Rapid-growth tech companies often operate as adhocracies—they do whatever it takes to grow, move quickly, etc. The 0-1 stage is characterized by a lot of startup-wide bridging and fluidity. After the 0-1 stage, there's a tendency to favor team independence, clear spheres of ownership, and fewer global/mandated processes and rules.
And then if the company makes enough money when they get large they'll hire huge bureaucracies doing a lot of inefficient project/program management having synch meetings about spreadsheet update meetings so that execs that came up in the adhocracy can pretend they still work in an adhocracy and call it a "bottoms up culture"
Hi John, many thanks for your write ups, I follow them closely. This article prompted me to an op-ed to rethink bureaucracies, if you don't mind. The word "bureaucracy" creates unpleasant associations with slowness and inflexibility. Yet I'd invite everyone to consider a more neutral and utilitarian view on it.
Corporations have to follow a rhythm of sharing quarterly updates to shareholders. This is particularly true for publicly traded corporations, where the quarterly update cycle gave growth to a sub-industry of market analysis and prediction. Research analysts make estimations of relevant KPI such as EPS, which are aggregated by financial information providers into a consensus estimate. Company's ability to match up to these estimates, as well as ability to provide reliable forecasts make significant impact on stock price.
In other words, the volatile and unpredictable market values predictability of its participants. This was explicated in multitude of sources, e.g. the seminal work "Organizations in Action" by James Thompson (1967). The author discusses the concept of isolating an organization's core technology from environmental uncertainty. Thompson proposes that organizations employ mechanisms to protect their technical cores from environmental fluctuations, such as buffering, leveling, forecasting, and rationing.
This protection may be achieved through several mechanisms, and one of the most prominent ones is codification of business processes. As time goes by and workforce grows or rotates, it becomes important that new employees continue following processes that have been proved successful - hence processes rule and "explicit bureaucracy" emerges. It also becomes important that employees share internal rules of engagement to reduce internal cost of micro-transactions, therefore a set of unspoken rituals emerges, which is referred in the article as "implicit bureaucracy".
Bureaucracy permeates corporate world. Procurement departments of large corporations or government require that prospective suppliers prove they are sufficiently bureaucratic. An entire industry of corporate certifications offers to certify advanced level of bureaucracy in a corporation through ISO 27001, ISAE 3402 aka SOC 1, and endless assortment of other certifications. Vendors without proof of bureaucracy don't have a good chance, though.
Codified Processes bring in significant operational advantages:
* In terms of Cynefin, this is a major tool for transitioning from Complicated domain into Simple/Obvious domain and enabling the Sense-Categorize-Respond action logic.
* The above unlocks scaling of business processes by making them clearer to wider groups of potential workforce candidates. Companies with tens of thousands of employees cannot rely on scaling by hiring only "the best of the best", but rather have to efficiently utilize whatever candidates can be attracted from the labor market.
* Repeatable processes remove dependency on individual team members and contribute to longevity and predictability of execution.
* Codified processes are often seen as an enabler of transparency, which is considered a desirable component of an organizational culture. Transparency is achieved by shared understanding of which knowledge artifacts need to be produced and published during decision making.
* Codified processes are also often regarded as a pre-requisite to pursuing equality or equity in a work place, so that everybody is subject to the same process, although this alone isn't any guarantee of fairness, equality or equity.
Given the above list of advantages there should be no surprise about proliferation of "bureaucracy" in business relationships.
Silicon Valley is no exception here, and deals with bureaucracy in three expected ways:
* Avoid: startups aren't yet expected to repeatably participate in corporate/government procurement process; they rather rely on personal networks of founders, VCs and early employees to secure launch clients. Similarly, due diligence process of VCs focuses on personalities in a startup team, rather than on their ability to handle changes of team members. Personality-based ecosystem allows to compromise predictable long-term execution in favor of short-term business agility. This dynamics radically changes during a liquidity event, when the startup does IPO or gets bought by a larger company with an elaborate bureaucratic tradition.
* Adopt: VC funds themselves operate in accordance to well-known and codified process of funding rounds. Departure from this process would confuse LPs and founders, so this is a domain of pretty bureaucratic relationships.
* Embrace: startups with business models that require scaling out through engaging wide number of people (e.g. crowd testing, food delivery or ride hailing) become perfect bureaucratic machines. They build algorithmic dictators, which fully determine nature and conditions of transactions (e.g. ride fee) so that human clients don't even have counterparts to negotiate with.
I'd argue that Westrum's model quoted in the article could be a little bit updated along the following lines. Bureaucracy vs. adhocracy axis could be made a separate dimension from Power-oriented vs. Performance-oriented axis. Working relations may assume different positions along these two axes, and it would be curios to see if any particular combination correlates with short- and long-term business success.
In conclusion, "bureaucracy" in sense of acceptance of codified processes over individual voluntarism of "adhocracy" introduces significant operational advantages. Any serious talks about stamping it out in large companies seem futile at best. A more pragmatic approach would be to consider it as a effective alignment tool. As any tools, it needs to be employed properly, maintained and sharpened.
I could think of a metaphor of an "evergreen bureaucracy", in which master gardeners (aka VP of Bureaucracy) monitor existing processes for their efficiency, solicit continuous feedback from the shop floor, and then trim, update and retire processes as needed. Messengers should be welcomed or better yet, trained, as suggested in the Westrum model. This approach would require serious OCM and cultivation of organization willingness to continuous change - yet doing it by moving from process to process while staying in the bureaucratic realm.
I’ve seen companies where the promise of autonomy was dangled in front of teams but never truly delivered. One organization, for instance, required teams to submit initiatives every six weeks in a rigidly ritualized process. Executives would deliberate behind closed doors and hand down a “go” or “no-go” decision without transparency or meaningful feedback. It was anything but autonomous.
In hindsight, a fully rigid bureaucracy might have been better—it would at least align expectations. The illusion of autonomy, coupled with a total lack of openness or inquiry into failures, created a toxic environment. It drained energy and morale, leaving teams frustrated and disheartened.
It’s a perfect example of how these hybrid structures can combine the worst aspects of both systems, eroding trust and fostering dysfunction.
As a technical architect I often have to explain that essential system complexity can be either redistributed or exchanged for a different set of challenges, but not magically eliminated. Reading the first half of this (implicit bureaucracy falling on key touch points such as the platform team) feels like an equivalent maxim for organizational structure.
And then if the company makes enough money when they get large they'll hire huge bureaucracies doing a lot of inefficient project/program management having synch meetings about spreadsheet update meetings so that execs that came up in the adhocracy can pretend they still work in an adhocracy and call it a "bottoms up culture"
Operation preserve veneer
Hi John, many thanks for your write ups, I follow them closely. This article prompted me to an op-ed to rethink bureaucracies, if you don't mind. The word "bureaucracy" creates unpleasant associations with slowness and inflexibility. Yet I'd invite everyone to consider a more neutral and utilitarian view on it.
Corporations have to follow a rhythm of sharing quarterly updates to shareholders. This is particularly true for publicly traded corporations, where the quarterly update cycle gave growth to a sub-industry of market analysis and prediction. Research analysts make estimations of relevant KPI such as EPS, which are aggregated by financial information providers into a consensus estimate. Company's ability to match up to these estimates, as well as ability to provide reliable forecasts make significant impact on stock price.
In other words, the volatile and unpredictable market values predictability of its participants. This was explicated in multitude of sources, e.g. the seminal work "Organizations in Action" by James Thompson (1967). The author discusses the concept of isolating an organization's core technology from environmental uncertainty. Thompson proposes that organizations employ mechanisms to protect their technical cores from environmental fluctuations, such as buffering, leveling, forecasting, and rationing.
This protection may be achieved through several mechanisms, and one of the most prominent ones is codification of business processes. As time goes by and workforce grows or rotates, it becomes important that new employees continue following processes that have been proved successful - hence processes rule and "explicit bureaucracy" emerges. It also becomes important that employees share internal rules of engagement to reduce internal cost of micro-transactions, therefore a set of unspoken rituals emerges, which is referred in the article as "implicit bureaucracy".
Bureaucracy permeates corporate world. Procurement departments of large corporations or government require that prospective suppliers prove they are sufficiently bureaucratic. An entire industry of corporate certifications offers to certify advanced level of bureaucracy in a corporation through ISO 27001, ISAE 3402 aka SOC 1, and endless assortment of other certifications. Vendors without proof of bureaucracy don't have a good chance, though.
Codified Processes bring in significant operational advantages:
* In terms of Cynefin, this is a major tool for transitioning from Complicated domain into Simple/Obvious domain and enabling the Sense-Categorize-Respond action logic.
* The above unlocks scaling of business processes by making them clearer to wider groups of potential workforce candidates. Companies with tens of thousands of employees cannot rely on scaling by hiring only "the best of the best", but rather have to efficiently utilize whatever candidates can be attracted from the labor market.
* Repeatable processes remove dependency on individual team members and contribute to longevity and predictability of execution.
* Codified processes are often seen as an enabler of transparency, which is considered a desirable component of an organizational culture. Transparency is achieved by shared understanding of which knowledge artifacts need to be produced and published during decision making.
* Codified processes are also often regarded as a pre-requisite to pursuing equality or equity in a work place, so that everybody is subject to the same process, although this alone isn't any guarantee of fairness, equality or equity.
Given the above list of advantages there should be no surprise about proliferation of "bureaucracy" in business relationships.
Silicon Valley is no exception here, and deals with bureaucracy in three expected ways:
* Avoid: startups aren't yet expected to repeatably participate in corporate/government procurement process; they rather rely on personal networks of founders, VCs and early employees to secure launch clients. Similarly, due diligence process of VCs focuses on personalities in a startup team, rather than on their ability to handle changes of team members. Personality-based ecosystem allows to compromise predictable long-term execution in favor of short-term business agility. This dynamics radically changes during a liquidity event, when the startup does IPO or gets bought by a larger company with an elaborate bureaucratic tradition.
* Adopt: VC funds themselves operate in accordance to well-known and codified process of funding rounds. Departure from this process would confuse LPs and founders, so this is a domain of pretty bureaucratic relationships.
* Embrace: startups with business models that require scaling out through engaging wide number of people (e.g. crowd testing, food delivery or ride hailing) become perfect bureaucratic machines. They build algorithmic dictators, which fully determine nature and conditions of transactions (e.g. ride fee) so that human clients don't even have counterparts to negotiate with.
I'd argue that Westrum's model quoted in the article could be a little bit updated along the following lines. Bureaucracy vs. adhocracy axis could be made a separate dimension from Power-oriented vs. Performance-oriented axis. Working relations may assume different positions along these two axes, and it would be curios to see if any particular combination correlates with short- and long-term business success.
In conclusion, "bureaucracy" in sense of acceptance of codified processes over individual voluntarism of "adhocracy" introduces significant operational advantages. Any serious talks about stamping it out in large companies seem futile at best. A more pragmatic approach would be to consider it as a effective alignment tool. As any tools, it needs to be employed properly, maintained and sharpened.
I could think of a metaphor of an "evergreen bureaucracy", in which master gardeners (aka VP of Bureaucracy) monitor existing processes for their efficiency, solicit continuous feedback from the shop floor, and then trim, update and retire processes as needed. Messengers should be welcomed or better yet, trained, as suggested in the Westrum model. This approach would require serious OCM and cultivation of organization willingness to continuous change - yet doing it by moving from process to process while staying in the bureaucratic realm.
I’ve seen companies where the promise of autonomy was dangled in front of teams but never truly delivered. One organization, for instance, required teams to submit initiatives every six weeks in a rigidly ritualized process. Executives would deliberate behind closed doors and hand down a “go” or “no-go” decision without transparency or meaningful feedback. It was anything but autonomous.
In hindsight, a fully rigid bureaucracy might have been better—it would at least align expectations. The illusion of autonomy, coupled with a total lack of openness or inquiry into failures, created a toxic environment. It drained energy and morale, leaving teams frustrated and disheartened.
It’s a perfect example of how these hybrid structures can combine the worst aspects of both systems, eroding trust and fostering dysfunction.
As a technical architect I often have to explain that essential system complexity can be either redistributed or exchanged for a different set of challenges, but not magically eliminated. Reading the first half of this (implicit bureaucracy falling on key touch points such as the platform team) feels like an equivalent maxim for organizational structure.
Lots of great thoughts, thanks for sharing!