Why large companies generally fail to instill an entrepreneurial culture!

In my career with some of the largest corporations I been on the receiving end of a letter from the CEO exhorting all of us to have an entrepreneurial culture and mindset. It is only in the last five years where I have personally been involved in two entrepreneurial journeys and had the privilege to serve on a few boards that I understand why large corporations generally fail to instill an entrepreneurial culture with their employees. Here is my list of reasons!

·      Burden of Processes: Processes are very important for a number of reasons. It keeps you out of trouble. Processes bind together large organizations into a particular way of doing things from sales to cash collections. You cannot ask your employees to be entrepreneurial when they have to check with three layers of vertical management and two layers of finance approval on whether they can match or beat a price quote in a competitive situation. Startups also have processes but they are designed to be agile and to win at all costs. If we have to beat or match a price quote it is a two minute conversation with the founding team. 

Incentive processes that incentivize on instant gratification i.e this quarter sales, encourage employees to put blinders on seeing and taking advantage of opportunities. Add to this the layers of bureaucracy who have to approve a new opportunity and it becomes apparent that most employees will opt to let go of the opportunity than go through the pain. Agility is not something that large organizations are known for.

·      Status quo leadership layer: Look closely at any large organization and you will find that the leadership layer, from a team leader to the CEO is paid on maintaining the status quo. If 50% of your variable pay comes from how the quarter ends up, you can pretty much conclude that the leadership team is paid to maintain the status quo. Good luck trying to convince that layer on pursuing a promising but longer-term opportunity. Look no further than some of the legacy technology companies that have lost out on the leadership in the newer technologies despite having the technology and the know-how to be market leaders. 

·      Quarterly Reporting: Quarterly reporting forces organizations to focus on the status quo because of the mirage of certainty. There are large organizations such as Amazon and Google who has messaged its investors that they will focus on the longer term. This has allowed them to remain entrepreneurial despite their size. The market rewards them with strong valuations and their investors’ benefit from stock price appreciation. Exhorting employees to be entrepreneurial while giving quarterly guidance on EPS leads to the only result possible – employees treat it with the disdain it deserves.

·      Inspiration through passion: Start-ups are driven by passion. People who join a start-up taking significant salary cuts with no perks are driven by the passion to make a difference, to change the world. Passion is infectious and over time it becomes the culture of the organization. This translates into a will to win. Contrast that to large organizations where despite their value statements, mission and vision try to motivate people through compensation packages. Instead try giving meaningful equity to employees and inspire them to really change the world. Creating marketing messages around how an organization is “essential” or how the world is “smarter” because of one or two stretched examples does not inspire people. It communicates to them that it is ok to stretch the truth and gives them a false sense of comfort while an agile start up is working on making them irrelevant. 

·      Personal Ownership: When employees truly feel that they are making a difference, they take personal ownership for the success of the company. They find new markets where their core competencies can make a difference. This is what makes them work 16/7 and not watch the clock. When I speak to the people engaged in the start-ups I am involved with, I realize what it is to be a kid again. The pure joy of their conversations, the excitement they bring, the playfulness, and the drive to make a difference, change the world is something to behold.

This is not to say large organizations cannot become entrepreneurial. IBM did it in the 60’s with a bet the company move through its mainframes, Apple, Google, and Amazon continue to do so. These exhortations to have a growth mindset and entrepreneurial culture should be supported by agile processes, trust in the employees to do the right thing, delayering of the management team, investments in upgrading employees skill sets and truly making a difference in the world. Let the work be their marketing message.