How to beat the innovation rot when your company scales

Most companies start out innovative. They have a good idea, put a team in place, and if the stars align they’ll make it through the first year without running out of cash. Getting this far isn’t as hard as you might think: According to the U.S. Bureau of Labor, 75 percent of new businesses survive their first year.

But that’s where it gets tricky. Most companies hit a tipping point when they reach a certain size — maybe you’ve gone from five employees to 50 or you’ve opened a satellite office across the country. Things are getting a bit chaotic and you need to engineer a response to stay on track.

Your next move can have a huge impact on the future of your company. The right response creates a culture where innovation thrives even as your company grows, but it depends on the organizational choices you make. The wrong move can snuff out your creativity before it has a chance to develop.

Most companies double down on process: What’s our procedure for approving budget requests? How do we structure our teams? What do we do to reward performance? Adding structure and process feels comforting; it feels safe because it’s how many large companies operate.

But there’s a different path that relies less on process and more on empowering employees to make their own decisions. And it’s better suited to the rapidly-changing markets most of us operate in today.

Here’s how it looks: Instead of dictating how things get done, management provides guardrails that keep teams on track and allow them to operate with autonomy. The focus is on outcomes rather than how they’re achieved. The business is built on trust and transparency rather than control.

As management guru Gary Hamel put it: “To build organizations that are adaptable at their core, we will need to rework every management process so it enables, rather than frustrates, breakthrough thinking and relentless experimentation.”

Here are some of the key tenets for building this type of adaptive culture:

Minimize central control: There’s an incredible temptation to run everything from the top. Resist it. When things are dictated from above, employees stop thinking for themselves. Instead, create strong teams and trust them to do their work. You’ve hired people because they’re smart. Don’t squander their talent with a 10-point bullet list that dictates how everything needs to get done.

Crowdsource ideas: When problems arise, solve them as a group. Those workers down at the coalface are probably way closer to any problem that arises than you are, and they probably have a good idea how to fix it. When teams create their own solution, they have an incentive to make it succeed. Your staff will feel motivated and involved, which also means they’re likely to stick around longer.

Keep your teams small: Large teams are the death-knell of empowerment and creativity. Numerous studies have shown that workers perform better in small groups. They feel their contributions are more meaningful, and they’re less likely to slack off. How small is small? You’ll have to decide what works for your company. But Jeff Bezos summed it up well with his pizza rule: If you can’t feed the entire team with two pizzas, it’s too big.

Reject process: This is a big one. Don’t carve all of your operating procedures in stone. When you’re a fast-growing business, the way you did things last week might not work as well next week. Allow your teams to collaborate the way they want to and build products the best way they know how. Sure, consistency can be good — if you have a recruitment process that really works, standardize it across the company. But it’s a spectrum. Don’t tie your hands by regulating how every little thing gets done.

Embrace diversity: Great minds don’t always think alike. If you surround yourself with like-minded people, decisions will get made easily because you’ll all agree on everything. But research has shown you’re less effective when you don’t consider multiple points of view. Diversity in our teams makes us smarter. That includes gender, race, and expertise. Put engineers, designers, and product managers together. The positive tension that results is where great things happen.

This “practices-driven approach” won’t be right for everyone. If you’re in a static industry, such as running a railroad, process and hierarchy might be just what you need to keep the trains running. But that’s not the world most of us live in. The cloud and mobile computing have wrought incredible changes to how we shop, socialize, and do business. And the pace of disruption isn’t slowing.

You enjoy the nuances of being a small company — the speed, the agility, the fact that everyone feels engaged and involved. So build a culture that keeps that intact when you grow. Don’t kill what made you great in the first place.

Dom Price is head of R&D and work futurist at Atlassian. Follow him on Twitter: @domprice.