People or process?

3.22.12 by Dov

The question periodically comes up (as it did here today) whether it’s more important to have great people or great processes.  It’s an important question, because the answer dramatically affects how you should be building your business.  And while it certainly varies across companies based on industry and other factors, I think there are some basic points that are helpful to consider.

Startup or publicly traded?  The most important factor in determining which way to lean is the size of your company.  At one end – a raw startup – it’s all about people.  You need to be completely flexible, so processes will only get in your way.  And that’s assuming you could even figure out what your process should look like – an uncertain proposition at best.  It’s absolutely vital that you have the best possible team and that every member of your small team be a highly capable “A player”.  On the other hand, if you’re a massive corporation with thousands (or tens or hundreds of thousands) of employees, it’s just not realistic to think that every member of your, now-enormous team will be an A player.  But operational, regulatory, public relations, and other demands make it important that those employees perform like A players.  And that’s where high-quality processes come in.  Your A players can design the processes to make your B players behave like A players (on average).

Level of customer interaction. Another factor to assess when you’re considering the level of process to put in place is how much your organization (or a subset of it that you’re considering) is how much direct interaction there is between your employees and your customers.  The more interaction, the more important people become.  There are an enormous variety of “hiccups” that can and will occur in all aspects of every business.  When those are purely internal, it tends to be less important that your process handle them well – and in many cases, it will even be better to just miss out on some opportunity or incur some unnecessary cost in order to keep the process intact for the long run.  But when you’re interacting with your customers, more flexibility is demanded.  We all HATE being told by a customer service representative they’re not allowed to do something even though it’s obviously the right thing to do.  And it’s even worse for a startup interacting with their customers – none of whom can you afford to lose.

Level of risk tolerance.  In essence, when you decide whether to “processize” something your company is doing, you are essentially making a trade-off between risk and return.  A process, when properly designed and implemented, reduces the range of outputs you will get for a given set of inputs.  That is, it decreases risk.  At the same time, however, by reducing or eliminating the extreme cases, it reduces the ability to capture out of the ordinary benefits (revenue, profits, etc.) in favor of reducing the likelihood of getting worse than average results.  If your company is at a point where it needs to grow rapidly to succeed (e.g. because you need to reach profitability before running out of cash),  that may not be a tradeoff you can afford.  If you instead need to be more predictable in your outcomes (e.g. because you need to report to a board of institutional investors), you can instead build that reduced upside into your projections and then build processes to ensure you hit your numbers.

The wonderful world of early-stage.  The companies we work with at Allos tend to be right at the cusp of starting to move from people-focused to process-focused.  They usually have a great team that’s made a lot of progress, but are starting to find it difficult to manage their growth without building some process (particularly around how they manage their sales pipelines and their customer implementations).  As they’ve grown, a smaller fraction of the overall organization is directly interacting with customers (when there’s only the co-founders, it was likely 100%, so it can only go down).  And taking on a multimillion dollar investment injects both the ability and the desire to improve the predictability of the company’s performance.

Finding the balance is never easy, but it’s critical to building a successful company.  How have you managed it at your company?  Share your stories in the comments!

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Posted in Company Operations | 1 Comment