How Great Companies Scale: Principles That Make Decisions Without the Founder

Last week, I made a distinction between building a business and building an organization. A business depends on the founder, whereas an organization is built on four pillars:

1. PRINCIPLES
2. PEOPLE
3. SYSTEMS
4. CULTURE

Over the next several weeks, we’re going to unpack each of these pillars, beginning with what I believe is the foundation upon which everything else is built.

PRINCIPLES.

Most companies have principles, at least they think they do. They’re framed on walls, printed in employee handbooks, displayed on websites, and discussed during orientation, only to be largely forgotten when Monday morning arrives and the real decisions have to be made.

That’s because most organizations misunderstand the purpose of principles.

Principles aren’t decorations. They’re decisions you’ve already made about how your organization will think, behave, and operate.

Think about that for a moment. As an entrepreneur, one of your greatest challenges as your business grows is that you can no longer be everywhere at once.

When you have five employees, they can walk into your office and ask what you think. At fifty, that becomes difficult. At five hundred, it’s impossible.

And if your goal is to build an organization capable of generating $100 million or more in revenue, thousands of decisions will eventually be made every day without you ever knowing they were made.

So how do you ensure people make the decisions you would have made if you were standing beside them? You don’t give them more rules. You give them principles.

Rules tell people what to do in situations you’ve anticipated. Principles teach people how to think in situations you haven’t encountered before, and that’s an enormous distinction.

A rule says:

“Here’s what you should do.”

A principle says:

“Here’s how we make decisions around here.”

One creates compliance. The other creates leaders. If you’re serious about building an organization that can eventually thrive without you, your people can’t simply know what you do. They have to understand how you think.

I vividly recall learning about this challenge before we had to use this distinction. It turned out to be a godsend that we did, because without it, we could have easily stopped growing.

We had opened our 5th office and were approaching 50 team members in total. What works in one office starts to break down quickly in three. Because we had four partners who shared decision-making and were each leaders in their own right, we were able to hold it together pretty well until we were about to open our 6th location.

We realized that to have that many people rowing in the same direction across different locations, we would need to establish a Vision, Mission, and Principles to run our business, or it would falter. A good friend of mine, who owned a software company in Colorado Springs, CO, had successfully navigated the same challenge and offered to support us by hosting a business bootcamp for the founders.

We spent three days immersed in every aspect of his company and walked away with Leadership Guidelines that we immediately shared with our team. Each letter in LEADERSHIP stood for a principle that all of our team members could use to guide their conduct and decision-making.

I won’t share all of them here, but to show their power, I’ll share the first four.

L – Lead with honesty, trust, and integrity.

E – Ensure a successful attitude.

A – Acknowledge success and a philosophy of never ending improvement.

D – Do your own work.

This became the foundation for growing from 50 to over 1,000 employees, thereby pushing critical decisions down to the individual.

If your people need you to make every important decision, you haven’t transferred your principles. You’ve only transferred tasks. That’s directly connected to the founder-dependency conversation we’ve been having.

Your goal isn’t to create an organization of people who constantly ask, “What would the founder do?” Your goal is to build an organization of leaders who understand the principles so clearly that they already know what the organization should do.

That’s when your thinking becomes scalable and when something extraordinary begins to happen.

Your principles begin producing leaders. Which brings us to our second pillar.

PEOPLE.

We’ll go there next week. Until then, ask yourself: If I disappeared from my business tomorrow, would my people know how to make the decisions I make today?

Be Larger Than…