Strategy First, or Organization First? | BlueRun Ventures Portfolio Event on Organizational Capacity
Forging a "Muscular" Organization
How should founders actively confront organizational challenges and make sound decisions amid volatile markets to build organizations with greater "muscle mass"? Recently, BlueRun Ventures held the second installment of its post-investment series, focusing on "organizational strength." Over 200 members of the BlueRun portfolio participated online.
Four seasoned BlueRun portfolio founders — Peng Shen of Waterdrop, Wu Hongxing of ShanZhen, Xu Bin of Xiaobang Planning, and Zhai Guanglong of Songguo Travel — joined Chen Ning, an independent advisor on HR strategy and operations, to discuss team building and organizational transformation.
This article summarizes key takeaways from the event. We will continue rolling out themed post-investment series to support founders in their growth journey. (Click here to review the first installment on "Financial Management")
Founders and Executives Are the Company's "Mirror"
Entrepreneurship depends on organizational capability. Fundamentally, everyone has their boundaries and limitations; everyone is self-centered to varying degrees. If founders and senior executives lack breadth of vision or cognitive range, bottlenecks emerge at certain stages, making it difficult to attract exceptional talent to break through together. The smaller the ego, the larger the格局.
In startups, what employees follow is often the founder's personal格局 and ability to inspire. Founders and executive teams should be steadfast captains.
In booming markets, confidence is a founder's powerful weapon, capable of energizing the entire team. Data shows that confident leaders are twice as effective at influencing and empowering others compared to other leaders. Since the VUCA new normal and COVID-19, surveys indicate executives' self-assessment of their influence and communication skills has dropped by 20%. CEOs and founding teams must overcome anxiety and flagging confidence — a new imperative of crisis leadership for the "lonely captain."
When facing crises, founders naturally experience anxiety. Confidence is contagious; so are anxiety and doubt. The state that founders and executives display in solving problems gets projected onto the organization's state. If the founding team maintains strong confidence during difficult periods, their leadership and influence will grow.
The pandemic-era confidence decline was universal; everyone was anxious. But how founders and executives serve as guiding lights, and how they lead teams forward with openness and inclusivity, demands serious reflection.
Strategy First, or Organization First?
Often when founders discuss organizational issues with their teams, they attribute poor performance to strategy. Yet no matter how correct the strategy, if the organization lacks vitality and refuses to fight, the strategy amounts to zero. As Ren Zhengfei put it, the fundamental logic of corporate development is this: "The direction can be roughly correct, but the organization must be full of vitality." This formulation carries both philosophical weight and practical relevance. Facing uncertainty, management guru Peter Drucker defined "decision" thus: A decision is a judgment, a choice among alternatives. Such choices are typically not between "yes" and "no," but at best between "seemingly yes" and "seemingly no."
Carl von Clausewitz, the German military theorist and author of On War, noted that facing uncertainty in war, excellent commanders need two qualities: first, the ability to detect a glimmer of light in the darkest moments — using intellect and courage to perceive clear strategy and correct direction; second, the courage to follow that glimmer forward, which corresponds organizationally to ensuring the organization is brimming with vitality. Especially for startup teams, once direction is set, they must be able to fight and dare to fight.
When examining organizational effectiveness, consider management effectiveness, employee vitality, and employee efficiency.
Management effectiveness first requires focusing on the strategic system, including company mission, vision, corporate strategy, and goals. To drive the strategic system, robust organizational, talent, and incentive systems must be established. The organizational system encompasses processes and controls, organizational structure, and job architecture. Only when job architecture aligns with the business system can management functions truly work. The talent system requires attention to talent planning, assessment, and development as an organic whole. The incentive system includes compensation, benefits, and performance management. Additionally, foundational systems — company culture and philosophy — matter. Cultural synergy drives innovation capability, giving the organization momentum.
Organizational vitality should focus on employee engagement 3C (Committed, Contributing, Captivated) and employee vitality 3E (Energized, Enabled, Empowered). When these metrics improve, employee and organizational alignment produces high-performance value.
Employee efficiency requires examining whether internal and external markets are fair; whether current performance management and compensation match business growth; leveraging the scissors gap between labor and operating costs to achieve breakthroughs through "two people doing four people's work for three people's pay"; and integrating HR tools like OKRs and KPIs.
For any organization, the sole criterion is whether it fits and advances the business — everything else is illusory. Founders must read the macro environment, maintain accurate self-awareness, and control growth pace while adhering to mission and vision.
Every company's resources are limited; you can't over-allocate at every point. So concentrate resources and over-allocate where it truly matters. Founders should habitually engage with industry peers and continuously recruit through headhunters or internal referrals to deepen their understanding of key industries and businesses, identify exceptional people, and explore future collaboration. While pursuing an all-star team isn't necessary, you need to build sufficiently long strengths in specific areas.
Startups must also cultivate a culture where everyone embraces change at all times, because everyone encounters bottlenecks and unforeseen challenges at every stage. Only through the organization's timely adaptation can true breakthroughs occur. If organizational adjustments carry prohibitively high communication costs, the company easily collapses.
Organizational Management Solutions from 1 to 10
As organizations scale, a major problem emerges: "everyone is locally right, but the whole is wrong." From each business unit's perspective, however you evaluate employee performance, they appear correct. Yet from the founder's view, internal operations feel unsmooth.
Startups tend toward addition — adding departments as needed. No one sees problems in this process, but addition eventually creates major issues because each department operates from its own perspective. Business units assign KPIs to every employee, who then derive their paths from those KPIs, but their derived paths may not align with the founder's overarching direction.
At several-thousand-person scale, founders often feel strained — unable to clearly see their organization, conduct granular evaluations, or maintain genuine organizational vitality.
This demands a top-down perspective on the entire business system, examining whether to subtract, consolidate similar functions, or reorganize departments through a new lens.
Every company sets OKRs and KPIs, but quality and perspective vary enormously. After deep reflection, the weight and angle applied when defining interdependent and upstream/downstream departments differ substantially.
Because excessive addition inevitably bloats the organization, with each department feeling uniquely justified and massively contributive. Yet departments created through addition don't necessarily contribute meaningfully to company-wide goals. Each company's growth stage differs; the company's current stage and objectives must inform medium- and long-term economic models before determining appropriate strategy.
Key Metrics for Organizational Effectiveness
Organizational effectiveness evaluation has rational and emotional dimensions. Emotionally, founders must not distance themselves from employees. Walking the office floor regularly reveals whether people are energized and productive or listless. Regular online and offline communication with frontline colleagues, observing response speed and question participation, helps gauge organizational engagement and vitality.
Rationally, first examine labor efficiency, which reveals business model sophistication and whether organizational effectiveness is improving. Metrics include total labor cost to revenue ratio, back-office labor cost to revenue ratio, overall revenue per employee, and overall profit per employee. Most commonly used is total revenue divided by full-time employees, which reflects both business model sophistication and, through longitudinal comparison, organizational effectiveness gains.
Second, examine expense ratios. For instance, what percentage of revenue does R&D cost represent? Determining reasonable ratios surfaces many issues. As markets cool and corporate objectives shift from "revenue growth maximization" to "profit maximization," careful accounting becomes essential — founders need a scale weighing the benefits of spending on departments and hires against the savings from not hiring.
If multiple businesses coexist, implement independent accounting, assessment, and incentives for each to truly unlock organizational effectiveness. Independent accounting means not just tracking each department's costs and revenues, but clearly calculating inter-departmental settlements, treating them as independent companies for evaluation purposes.
Moreover, don't focus solely on results — routine process controls must be sufficiently granular. High organizational effectiveness depends on assessment and incentives; truly valued priorities must be incorporated into evaluation, reflected in performance, and ultimately transmitted to compensation and equity incentives. That is genuine commitment.
Some monitor turnover rates, but organizations should track "regrettable turnover rate" — whether key contributors or high-impact personnel in critical positions have departed. Founders should regularly and quantitatively review this metric. Because companies fundamentally break through from points to surfaces, high regrettable turnover signals the onset of reverse selection, severely damaging overall productivity.
True organizational strength comes from sufficiently solid management fundamentals. All organizational work should revolve around the business and core underlying standards — the fundamental principle remains constant. Regardless of company size, from CEO to frontline employees, management fundamentals matter: knowing the basic common sense for doing things well, and how to implement through practice.
Most critically for organizational effectiveness: founders must be sufficiently decisive on major decisions, sufficiently clear-headed, and think things through thoroughly — then act decisively once decided. Building a successful company requires sufficient decisiveness and nailing every node. This is paramount.
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BlueRun Ventures was established in Silicon Valley in 1998. BlueRun Ventures China was founded in 2005 and is a venture capital firm focused on early-stage startups.
Currently, BlueRun Ventures China manages multiple USD and RMB dual-currency funds with over RMB 15 billion under management, making it one of the largest early-stage funds in China. It invests primarily at Pre-A and Series A stages across hard tech and innovative interaction, enterprise technology, new consumer, and healthcare sectors, having backed over 150 startups including Li Auto, Waterdrop, QingCloud, Guazi Used Car, Songguo Travel, Ganji.com, Energy Monster, Yuntu Semiconductor, Machenike, Yunsheng Intelligence, Anxin Network Shield, and BioMap.
BlueRun Ventures has been ranked #1 on Zero2IPO's "China Early-Stage Investment Institutions Top 30" and ChinaVenture's "China Best Early-Stage Venture Capital Institutions TOP30," and recognized by Preqin among the Top 10 global VC fund managers for sustained high returns.
Additionally, BlueRun Ventures has received consecutive honors from Forbes China, 36Kr, Cyzone, Caixin Media, CBNweekly, and Jiemian as "China Early-Stage Firm of the Year," "China Top Venture Capital Firm," "Most Founder-Friendly Early-Stage Firm of the Year," and "Most Influential Early-Stage Firm of the Year."