In a previous post, I wrote about the point in the scaling journey where too many CEOs fail miserably: the transition from a stage 2 to a stage 3 CEO.
Stage 3 CEOs are leading companies that have reached Series C or beyond and probably have well over two hundred employees, which means there’s a lot more complexity to manage. They can’t be focused on getting shit done or directly managing the people who are getting shit done — there’s just too much going on now for that to work. The only way to continue functioning as the company grows is to build an organization that gets shit done without the direct involvement of its leaders in everyday business activities.
Your capacity to do this is your Organizational Intelligence Quotient, or OQ. The CEOs who make this transition easily have a high natural OQ, so they understand intuitively how to develop their organizations. To them, diagnosing organizational problems and solving them is easy, the same way reading and influencing emotions is effortless for people with high emotional intelligence (EQ).
The rest of us have to consciously develop our OQ. With practice, it’s possible to strengthen this way of thinking, which in turn will strengthen your organization.
So, how exactly can you do that?
By keeping both eyes open — that is, by looking at every problem that crosses your desk through two different lenses.
A Business Problem… Or An Organizational Problem?
Business problems hit the desk of every CEO, no matter the stage of the company, at a frightening rate. Should we offer that massive customer the massive discount they’re demanding? Should we postpone our product launch until the product is bulletproof? How should we deal with the disruption to our supply chain? These are all business problems, clearly. Startup CEOs love solving these kinds of problems — it makes you feel like you’re adding value and moving things forward.
Then there are problems with people and how they behave. Two executives are having trouble getting along. A team leader keeps losing top talent. An employee is a star performer but doesn’t reflect the company’s values. These are all obviously org problems, right?
But some business problems are really org problems in disguise.
When two executives come to you with a disagreement over which project to prioritize next quarter, it seems like a business problem. And it is…but as a stage 3 CEO, you’re past the point where you can afford to spend all your time making business decisions. All but the most strategic and far-reaching choices should get resolved elsewhere: by your executives, managers, and teams.
So, the fact that this business problem even reached you indicates that you have an organizational problem to solve as well. It’s not just an issue of insufficient delegation (although that’s sometimes a factor). It’s a question of whether the people you’ve delegated to are equipped to execute their responsibilities in an efficient, collaborative, and productive way.
The key to achieving that goal — and raising your OQ — is to look at every business problem as potentially the result of some underlying organizational dysfunction.
Otherwise, you’ll get stuck solving business problems all day every day. That makes you a bottleneck in your company and leaves you no time for the strategy and organizational development work a stage 3 CEO needs to do.
Look Through Both Lenses
When you face a business problem, it’s tempting to dive in and start solving it. Instead, strengthen your OQ (and your organization) by looking for these five clues that there’s a deeper issue to tackle.
1) Have I seen this problem before?
Let’s go back to the resource allocation problem again. When those two execs came in, fighting over whether to fund Project A or Project B, did the conversation sound familiar? How many times have you had to arbitrate a disagreement over funding that really didn’t need to involve you?
The first time a problem comes up, you solve it. The second time, you make it clear to the people involved that it’s their responsibility to solve it on their own. If it keeps repeating after that, it’s time to ask why your organization is struggling to handle this without your input. What would it take for the people who are supposed to make the decision to do so successfully?
2) Have I seen this behavior before?
Maybe the business issue isn’t the same every time, but the same problematic behavior keeps popping up. These two people are constantly butting heads over everything from project prioritization to hiring processes to what’s for lunch. One or both of them is behaving in a way that’s undermining progress or causing undue friction.
These are the people you’re counting on to model the behavior you want to see throughout the organization, so if they struggle to collaborate, you can bet they’re not the only ones. Instead of arbitrating again, it would be more productive to address the behavior that’s driving these conflicts.
3) Is there a conflict of goals, priorities, or constraints?
Sometimes, a disagreement is a sign that everyone is not on the same page. It’s nearly impossible to collaborate productively when each party aims for different outcomes, prioritizes different things, or has different resources available to implement whatever solution is chosen.
When you see that, it’s a warning of misalignment throughout the organization. You could solve the problem at hand, but it would keep coming up in different ways because the underlying conflict is still there. Instead, take the opportunity to put everyone on the same page and consider how you’ll make sure they stay there over time.
4) Is there a conflict of ownership or decision rights?
A disagreement over what to do might really be a fight over who gets to choose. In some cases — usually the minority — the solution is as simple as clarifying who owns this particular decision. More often, though, it should be a joint decision, in which case, you need to make it clear that you expect them to work together productively. If they still can’t, look to the other items on this list for the deeper source of the problem.
5) Are all the key stakeholders being engaged?
A lot of things should happen before a problem gets escalated to you. Whoever owns the issue should gather all the relevant experts and stakeholders to share information and discuss the issue in a collaborative way. That means at least one meeting (maybe more) where the right people are present and have the opportunity to contribute to the conversation.
Did that actually happen before you got involved? Startups tend to be full of new managers and executives, and it’s not uncommon for them to escalate things prematurely. Bringing all the right people to the table and facilitating a productive dialogue is a skill, one that some team leaders might need help developing. With the right guidance, they can solve this problem — and many more in the future — without you.
6) Does the left hand know what the right hand is doing?
As your organization grows, it becomes impossible for everyone to know everything that’s going on. If you haven’t yet built robust systems to make sure your leaders stay informed of everything they need to be aware of, you’re bound to encounter business problems resulting from an information gap.
That’s a red flag that your company’s communication links aren’t keeping up with its growth. If you address that underlying issue, you’ll prevent an untold number of problems down the road.
What’s your ratio?
When your company was just starting out, you were in get-shit-done mode, which meant you were solving business problems all day long. That’s exactly how it should be for a stage 1 CEO. The ratio of business to organizational problems you face at that stage is probably 10:1.
But think back to when Jack Welch was the CEO of General Electric — you can be sure that he didn’t make many business decisions. How could he, from the very top of a huge conglomerate that included everything from dishwashers to aircraft engines? His job wasn’t to make business decisions — it was to make the organization work. The ratio of business to organizational problems he dealt with was probably 1:10.
A series C company of a few hundred people is not at the GE level, but you’re not a series A company anymore either. If you’re looking properly through both lenses — business and organizational — you’ll probably find that the ratio is about 1:1.
The more org problems you solve, the more business problems can get resolved without you. That’s how you become a true stage 3 CEO who focuses on setting strategic direction and building a great organization. Even better, it’s how you get out of the way of your company’s exponential growth.