It feels horrible: You’re scaling up aggressively and working harder than ever, but with each passing day you feel more overwhelmed. Your business is a success, but you feel like a failure. You used to be able to track everything with an Excel spreadsheet, personally designed by your CFO; now you’ve got an SAP installation in its place, supported by an entire IT department. You and your founding team used to feel like members of the same small tribe; now you’re working with unfamiliar layers of staff hired from companies whose culture is not like yours. You used to know your key customers by their first names; now you know them only as averages on PowerPoint slides. Every employee used to know what made your mission special; now most of them don’t. Things are spinning out of control, and you don’t know what to do.
What’s going on? You’ve hit overload—the internal dysfunction and loss of external momentum that strikes young, fast-growing companies as they try to rapidly scale their businesses. Overload is one of the three predictable crises that companies experience as they grow. With overload everyone in the company becomes stretched and loses the focus on the customer. A helpful image to keep in mind here is that of a plate spinner. As the spinner sets more and more plates in motion (growth), he obviously has to keep them in motion. This gets harder and harder, especially if he hasn’t prepared adequately for the challenges involved. Soon what once was a satisfying process becomes a deeply troubling and threatening one (overload): plates start to wobble, and the spinner has to scramble ever faster to keep them all in motion. His mission has changed. He’s no longer thinking about serving and delighting his audience (customers). He’s just trying to manage the chaos and avoid catastrophe.
There are plenty of signs that overload has arrived. Things fall through the cracks. Bottlenecks appear. Systems don’t scale. Talented staff members, stretched to the breaking point, start fighting among themselves and even leave the company. Organizational malaise sets in on the inside, and then ripples outward, creating a subpar performance in the marketplace, customer frustrations and financial shortfalls.
Consider the case of Norwegian Cruise Line. Founded in 1966, Norwegian quickly became an innovator in its field as the first company to offer round-trip cruises that nearly anybody could afford. For years, the company led its industry, guided by strong growth ambitions and aggressive investors. But by the 1990s it had run aground: It hadn’t properly developed systems to implement its growth strategy internally, and so that strategy broke down at dozens of points of execution on the front line—with customers, crew, staff on the shore and the company’s travel agent partners. In 2000, with more than $100 million in negative cash flow, the company agreed to be acquired by Star Cruises, a leading cruise operator in Asia.
Norwegian made a promising first move under its new management: It began offering guests what it called Freestyle Cruising, which provided multiple dining and entertainment venues with flexible times, as opposed to the industry model at the time of single venues with set times. The concept was revolutionary, but the execution proved difficult. The galleys on Norwegian’s ships, for example, were separated from dining areas, which meant that in this new scheme passengers had to wait a long time for food. Guests grew exasperated, and the crew, feeling battered by dissatisfied guests and the stress of rolling out this new offering, grew upset and disengaged. Nevertheless, the company pushed ahead aggressively with its expansion, growing for the sake of growth—spinning more and more plates, as it were.
Chaos ensued. Eventually, feeling it had no other option, the company adopted a low-cost strategy on the outside: last-minute price-cutting. But this only compounded the chaos. The company lost the trust of its frontline employees, the commitment of its travel agent partners and the loyalty of its passengers, who increasingly switched to other vacation sources.
Fortunately, these failures didn’t spell the end for the company. That’s because overload is a surmountable crisis—under the right leadership. And in 2007 the right leader arrived: Kevin Sheehan, a veteran executive with experience in the car-rental and entertainment industries.
Sheehan quickly diagnosed what was ailing Norwegian. He explains:
“Our biggest problems were internal, not related to the industry. We had pioneered Freestyle Cruising, but we were executing poorly, resulting in long lines and unhappy passengers. We were pricing in a uniform way, yet the truth is that there was a huge difference in value across cabins, and we needed a sophisticated yield system, like we had in the rental-car business, to match demand and value and pricing dynamically. Our travel agent partners were frustrated with us for last-minute price discounting and did not feel like real partners. And most importantly, our frontline employees had lost a sense of what was important. Were we a price cutter? An innovator? Customer-focused? What?”
Sheehan acted fast to address these problems. During his first year, he changed more than 80% of Norwegian’s top-tier executives, looked for ways to rediscover the company’s core mission and began the work of transformation from the front line up. In doing so, he relied on what we call the founder’s mentality—a frame of mind and set of behaviors usually embodied by a bold, ambitious founder but that any leader can adopt to effectively help companies navigate the challenges of overload on their way to sustainable growth. For example, here are some of the strategies Sheehan adopted:
Open up lines of communication. One of the central dysfunctions that plagued Norwegian during its decline was that shipside personnel didn’t believe that shoreside personnel understood the challenges of their work, and vice versa. In addressing overload, Kevin Sheehan made connecting these two sides a key priority. To make sure each learned from the other, he and his team began including shipside staff in processes and decisions that had previously been handled exclusively in the corporate office, and invited officers from across the fleet to attend the company’s leadership retreats. Every company, especially those growing rapidly, can benefit from this sort of cross-fertilization. You can’t combat overload without it, in fact.
Celebrate and reward frontline heroes. When they confront overload, managers often react in ways that put distance between themselves and the front line. To avoid that problem, Sheehan and his team introduced the Vacation Hero program, which taught staff how to better engage guests and identify employees who had gone out of their way to make a passenger’s stay special. Sheehan’s reasoning was simple: He knew that an organization is ahead of the game in preventing overload if its frontline employees love the details of the business and feel empowered to solve tactical problems on the spot, because in doing so it can create more capacity to grow, keep decision processes swift and smooth, and sustain employee loyalty and productivity. The result is a self-correcting organization that learns and changes almost automatically.
Make constant improvement a focus. The leadership team at Norwegian put in place a kaizen (continuous improvement) system to gather ideas from the front line on how to improve and streamline operations and processes everywhere in the organization, and created extensive discussion forums and recognition for the best ideas. They even developed a method to involve employees in the details of ship design, a powerful example of their new emphasis on the vertical rather than the horizontal. Norwegian encouraged its employees, in other words, to adopt an owner’s mindset: a powerful sense of responsibility for all of their employees, customers, products and decisions. The difference between employees who operate with the owner’s mindset and those who don’t can be as great as the difference between devoted parents and restless babysitters.
Codify best practices. Norwegian developed a new software program, delivered through iPads, that defined and gathered inputs on Platinum Standards—that is, the best practices in terms of both operations and passenger loyalty drivers. Sheehan understood the critical importance of this step. If you take the time to codify your key practices and principles, and use them as a compass to help chart your course, you can help your company maintain a strong sense of purpose and a powerful consistency of action as you contend with overload.
Sheehan’s strategy has worked. In early 2013, Norwegian went public and became one of the most successful IPOs of the year, closing the year 87% above its IPO price. From 2008 through 2013, EBITDA (earnings before interest, taxes, depreciation and amortization) margins increased for 20 consecutive quarters, from 5% to 25%. Overall, the company’s revenues have grown by 50%, and its net yield and average fleet age are now the best in its industry. Having successfully survived the crisis of overload, Norwegian is a leader again.
The crisis of overload is stressful because it happens when people are already working has hard as they have ever worked in their lives, with limited capacity to deal with more. If you’re starting to see the symptoms of overload in your company, your core challenges are to refocus the company on customers and frontline employees and remove barriers to decision-making. By thinking like a founder and acting quickly, you can steer your company back on course.