A good chunk of my early career was spent writing code. In COBOL no less (one more proof that I am indeed an old fart). Someone had developed pretty detailed specifications and my task was to translate those specs into working code. Much like doing math homework, I spent my days solving problems.
One cliched criticism from clients footing the bill for this work ran along the lines of
“what do you really know? You’ve never had to worry about making payroll”
In reality, neither had any of my critics but that was no impediment to the critique.
Unlike those critics, however, there came a time when I did, indeed, have to worry about making payroll. In 1994, I left a secure job with an established company to start a consulting firm with nine other partners and an initial staff of fifteen. We each invested from our savings and took about half our pay as deferred compensation to be paid if and when we were successfully established. We got stock options that might be worth something in a few years if we succeeded.
In our first year of business we did $12 million in revenue. We did close to $26 million in our second year and hired another 30 people. My partners and I were indeed getting a first hand education in “making payroll.” When we weren’t fretting about where the next client or check would come from, we were working to build an organization out of a collection of people who were learning each other’s names.
Two things were going on as we made plans for our third year of business. One, we were making a bet on how much business we could do in the coming year. Two, we were looking to hire the people to do the work we had sold and hoped to sell. We set our revenue goal to double again, this time to $52 million.
Meanwhile, we were on business school and top tier college campuses looking for talent. We were basically complete unknowns competing against established firms ranging from McKinsey and the Boston Consulting Group to Accenture and Deloitte. If you know the industry, these names tell you a lot. If you don’t, think of us as a club ice hockey team thinking it could compete at the Olympics.
Come April 1st, we had a budget and offers out to about twenty five students set to join us come the summer. If we were an unknown to prospective clients, we were a complete unknown on campuses. We had a good story for students looking for something a bit less safe than signing on with a name firm. Recruiting offices on campus were skeptical but tolerant. We were making investments for the longer term.
Two weeks later our largest client, representing half of our revenue, was acquired by another company who immediately shut down all active consulting projects. We were faced with the question of do we withdraw our outstanding job offers? How would we ever recruit at any top tier school if we did? Meeting payroll now seemed such a simple problem.
Some immediate decisions were straightforward. The budgeted bonus pool for the partners was zeroed out. So was our future deferred compensation. The risks that come with being an entrepreneur.
What happened next was the interesting story. We elected to lay out the entire situation to our staff. Their very first question was why did we still have a line item for staff bonuses. There was also universal support for maintaining the outstanding job offers and signing bonuses for incoming recruits.
We weathered the storm, although we didn’t hit our revenue target. We did do $36 million by year’s end. We continued to recruit on those campuses and others. Those graduates who stayed with us became partners. Others moved on to C-level roles elsewhere.
The late Russell Ackoff was a student of organization and complex systems. One of his core lessons was that organizations rarely get simple problems to solve. They are routinely challenged with amorphous, ill-defined messes that must be managed.
Mess is the default state of human organizations. Keeping the level of mess to a manageable level is the lot of anyone who aspires to rise within them.