CHAPTER 7

The Personal Enterprise

If you want a track team to win the high jump, you find one person who can jump seven feet, not seven people who can each jump one foot.

—Terman’s Law of Innovation

Terman’s Law of Innovation is true enough—but not if you are running in a relay race. In the Personal Enterprise, the focus is on the person in charge, the chief. Think of an entrepreneurial company or a social enterprise run by its founder, a new government department that needs focused management to get established, even a hospital in crisis. Someone may have to take full charge, as the center of a hub from which to exercise direct supervision to get things done.

We shall use a team sport to illustrate each of the forms. Which do you think applies best to the Personal Enterprise, where one person is so influential? Try to think of one before you read on.

(Logo for the Personal Enterprise)

The answer for this form did not come easily to us—the other three did—but once found, it seems obvious: world cup yacht racing. One person can get the idea, the vision, work with the designer of the hull, engage the crew, and skipper during the races. It’s not that the other members of the crew are incidental; it’s that their efforts revolve around the chief.

Basic Structure of the Personal Enterprise

The structure of the Personal Enterprise is characterized by what it is not: elaborated. It actually resists structure. In earlier versions of this book, I called it simple structure. This form has a loose division of labor and little analytic staff, which means that it avoids the mechanisms of standardization and the systems of planning and control: these are discouraged as a threat to the organization’s one authority.

Likewise, there is a limited managerial hierarchy. Instead, the chief tends to have a wide span of control (here the label really applies). In small Personal Enterprises, it is not uncommon for everyone to report to the chief. Hence the logo on the first page of the chapter pictures this form as a flat organization. Often the place does not even have an organization chart—why bother when everyone knows who’s boss? A group of my students commented in the study they did of a small manufacturer of pumps: “It is not unusual to see the president of the company engaged in casual conversation with a machine shop mechanic. [That way he is] informed of a machine breakdown even before the shop superintendent is advised.” Even in this great big corporation

[Steve] Jobs did not organize [the huge Apple company] into semiautonomous divisions; he closely controlled all of his teams and pushed them to work as one cohesive and flexible company, with one profit and loss bottom line. “We don’t have ‘divisions’ with their own P&L,” said Tim Cook, who later succeeded Jobs as CEO. “We run one P&L for the company.”⁴⁶

One consequence of all this is that conflict is less likely to arise in these organizations. Any insider who challenges a thin-skinned chief may not last long. And if an outsider—say, a powerful customer— seeks to exert influence, the chief may be inclined to push back, or even take the organization to a less exposed place in the environment.

Like most everything else, decision making and strategy formation tends to revolve around the chief. This can allow for rapid response— if he or she is so inclined. And since such people are oriented to art more than science, look for a good deal of intuition and opportunism in these processes, especially seeing first to grab opportunities. Hence the common use here of words like insight and vision. Accordingly, the strategy of the Personal Enterprise often reflects the chief’s perspective of the world, sometimes even an extrapolation of his or her own personality.

Conditions and Kinds of Personal Enterprises

Don’t look for the Personal Enterprise in an established space agency or a post office, unless it is in crisis. Such organizations need to get beyond simple structures as well as central authority, albeit in different ways. Look for it, instead, for example, in retailing, where one individual may be able to keep control of a chain of many stores, in effect managing them as one store replicated many times. The environment of such retailing, as in other Personal Enterprises, may be simple, but it can also be rather dynamic. With one person calling the shots, the organization can respond quickly.

New organizations, so-called start-ups, typically use this form of organization because a single person has to get them going—hire the people, establish the facilities, create the culture, set the pace. Hence the entrepreneurial firm is the quintessential Personal Enterprise. A strong-willed chief is typically the founder and significantly the owner.

But the Personal Enterprise is hardly restricted to conventional business. Having the same needs are start-ups in government agencies, NGOs, and all sorts of social enterprises (meaning businesses not owned by investors, sometimes called not-for-profits). And, in turn, this personalized kind of leadership is attracted to start-up situations, often to escape the narrow world of bureaucracies.

Once established, however, so long as the founding chief remains at the helm, the organization may retain this form of structure, especially, but not necessarily, while it remains small, so that direct supervision can suffice for coordination. Large organizations generally favor a different structure (discussed in Chapter 8). But many business and social enterprises have grown rather large under the tutelage of their founders, to whom everyone continues to turn for guidance, albeit with the other coordinating mechanisms struggling to find their place. Long after its founder’s death, someone at Disney told me that the way they continued to make decisions was to ask: “What would Walt have done?”

Crisis is another condition where we can find the Personal Enterprise. Faced with the need for rapid, consolidated response, again, what better form than that centered on a single individual who calls the shots? In other words, an established organization in difficulty often reverts to a simple structure to save itself, through what is called turnaround. It suspends its established procedures to close ranks around someone who can take charge to clear out the cobwebs, rebuild the culture, refocus the strategy. Sometimes that person is the retired founder himself or herself, as happened some years ago at Apple, Dell, Starbucks, and other start-ups grown large. Entrepreneurship can be a tough act to follow!

Pros and Cons of the Personal Enterprise

In each of the four forms, we find great strengths as well as debilitating weaknesses, sometimes for the same reason. No structure can be more dynamic, more engaging, more vibrant than one led by a founder with a vision. A Personal Enterprise with such leadership can propel itself into a protective niche in its marketplace, to pursue a distinct strategy with determination. No wonder many people jump aboard.

Entrepreneurs can be masters at constructing big pictures from grounded details. As Konusuke Matsushita, founder of renowned Japanese company of his own name (now called Panasonic), put it: “Big things and little things are my job. Middle-level arrangements can be delegated.” Of Steve Jobs, Isaacson wrote: “Some leaders push innovations by being good at the big picture. Others do so by mastering details. Jobs did both, relentlessly. As a result, he launched a series of products over three decades that transformed whole industries.”⁴⁷

This very strength, however, has brought down many a Personal Enterprise. Some chiefs get so enmeshed in the details that they lose sight of the big picture. (Henry Ford said that his customers could have his cars in any color they liked so long as it was black. Black days followed eventually.) Others get so enamored with the great vision that they lose sight of the details necessary to sustain it. Think of Steve Jobs, again, in the early years of Apple with his disregard for marketing. “The flipside of his wondrous ability to focus was his fearsome willingness to filter out things he did not wish to deal with.⁴⁸ Moreover, the Personal Enterprise is so dependent on one person that should it lose him or her, the whole place can come crashing down. One heart attack can wipe out the organization’s prime mechanism of coordination. Even when the chief remains at the helm but loses interest, the organization can atrophy.

Success can also breed failure in other ways. Many Personal Enterprises are brought down by founders who expanded them at a pace beyond what their markets or finances could handle, thanks either to miscalculation—more likely, lack of calculation—or narcissistic overreach. With great success, the entrepreneurial personality can feel invincible, attributing his or her success to some magical talent, rather than to deep engagement in the business.

Even with sensible growth, to avoid agility metamorphosing into rigidity, the structure may have to develop beyond what the chief is prepared to accept. Together with this comes the challenge of succession in the Personal Enterprise. How to fill the shoes of a chief who has managed in such a personal fashion? Can one entrepreneur succeed another? More likely, the organization may have to metamorphose into another form. Meanwhile, see the box for how not to manage succession.

Many people love to work in Personal Enterprises. They relish the intimate, informal relationships, the excitement of growing something new, the charisma of the chief. But others reject all this, feeling like cattle being led to market for someone else’s benefit. With the broadening of democratic norms into organizations themselves, the Personal Enterprise has lost some of its luster, perhaps especially among young people entering the workforce—at least as employees, if not founders. To many of them, the Personal Enterprise looks paternalistic or maternalistic, if not downright autocratic.

And this brings us to another place where, unfortunately, we find the Personal Enterprise on the rise at the time of this writing: autocratic government, whether rule by fiat in a nation-state after a coup or the election of a power-obsessed populist.

Has this personal form of organization become an anachronism? Let’s hope so in the case of the populist leader, but not elsewhere. Just look at all the exciting start-ups in so many unexpected places, with many young people keen to make a go of something new. It is the Personal Enterprise, social as well as business, that sustains healthy development in our world of organizations, and it always will. Thus we must continue to prize this form of organization, not only for creating enterprises and turning established ones around, but also for managing many simple organizations, especially small ones.