As an investor, founder, CEO and business book author, I write about startups, design, how to build a good business, and I like to muse about culture in any form.

Do you work for a transactional or a transformational company?

Screen Shot 2017-05-02 at 4.29.10 PMI was flying home from a business trip late last Friday night when I opened an important email. It was the download from a recent Grommet team survey. We had 100% participation in the survey and it deserved my full attention. I took a breath, steeled myself for some meaty brain work, and opened the 54 page document. I scanned a few bar charts and a couple of dense pages of comments.

Then, I shut it down.

Not because I did not like what I had seen–not at all. I hadn’t even gotten very far. I realized I needed to step back and mentally catalog what kind of company we aspire to be before I could properly take in the feedback. I was not “deserving” of the information until I had absorbed the full breadth of the task I faced.

Geeky?  Yes.  The human side of me was DYING to read everything at once. The “leader” side remembered the responsibility to set course and be clear-eyed about my goals for the next phase of The Grommet. After all, if you do not know where you are going–or who you want to be–any road can get you there.

It had been a long week and I was already in a reflective mood. I started mulling over Grommet’s growth and challenges. I thought about the various employers I’d had, and what I knew about my friends’ work experiences. I realized my past companies fell into two buckets and I gave them descriptions: 1) transactional and 2) transformational companies.  I have benefited from and valued both–but they are radically different.

A transactional company has these characteristics:

  • Obvious business model with direct competitors
  • Optimized processes
  • Clear chain of command
  • Articulated opportunities for training, development, and promotion
  • (Probably) a high degree of specialized work

These companies are the stuff of MBA dreams–they prize efficiency and tend to originate many industry-leading best practices as they grow. They are often a wonderful place to learn. Some examples: Enterprise Rent-A-Car, WalMart, Warby Parker. Most professional partnerships like law firms work this way too.

When I worked at Unisys–a transactional employer–a product manager frequently stated “This company has so many well-oiled processes that if half of us disappeared tomorrow, things would still tick along just fine.” He was not criticizing the organization’s “fat,” but rather highlighting the strong structures of the company.

Transactional companies can be of any stage of life but their “contract” with an employee is simple. The employee gives their time and skills and in exchange the business tries to deliver clarity about its goals and business model, meaningful training, and well-organized advancement opportunities. The downside can be rigidity and risk aversion.

I worked as President in a startup that was only ten people, yet had been conceived as a transactional company. The founder was a creative and strategic genius who really just needed a competent team to execute his vision. He did not want a whole lot of input to the strategy or plans because resources were scarce and he prized speed over collaboration. For me the job was engaging because we were pioneers in social media, but it was also straightforward–because I was executing the founder’s plans. There are times in anyone’s life when a straightforward job is welcome and a transactional company can be a great place to find it. Similarly, there are times in a career when a “learn the ropes” role is an important career-builder.

A transformational company has these characteristics:

  • A complex or innovative business model with few (or no) direct competitors
  • A high degree of change and experimentation
  • A lack of refined processes
  • Changeable org structures and individualized career paths
  • Tolerance for risk

I have worked for very few transformational companies myself, but I would include organizations like Amazon, Google, Alex & Ani and Jeni’s Ice Cream in this camp. I suspect the relative scarcity of transformational companies is simply because they are harder to sustain and original business models don’t always work out–despite best efforts.  They probably also have a natural likelihood to evolve into transactional companies.

While transactional companies are a great place to learn —a transformational company is a great place to expand and grow. The “contract” with the employee is an expectation of digging deep to help shape the company and the company gives the employees an unusual degree of trust. I now know that employees have to be prepared for the independence, ambiguity, and potential associated anxiety. And they have to be prepared for cycles when you and the company are “in flow” and others where things are a bit off-kilter. Those are fragile times because the company does not have the relative comfort of comparables in the marketplace (“just do what they do”) or firm internal processes to control all the seeming chaos.

I experienced this when I worked at Continuum in its very early days. The founders had created an original model for a product development and innovation consultancy. It only had one direct competitor–IDEO.  But we almost went out of business within two months of my joining (I swear it wasn’t me!) and we had to dig deep to survive. To avoid being laid off, I pitched the founders to move me from marketing to sales. I had no idea if I could do the job but I could see someone had to bring in new clients. I was willing to take the risk. And so were the founders. In retrospect, it was probably a no brainer for them. Why?  I told them I would cut my salary down to $12,000 a year and I made up a supplemental commission plan from thin air. It was scary for me but in that turbulent phase of the company, I figured the safest bet I knew was betting on myself.

I stayed for five happy years and am still very proud of my impact on expanding the capabilities of the firm through winning projects from impressive clients in many industries. We went from being a firm that only worked on medical instruments for a small roster of companies to creating the Reebok Pump shoe, many Samsung products, Herman Miller healthcare products, and even the P & G Swiffer! That took a lot of individual and collective transformation.

Harvard Business School wrote a case about The Grommet and I went there last month to see the case debuted in the MBA program. Afterwards the professor asked me how I was doing and I mentioned that this is a year that is testing my patience. I explained that we have to get through a lot of stops and starts on key projects and build for scale. He replied, “Well of course your business is going to take patience. It is a very complex business model. Why do you think I saved The Grommet case for the last class of the semester? Why do you think we wrote a case about you rather than somewhere like Dunkin’ Donuts?  You’re originating. Go back and tell your team that they are doing something that Harvard MBA’s could not crack easily and of course it takes patience.”  Well OK then. I guess if I had any doubt about our existence as a transformative company, this professor cleared that up.

I particularly respect Amazon as a transformational company (at least from the outside) because it has kept its edge and hunger while scaling and constantly innovating. If I could interview Jeff Bezos, the first question I would ask is, “How do you keep your company and employees on a growth edge while also building repeatable tools and processes?”

For Grommet, we now face the challenges of maintaining that transformational nature while scaling. When I dive deep into the employee survey feedback I will be looking at it through that lens. Questions I will be asking myself and my team:

  • Does this [program, process, policy] keep people involved in the co-creation of Grommet?
  • Is this [program, process, policy] something that needs revamping or optimization to allow the people doing the role more growth?
  • How do we provide support for the people we are throwing into the deep end (new managers, young grads)?
  • How do we balance the need for specialization and efficiency in some roles while giving the people in those roles sufficient chances for professional and personal growth?
  • How do we keep the social fabric that is the backbone of effectiveness in a young transformational company?  Because you cannot rely on chain of command or firm processes, the relationships are paramount.

These questions are very internally focused and we obviously have meaningful business objectives and goals. But I’ve learned that achieving our intended results and building our competitive position has very little to do with external factors and more to do with the internal people. When they are as dedicated, skilled, intelligent and mission-driven as The Grommet team, they keep me on my toes. We have to be true to the implicit promise we made–to offer a transformational experience.

Every company has a core DNA. Does this sorting into transactional and transformative types resonate with your work experiences?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Basic HTML is allowed. Your email address will not be published.

Subscribe to this comment feed via RSS

%d bloggers like this: