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Thursday, May 21, 2015

Entrepreneurial Gap

I recently came across a blog post that mentioned an intriguing concept, the "entrepreneurial gap." The idea is straightforward: give people more accountability than they have the direct resources to accomplish.

In many organizations employees are generally held accountable only for things fully within their control. So while the CEO has both all the resources of the company and the ability to make decisions that cause major tradeoffs (sacrificing profit for growth, for example), a manager of a team is only given projects big enough for that team to accomplish and goals big enough for that team to meet.

The entrepreneurial gap comes in when you give people bigger accountability than they have the direct ability to execute against. This is in many ways the classic startup move. You hire people and give them enough freedom to accomplish whatever they can manage to accomplish. Because early startup employees tend to be very entrepreneurial they often find a way to do just that, to gather support from other people in the organization and align efforts to produce outsized results. I think this is an important element of a growth business, something that inspires great people to work for a company, and produces a really fun culture to work in.

But, there's a trap.

The entrepreneurial gap works incredibly well when you give teams aligned goals. If you read the first case studies in the paper, you will see that in all of the examples the CEOs focused the company on a few goals, and in fact in all three examples there was a very strong emphasis on the customer. In companies where everyone is working ultimately towards the same goals, the entrepreneurial gap is awesome because it encourages people to work together and identify opportunities and efficiencies, especially cross-functionally, that may otherwise be lost.

Unfortunately, it is just as common to see companies put in place both an entrepreneurial gap and too many or misaligned goals. When you are in direct competition with your peers for scarce resources and you are not going to be graded on the same outcomes, the entrepreneurial gap produces a toxic environment of politics and power plays. Perhaps the best idea sometimes wins in these situations, but more often the best political players rule the day.

So what do we take away from this?

Organizational alignment is important because it lets you successfully ask more from people than the resources they have at hand. Without organizational alignment, you get political maneuvering. Without stretching people beyond their direct control, you get a lack of collaboration and creative cross-functional engagement. Set the right priorities and give people the freedom to stretch to them, and you will see the full potential of your organization come to life.

(The paper again: The Entrepreneurial Gap: How Managers Adjust Span of Accountability and Span of Control to Implement Business Strategy)

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