One problem I have seen repeatedly in fast growing companies is the tendency to centralize some functions as the company grows. Just as the Soviet Union collapsed under the weight of centralization, and it severely negatively impacted their economy, many companies should put a brake on growth by centralization.
Functions range from marketing to HR to finance to product to tech. The underlying hypothesis is that the company will enjoy economies of scale, share knowledge better and can build stronger expertise in functional areas. The reality is that it often leads to extra unnecessary headcount, bureaucracy that puts a time burden on anyone without noticeable benefit, an “us versus them” mentality, losing touch with your customers and weakness in the functional areas. Continue reading “Be wary when centralizing”