of organizational growth. However, it is important that businesses move away from this dependency by encouraging the free flow of information and knowledge between business employees. If you fail to do this, the effects of founder dependency will soon become apparent in areas such as growth and scalability, innovation, talent retention and overall profitability. Sharing control of your organization with its workforce will allow you to grow stronger together, opening up new opportunities for each individual as well as the company as a whole.
