Editor’s Note: In the new podcast Masters of Scale, LinkedIn co-founder and Greylock partner Reid Hoffman explores his philosophy on how to scale a business — and at Entrepreneur.com, entrepreneurs are responding with their own ideas and experiences on our hub. This week, we’re discussing Hoffman’s theory: the smartest companies don’t tell their employees how to innovate, they manage the chaos. Listen to this week’s episode here.
Early in an organization’s lifecycle, everything is experimentation. Externally, it’s the product, the target audience — even finding a winning business model can be a series of tests. Internally, it’s often management styles, processes and organizational hierarchies. In both cases, it’s about seeing what works, what sticks, what’s effective and then doubling down while everything else is cast aside.
Typically, a manager will be presented with a problem, come up with a solution and then direct team members to execute on the strategy at hand. Obviously, the manager has a large degree of control and weight in everything taking place. After all, it’s his or her project, and to remain accountable, it’s important to keep everyone tied to the same solution.
But, this top-down approach has substantial drawbacks. If a business is hiring the right people, contributions should come from every member of a team. So, why would an organization limit its own collective mind power through a system of direct action? Rather than having people think about the larger problem the business is facing or working towards, team members are limited to focusing on a singular piece. It’s one person’s solution executed by many, rather than many competing solutions being tested and iterated. In this world, team members’ mindset is to execute rather than to innovate, effectively being blocked off from looking beyond the organizational walls built around them.
The second big problem is a loss of accountability and responsibility. Team members are merely executing on a manager’s idea, rather than building their own concepts. The failure of an initiative doesn’t extend beyond the creator, leaving many outside of the stakeholder group. In rapidly growing organizations, ownership is key for culture, and top-down management often reduces ownership, whether that ownership results in success or failure.
The lesson learned? Flip the model on its head.
Give team members a framework to work around in the form a “company northstar” to guide their efforts. This northstar creates clear lines between what’s a priority and what’s not, and it empowers employees to be guided by impact rather than execution. Team members have clarity, and they maintain accountability because the concepts they’re working on are based on their own strategic thinking and analysis.
Since Fiverr’s inception, a core driving tenant of our business has been to bring ecommerce simplicity to freelance services. We recognized a high friction problem in how freelancers offered their services and how businesses bought them, and saw an opportunity to apply what everyone already loved about buying products online. That framework — recognize low friction above everything else — created the outline that everyone in the company worked towards. An idea that solved complexity with simplicity was to be pursued, regardless of where it fell in the product. Any idea that wasn’t following this framework wasn’t pursued.
As a data-driven company, team members could recognize where inefficiencies existed, come up with potential solutions and hypothesize on the target impact of their new solutions, implement an experiment and extract the right signals to decide if they pursue the direction. The framework of simplicity drove the thinking, the team drove a solution and then backed it up with data. Management’s job in all of this is to be a guiding resource, rather than a task master.
A good example of this commitment to simplicity as a framework came through in our marketplace as Gig Packages. As Fiverr grew, we recognized that entrepreneurs were looking to the marketplace for more complex services and freelancers wanted to expand the breadth of their offerings. But, the structure of many services didn’t allow for a ton of wiggle room — services were narrowly defined to maintain simplicity. Recognizing this core problem, the team maintained a commitment to simplicity while expanding our opportunity through a “Good,” Better” and “Best” enhancement. One service with standardized elements across three price points. Recognizing an opportunity and equipped with a northstar, the team developed a solution that could be rolled out strategically and tested. The result? A browsing and purchasing solution with simplicity and depth.
We simply created a company of CEOs. Team members know the problem, and it’s their job to develop a solution, hypothesize an outcome, experiment and then implement. Managers play the role of a board of directors, providing implementation resources and analyzing outcomes to sharpen and push the team for higher goals.
The impact on our company culture cannot be understated. In this kind of system, ownership within a company goes beyond individual projects. Many hands aren’t just working collaboratively, they’re all strategically pulling on the same rope to derive a larger outcome.
Like any organization that’s “moving fast and breaking stuff,” priorities will shift and change. It’s the job of management to continue to refine and communicate northstar guiding principles and make sure they’re universally understood from all corners of the business. Whether it’s human resources or front end development, a culture of strategic problem-solving and driving impact flows through an organization that empowers its team.