Leading a Groundbreaking Organization: Handy's Fleas and Elephants

We often enter or start a new science and technology company because of a desire to accomplish something groundbreaking and do it now. Certainly, there is the potential of hitting it big financially, but most who are successful in achieving the organization’s objectives will be driven by their core values and the purpose of the company. Ideally, those primarily financially motivated, i.e., speculative investors, exist outside the four walls of your company. Within the company, you need the motivation to achieve that groundbreaking product in everyone, including those beyond R&D. That feeling of shared commitment is what invigorates a start-up environment. Innovation, outside-the-box problem-solving, and a willingness to wear many hats permeate the whole company. It is challenging yet there is a sense of empowerment and a freedom to act. It is the environment for what the venerable Charles Handy calls the fleas.

On the other end of the spectrum are the large established corporations (the elephants) that may have been built on flea power but now exist as elephants. We’ve seen examples of elephant CEOs attempting to restructure in ways that support the existence of fleas within their system. But as Handy points out, while fleas can survive on an elephant’s back, they won’t last within an elephant’s physiology for long. If we look at Google, Apple, the Bell Labs of old, 3M, or the original Genentech, it is not that an elephant’s physiology cannot be structured to support fleas. However, the effort must be deliberate and ideally dyed-in-the-wool right from the start.

A flea culture can always unravel and thus requires a constantly renewed commitment. As a company grows, and the balance sheet is what investors focus on, fleas may seem like an expensive nuisance. The nature of a flea’s motivation is no longer considered or respected as an investment in the company’s future. There’s always M&A but you won’t have much control over another entity's focus or timing no matter how much you can invest.

Fleas are needed to achieve what the inspirational Dan Goldin, a former Chief of NASA, refers to as “the hard things” that are truly of benefit (https://bit.ly/3Q4k5Fi). While you may not be aiming for Mars you are likely aiming to land in a demanding new territory. Once flea culture is lost, it is hard to rebuild a physiology that will retain it and enable it to thrive. Also, you may find that you do not have the luxury of the time it will take to re-establish it; investors have little patience.

Handy concluded that the co-existence of fleas and elephants is best accomplished within a federalist structure. A federalist structure can provide the freedom to pursue a group objective, minimizing the constraints of a large corporate structure. Indeed, the CEO of Bayer, Bill Anderson, recently proposed this type of restructuring for his organization (https://bit.ly/3Q4x7m1). Also, others like the former CEO of GSK, Sir Andrew Witty tried something similar around 2009 with limited success.

More recently, Hal Barron was hired to revamp the physiology of GSK's R&D once more; to achieve a more motivational and productive fleadom only to return to cutting-edge biotech after four short years; time will tell whether he made any inroads that will stick. Some of his challenges were that circumstances required shorter-term fixes to productivity to help the company and appease investors as well as longer-term fixes in culture to rebuild a groundbreaking fleadom to fuel GSK’s future (https://bit.ly/3xLYdIh).

I would be remiss if I didn’t add a word of caution about a Federalist structure. Particularly for small to mid-sized companies, setting up internal performance-based competition is challenging to lead in a way that doesn’t damage the ability of teams to benefit the whole and work together when needed. Ideally, everyone at GrowthCo is committed to the same purpose, a better GrowthCo, not a GrowthCo choosing my product over yours at all costs. I believe that competitive spirit should always be directed outward.

If we think of the United States as our model of federalism, we know that while each state exercises a degree of autonomy, the strength of the US is as a whole. No offense Vermont (my current home state), but Vermont is not a world power and neither is California or Texas, even though they can strive to be known for certain strengths. That said, the GDP of California helps support federal programs that help a smaller state while leaving the smaller state free to pursue its objectives, whether California agrees with them or not and vice versa. However, the whole must share a common purpose and core values. In today’s times, we realize that even in the largest federalist organization, there is a potential for harm to the whole when the common purpose and values wither and the us vs them attitude is fostered. I’ll let you reach your conclusions about the impact of the quality of an organization’s leadership on this. While the US is a political beast grappling with these challenges, such politics have no place in our companies, and it will be far easier to not allow them to take root in the first place.

So, remember how you started and why you started or joined that NewCo. As it becomes GrowCo or BigCo on the public market, what are you doing to protect its future? Staying with the metaphor, we can have fleas exist on the back of an elephant where both can mutually benefit for a time. However, eventually, that elephant will want to take in those fleas to contribute to the whole more directly. Have you given your fleas a place to live and thrive? Will they find a way to jump before you can assimilate them? Will they wither and die within your company’s physiology? Will other functions of your organization see the fleas as assets to merely acquire and pick apart? As Roche appreciated when acquiring Genentech, maintaining a fleadom’s culture is vital to maintaining its value. However, it requires a constantly renewed commitment even under pressure. Time will tell how successful Roche will remain in maintaining its internal flea potential as Teresa Graham takes the pharma helm amidst several portfolio setbacks in its pharma business (https://bit.ly/4d11uUw).

Need to talk to someone about the health of your flea(s)? I am here to listen. You can reach me or schedule a convenient time to chat here: https://www.parenteaubc.com/contact.htm