Dando Advisors

9 Reasons Growth-Hungry Leaders Use a Strategic Plan

Strategic Planning does not deal with future decisions. It defines the future of present decisions. As a leader your job is to have a blind date with destiny!

 An active, articulate, well-communicated direction for a corporation, division, or business unit is evidence of game changing leadership. Effective strategic plans encompass organizational discipline, accountability and direction.


Does it follow that an organization that lacks a strategic plan also lacks leadership? Perhaps.  The leader who claims, “Of course I know where we are going.  With this market it is obvious what we have to do. Besides we cannot afford the money or the time right now to get away and plan. I will let the others in on the direction on a need-to-know basis” is at least several shingles short of a full roof when it comes to leadership.

 As leaders, we often forget…we get what we set ourselves up for!

A strategic plan provides: 

1. A unified direction for your company: A strategic plan is a valuable leadership device. Employees sense when the organization is focused and when it is diffused.
2. More effective communication: A consistent means of expressing the company’s direction improves communications with employees, customers, and creditors.
3. Better anticipation of changing conditions: Effective planning means that most possibilities for change are considered and discussed. When high probability of change exists, contingent plans are built.
4. Heightened sense of order and discipline: Clear targets, frequent measurement, and positive feedback create accountability and focus energy.
5. Improved skills in group problem-solving and decision-making techniques: Planning is educational for both senior managers and new managers.
6. Improved leadership and management skills for participants: An effective strategic facilitator will help Planning Team members understand what to do and why they are doing it.
7. Enhanced teamwork: Planning Team members undergo a teambuilding experience through mutual problem-solving.
8. Strengthened sense of commitment: As a Planning Team member, key managers gain a high sense of commitment to making the results happen. This commitment is much stronger than when a plan is developed by others and handed to the manager for execution.
9. Greater focus for the efforts of key managers: Continuous reinforcement of goals and strategies builds focus for management.

KEY QUESTION: What has your experience been with strategic planning?  What was most valuable, the “plan” or the “process?”

How to Avoid the Pain of Hiring or Promoting the Wrong Person

As your company grows, the need for new/better talent becomes apparent. You are fully aware of the pain and destruction that can be caused by hiring/promoting the wrong person. However, due to your unknowingly flawed hiring and promoting practices, you now have friends, family members, partners, “pedigreed” executives hired from other companies or long-term loyal employees (who are not qualified for the job) in key positions. This is what I call HIRING AND PROMOTING FOR EXTINCTION.

No one ever disagrees; it takes the right person to get the job done.  Letting the tyranny of the urgent force you into hiring/promoting the wrong person blindly marches the company towards mediocrity and dumbs down the culture … or worse.  There is no other area in business where such poor results are so consistently tolerated than the area of promoting and hiring the right people.  As leaders we often forget; we get what we set ourselves up for!   

As the saying goes, we hire for expertise and we fire for behavior.  In short, if you want to improve your organizations growth and profitability, then improve the expertise and behaviors by doing a better job of promoting and hiring. 

3 Steps to get you started: (The temptation to water this down is great, do not do it!)

1.       GO BEYOND THE TRADITIONAL JOB DESCRIPTION: Huddle with several key stakeholders to not only discuss the job description, but talk about:
           a.       What are the MUSTS vs. WANTS?
           b.      What are the non-negotiable personal characteristics and behaviors?
           c.       If this person is wildly successful, one year from now what specific measureable and non-measurable differences will you see?
           d.      What would the person accomplish the first 90 days?
           e.      How do you expect this person to approach getting the results? (e.g. work with the team they have, command and control, collaborative, etc.)

2.       MARKETING AND SOURCING THE CANDITATE: Source candidates directly within the industry or related industries; utilize your network of contacts; and appropriate advertising. Be patient but very persistent … it is worth it!

3.       TRY DATING BEFORE MARRYING: Once you have narrowed the selection of candidates to two or three, ask them to prepare a plan of what they would do the first 90 days.  They will present this plan to key stakeholders, usually the management team. 
            a.       Tell them they have two or three weeks to prepare their presentation.  It is best to be vague;  this way you find out if you have someone that is resourceful, creative and can think on their feet.  This will speak volumes of how they will perform if you decide to hire them.  If they are any good and they have questions … they will ask!
            b.      Give them the numbers/emails of key people so they can contact them to ask questions.

I’ve seen profound results in companies that used this method. For example, a high-tech company I worked with, whose leaders admittedly had a history of hiring/promoting the wrong people into key positions, used this process in their search for VP of Operations.  Although it took the candidates a significant amount of time to prepare  their “90 Day” presentation, they said the process gave them great insight into the company and the people they would be working with. They even said they wished they had been required to do it with past employers.

A year later, the company  reported that the VP of Operations had far exceeded original expectations. Overall profitability was up 1 full percent and the key productivity metric (gross profit/person) increased $9.73/person.

Most importantly, the CEO and leadership team said that the peace of mind they gained by making the right hire was more valuable than the numbers. They felt relieved and hopeful for the future.  

If you have the courage to follow these steps, you will not only avoid the trap of HIRING AND PROMOTING FOR EXTINCTION, you will set your company up to stop growing though trial and error and to start scaling — by predicting problems before they show up in the results.

KEY QUESTIONS: Have you ever seen a wrong person in a key position? In your estimation, what did it cost the organization?

HOPE IS NOT A STRATEGY: 3 Steps to Making 2012 Your Best Year Ever!

Have you ever encountered people who say they desperately want to change their circumstances, but do not want to change themselves? They unconsciously choose the “hard way” over “hard work” and simply hope things will turn out for the best.

Dr. Woodrow Kroll recently reported in his radio broadcast that 3% of people have written goals, 10%  have goals but haven’t written them down,, and the other 87% simply do not have any specific goals at all.  Dr. Kroll noted that people with written goals are 50%-100% more likely to achieve them than those who haven’t written them down.   As Zig Ziglar says, “If you aim at nothing, you will hit it every time.”

Why do people avoid writing down their goals? What story do they tell themselves that makes not writing them down OK? Why is hope so attractive, even though it doesn’t work?

With the New Year upon us, it’s a great time to check your systems, people, strategies and resolutions to make sure you and your company don’t rely on HOPE as a strategy.  As leaders, we often forget…we get what we set ourselves up for.

Three overly obvious and embarrassingly simple steps to making 2012 your best year yet:

1. Write down your goals.

• Be specific.
• Be measurable.
• Be non-negotiable…if it’s not important, do not bother.
• Keep them simple.
• Share them with a SAFE person.

Then ruthlessly prioritize the following to align with your goals:

2. Examine how you spend your time.

• Most growth-hungry companies are worried about the competition. But the truth is, knowing how to spend your time will give you the biggest strategic advantage.  Everyone has 24 hours in a day…what you do with them determines if you win or if your competition wins.  You better be focused and you better have the right people on your team!

3. Evaluate how you spend your money.

• As Dave Ramsey says (and I agree): Either your money works for you or you work for your money.

So what, now what? Remember Dr. Kroll’s study.  You are faced with a choice. What are you going to do?  Will you improve your circumstances or let another year slip through your fingers HOPING that you meet your goals?

What methods have you used to get focused and meet your goals?

Why Most Successful Executives Don’t Scale

It’s So Simple, You Just Missed It!

The moral of this story: Executives often are too busy trying to look smart; by doing so, they dismiss the solutions that are in plain sight. As leaders, we often forget, we get what we set oursleves up for.

Many executives are worried about how competition might kill their company, when in reality, they are doing a more than adequate job on their own of committing corporate suicide.

I recently gave a talk to a room full of Fortune 500 C-level executives about the Top 12 Warning Signs of Success™.  One of the executives commented that these warning signs were very elementary compared to their “real” issues, such as figuring out their global go-to-market strategy.  What she didn’t know was that I gave the exact same talk to 75 of the top managers and leaders in her company just a month earlier.  She was perplexed to learn that these 75 people, many of whom report directly to her, said the top 3 issues facing their company were (click on for full explanation):

 Warning Sign #2 – NOTHING KILLS FASTER THAN SUCCESS

Warning Sign #7 – HOPE IS NOT A STRATEGY

Warning Sign #12 – THE ROAD TO HELL IS PAVED WITH ‘GOOD’ SYSTEMS

 They said if the executives would address these Warning Signs head on, they could actually start doing what they were hired to do, and the issues around figuring out the global go-to-market strategy would not be so difficult.

If this high-powered, highly educated, well-traveled, overly confident executive really knew exactly what her company needed to go to the next level, then why did those 75 people state something very different? 

 Too many times, we dismiss the overly obvious and embarrassingly simple repairs we and our company need to tackle in order to scale.  My advice: Get out of your chair and go ask your people what they think are the top 3 “things” your company needs to start, stop or change in order to increase productivity and profitability.  Better yet, show your team The Top 12 Warning Signs of Success™ and see if they think any of them are present in your company.

If these leaders knew what to do, why did their direct reports say something different?

Only 1% Have What It Takes to Lead … Do You?

Dando’s definition of lead.er.ship \ lēd-ər-ship\ n : Leadership is a walk on the wild side. If we did not have to deal with people or problems, leadership would be a piece of cake. Instead, leading is all about aggressively moving toward a clear goal while predicting the “train wrecks.” Mix in limited resources, uncertainty and people who may, or may not, come through in a pinch. Leadership is about growing in the face of crisis. Crisis is the eruption of chaos … it takes leaders to the edge, where some do not survive.

I’ve talked with more than 2,000 executives and their teams at growth-hungry companies around the world. In my experience, only about 1% of people have what it takes to be a Game-Changer. By gathering information and observing behavior – and its consequences – I’ve gained perspective on the traits I believe these leaders possess.

Heaven knows the world doesn’t need another article on the characteristics of a leader. The reason I am sharing my thoughts is to provide you with a tool you can use to 1) measure against your own perceptions and 2) let your team express how they believe you perform as a leader.

I am not going to name the usual identifiers, such as “visionary,” “risk taker,” etc. The following 10 characteristics collectively tell me whether I am working with a Game-Changer or a poser…

1.   Game-Changers know how to adapt their BEHAVIOR to meet the needs of other people and particular situations.

2.   Game-Changers have incredible DISCERNMENT and WISDOM when it comes to people. They are ruthless about getting the right people into the right spots.

3.   Game-Changers do not hesitate to DISCIPLINE inappropriate behavior. They do not look the other way because they know it will only get worse.

4.   CONFLICT and PAIN make Game-Changers come alive. Game-Changers pray for discomfort, anger, tears and foolishness. 

 THE LEADERS PRAYER:
May God bless me with DISCOMFORT
with easy answers, half-truths, and superficial relationships,
so that I may live deep within my heart.
May God bless me with ANGER
with injustice, oppression and exploitation of people,
so that I may work for justice, freedom and peace.
May God bless me with TEARS
to shed for those who suffer pain, rejection, hunger, and war,
so that I may reach out my hand to comfort them
and turn their pain into joy.
And may God bless me with enough FOOLISHNESS
to believe that I can make a difference in the world,
so that I can do what others claim cannot be done
to bring justice to all.
Amen”

5.    Game-Changers are problem-predictors vs. problem-solvers.

6.    Game-Changers are ruthless about selecting and communicating PRIORITIES and are willing to rearrange priorities in order to accomplish the goals.

7.   Game-Changers know how to MAXIMIZE on what they do well and spend time with their BEST people.

8.   Game-Changers WIN or LEAVE. They are NOT WHINERS…they win or they get out of the way.

9.   Game-Changers are SECURE in WHO they are so they see things AS they are. They don’t view everything through a filter of feeling like they do not have what it takes, they are not worthy, or that everyone is out to take advantage of them. When leaders believe these lies, they somehow twist everything they see and hear to fit that belief instead of what is true. Game-Changers do not do this!

10.   Game-Changers create SAFE environments, which builds TRUST and RESPECT, the jet fuel for teams that win.

We all need the help of others to broaden our vision and deepen our perspective. Which areas do you feel you need to focus on for improvement? Are you willing to hand this to your team and get feedback about yourself as a leader?

KEY QUESTION: What do you think is the biggest stumbling block for leaders?

A Tiger By the Tail: How Growth-Hungry Companies Get and Stay on Top

I have always been fascinated about what makes certain leaders and their companies get and stay on top. Why are some businesses wildly successful and stable, while others in the same industry, with the same opportunities, who fight the same battles day after day, level out in their growth and never reach their full potential? What, exactly, do successful companies and their leaders do and focus on that’s different?

After helping build a business to $1 billion, selling and subsequently interviewing and coaching over 2,000 executives in growth-hungry companies, I have been very surprised by the answers I’ve found. I thought I would find very complex and difficult-to-implement strategies; but I discovered just the opposite. It’s all about predicting and preparing for what turn out to be overly obvious and embarrassingly simple root cause problems (see The Top 12 Warning Signs of Success™). I have come to recognize significant, predictable patterns that are true for every business. Although the way your business grows is unique to your situation, the challenges that growth itself presents are common to all.

Experience has taught me that by focusing on the right things, depending where your company is on The Business Lifecycle™, you will be able to stop “growing” your business through trial and error and start building a business that can “scale” — and there is a difference!  The subtle but real difference is how normal growing pains are approached. Growing a business uses “see & solve” strategies; building a business that can scale uses “predict & prepare” strategies. Growing a business gets you on top; building a business that can scale gets you on top and keeps you there. The problem is, normal growing pains are often masked as successes, so they are invisible to the naked eye. This is what sets up The Top 12 Warning Signs of Success™. 

Making the shift from being a problem-solver to a problem-predictor ultimately leaves every visionary leader feeling energized, inspired and hopeful that they have what it takes to scale their business to a size and complexity far beyond anything they have ever been a part of before. 

Although I cannot condense every possible solution and strategy for a growth-hungry company into one article, I’ve provided a simple guide that explains what visionary business leaders should be focusing on, depending at which level their company is performing.

Click to read the guide: Growth Strategies for Companies at Levels I, II and III

KEY QUESTION:

What style does your leadership team use — “see & solve” or “predict & prepare?”

Will Any of The Top 12 Warning Signs of Success™ Kill Your Growth?

As a company matures, it often experiences subtle but very troubling growing pains (The Top 12 Warning Signs of Success™). As you might expect, these growth tremors are amplified in a depressed market. Compounding the situation, management, in its haste to maintain growth, often fixes its gaze outward on the environment and toward the future, hoping perhaps that more precise market projections and better ‘relational selling’ tactics will provide the organization with the impetus it needs to go to the next level of performance.

All the while, the company may overlook the Overly Obvious and Embarrassingly Simple repairs it needs to mature and stabilize.

The current market dynamics offer the perfect time to refocus and redefine you and your company’s success strategies. Generally, companies tend to pass through a series of developmental phases (The Business Lifecycle™) as they mature. Transitions between these phases do not always occur naturally or smoothly, regardless of the strength or expertise of top management.

Unfortunately, as a company reaches the point where it needs to move into the next phase of development, it can become vulnerable and operations can become rather chaotic. Morale is down and management feels as if it is losing control.

Also, at this crucial time, some decision-making processes are skewed awkwardly and access to helpful information may be inadequate. In short — a variety of factors combine to prevent opportunities from being seized.

The irony is only successful companies get to experience these Warning Signs.

Below are The Top 12 Warning Signs of Success™ that block a company’s transition to a higher level of performance. When these characteristics present themselves in an organization, they often push it to become what I call a “treadmill” company.  A “treadmill” company fights the same battles in precisely the same way, churning on and on, year after year, until ultimately, although the business does not explode, the owners and employees do, often at each other.

What a company does when these crises emerge determines if it moves on and becomes a mature, financially stable, professionally managed and led organization, or simply moves on aimlessly — or worse.

Check Your System
To be prepared for these changes, check DANDO’S Top 12 Warning Signs of Success™.   Are any of these Top Warning Signs of Success™ holding your company back? It only takes one to hold back an entire company from meeting its goals.

1. Right Idea, Wrong Person: As your company matures, you see the need for new/different talent. You may know what you want for a key position; perhaps you even have a very detailed job description along with specific expectations. But due to unknowingly flawed hiring and promoting practices, friends, family members, partners, “pedigreed” executives hired from the outside or long-term loyal employees – who are not qualified for the job – are in key positions. Also, it becomes apparent that some members of the senior management team are not developing into skilled leaders. Leadership finds itself asking who can and cannot scale, often without any clear answers…until there is a train wreck and it becomes painfully obvious. Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
2. Drinking the Chaos Kool Aid: Your company has added too many products/services, or has diversified into new businesses that do not fit its expertise and market experience — probably before the structures/systems are in place to integrate them. Leadership knows this needs to be remedied but may be tempted to sustain rapid growth indefinitely without the necessary systems and appropriate management team in place. This is a classic example of success breeding failure. Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
3. Open Door, Closed Mind: Although your company’s leadership team may say they are open to hearing new and innovative ideas, as well as concerns, due to an unknowing lack of true leadership skills, they may have closed their minds and let their actions speak louder than their words. The reality is, great ideas rarely get heard and people who complain become part of the “bad egg network.”  Once that situation develops, people start to “play it safe.” Leadership realizes they are now working with a team of passive-aggressives who enjoy watching their leaders and their company fail. You are now dealing with an “I told you sooooo network.”  The irony is that this may have started with leadership setting up employees to fail by having an unspoken attitude of ‘I know more than you, therefore’:
   – “If it is going to get done right I will have to do it myself” or
   – “I want you to fix everything, but you can’t change anything.” (This amplifies Right Idea, Wrong Person and highlights little or no true leadership is in the business.)  Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2. 
4. “Look the Other Way” Deals: Your corporate culture has come under attack by frustrated managers and employees who feel like what was once considered an absolute and non-negotiable set of values and way of “doing things” is now being compromised due to “look the other way” deals for special people or brilliant jerks. This unintentionally sets up the start of an underground culture called “Us vs. Them.” Also, employees probably don’t understand that there is a difference between non-negotiable core values and a company culture that matures (like a teenager into adult), along with the company’s success and growth. Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
5. Communication Vacuum (aka: It Sucks): If asked, several people in your company say one of the biggest problems is poor communication, despite the fact there are countless emails, newsletters, voice mails, meetings, etc. During growth, senior managers often lack direct contact with day-to-day operations and feel themselves losing control. Also, meetings (strategic and tactical) become awkward, time consuming and, at times, ineffective. The perception is that there is less communication from the top.  Picture a cell tower without any signal strength. Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
6. Convenient Accountability: Accountability at your company is confused and sporadic because there is a lack of clarity about how to go about creating a culture of accountability that is real and transparent. The only thing clear is that everyone sees the problem and is tired of being fooled by individuals who say one thing and do something else … or never do it at all. It’s also easy for those very individuals to blame the culture for their behavior because they are benefitting from it. Sound familiar? Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
7. Hope Is Not a Strategy: Your company lacks a strategic plan or robust problem-predicting process that gets and keeps the proper focus and/or, the plan never really gets implemented. What is called a “strategic plan” is actually a short-term operational plan on how to solve problems.  Everyone gets a “strategic planning” notebook full of great ideas and then hopes they will get implemented.  Little time is ever spent unlocking the missed opportunities. Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
8. Incentivizing Failure: Your middle and senior management compensation process is not tied to accountability, results or the “right” metrics. The incentives/rewards do not motivate, drive the right behaviors, or produce the desired outcomes. Leadership starts to give up the hope or belief that incentives actually work, or at least they feel they are not capable of designing incentives that work. Some key employees become disenchanted and leave … to the competition or to become the competition. Most often birthed in Level 1 and 2, but the consequences are often experienced in the Rapid Growth of Level 2.
9. SUCKS-ESS GAP:  Revenues are growing and are what your company is most focused on. However, subtly and unknowingly, expenses are growing at a faster rate than revenues. There’s a train wreck on the horizon. Also, financial and other key performance data needed to make critical decisions are not available, not appropriately gathered, not easily accessible or not properly analyzed. The absence of a sophisticated process AND proper analysis to predict and prevent crises before they get out of hand causes the executive leadership team to unknowingly be slow to react to and/or understand changing market conditions and increasing competition. Most often birthed in Level 2, with the consequences experienced in the Rapid Growth of Level 2 while trying to get to Level 3.
10. Scattered Focus:  As your company grew, an Executive Leadership Team was put into place. However, if that team isn’t functioning as a truly aligned team (with maniacal focus), whose members trust and respect one another, it becomes painfully obvious to everyone – especially those depending on them to function as a unified team. “Private” bitch sessions begin and slowly, but surely, paralyze the team’s ability to focus and execute game-changing strategies. Also, it’s often the case that too many people are reporting to the CEO, creating an organizational structure that looks like, and unfortunately performs like, a rake. If the CEO gets worn down, he/she may move the rake under someone else, such as a president or COO, which is not a sustainable solution. Most often birthed in Level 2; if not corrected, you and your company will not get to Level 3.
11. Accidental Management: When a company is growing rapidly, and/or the path of least resistance has been chosen, your company’s top individual contributors have teams grow up around them.  Eventually these best performers get the title of Manager and collectively become The Management Team. However, some individuals in this group are most comfortable in their technical comfort zones and lack the personal experience and behaviors to truly lead. They are unable to develop other people and the processes your company needs to scale. Therefore, they go back to their comfort zone, which is usually “working in the business” instead of “working on the business.” Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2; if not corrected, you and your company will not get to Level 3.
12. Sowing the Seeds of Decay:  Systems and processes (accounting, financial performance reporting, work processes, and Information Technology) have become obsolete for the size and complexity of your company. While the systems may have been “very good” during the rapid growth stage, they now have started to sow the seeds of decay, which is not obvious to the naked eye. Leadership, in its haste to maintain growth, overlooks the fact that some results that look like success (rapid growth) ultimately breed failure (outdated systems that cannot support the weight of more growth). Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2; if not corrected, you and your company will not get to Level 3.

 Build Your Base
Although obvious, you also need to consider the following for a company to mature, grow and stabilize.

• Strong management team. A senior management and leadership team must be staffed with people who are skilled, established managers, as well as being technically savvy. The right people must occupy ALL key positions.
• Systems. Accounting, financial performance reporting, and control systems needed for the company’s size and level of complexity must be in place, and the information produced by those systems used by the management team in decision making and planning. The operating process systems also must be in place and working capably. These systems are necessary to get the day-to-day work done efficiently.
• Market niche. The company must be focused on a well-defined, viable market niche, stay focused on the business in which it has become expert, and produce or sell products and/or services that are compatible with the company’s market niche. Marketing and sales systems appropriate for the company must be in place and effectively working.
• Financial flexibility. The company must consistently meet a set of financial goals balanced among profit, cash flow and equity building.

The equity capitalization of the company must be balanced with the debt the company carries. The objective is to minimize debt capital and maximize equity capital. Companies that are heavily leveraged with debt may grow quickly, but they fall even quicker! This responsible stewardship of resources requires considerable self-awareness on the part of top management.

The critical task for management in each developmental phase is to find a new set of organizational practices that will become the basis for managing the next level of performance.

Leaders at the top must be ready to work with the flow of the tide rather than against it; and they should be watchful because it is easy to diagnose the symptoms and miss the onset of the disease.

We all need the mediation of others to help broaden our vision and deepen our perspective.

KEY QUESTION:

Why is it with all the business experts, business books, business college professors, MBA’s, iconic business gurus, etc. in the world who provide compelling “how to” and “need to” advice that so many companies and leaders grow themselves into predictable and somewhat preventable problems and never really meet their full potential?

Where’s your company on The Business Lifecycle™?

Part 1 in a Series of 4

The Business Lifecycle™ is a model that enables business leaders to identify the level of performance at which their business is operating and to determine exactly what needs to be done to move that business to the next level.

The Business Lifecycle™ is based on my and many other’s years of experience and is an approximation of how successful businesses grow and some of the problems (The Top 12 Warning Signs of Success™) they encounter in their efforts to become what I call a mature, financially stable, professionally managed and led business (Level III).  From my experience this should be the objective of all growth hungry businesses.

By having a sensitivity and general understanding of the stages of development in The Business Lifecycle™ managers  will be in a position to predict problems and thereby prepare solutions and coping strategies to help the company go to the next level before a crisis gets out of hand.

Companies tend to pass through a series of predictable developmental phases as they mature.  Transitions between these phases do not always occur naturally or smoothly, regardless of the strength or expertise of top management.

Every organization and its component part are at different stages of development.  Each level begins with a period of steady growth and stability and ends with a crisis period of substantial organizational turmoil and change.  The task of top management is to be aware of the stages; otherwise, it may not recognize when the time for change has come, or it may act to impose the wrong strategic solution.

Experience shows only one out of ten companies who grow from Start Up  (Level I) to Rapid Growth (Level II) succeed in making the transition to a Market Leader (Level III). The remaining 90 percent slide back and shrink, fight the same battles in different ways, or go out of business when they hit the transition period between Level II and Level III.

The critical task for business leaders in each developmental phase is to find a new set of organizational practices that will become the basis for managing the next level of performance.  Leaders must be ready to work with the flow rather than fighting the tide.  And they must be watchful, because it is easy to diagnose the symptoms and miss the onset of the disease.

When a business is at or near the top of either the Start Up or Rapid Growth Phase (Level I or II respectively), intervention by an experienced business advisor can help determine where the company may be entrenched, blocking transition to the third phase. The advisor can also help plan the necessary steps toward maturing the business and help ease implementation of change.  We ALL need the mediation of others to help broaden our vision and heighten our perspective!

KEY QUESTION:

Where do you think your company is in The Business Lifecylce™, would other people in your company agree?  If not, what level would they consider the company is experiencing?

The Level I Company: "Entrepreneurial Startup"

Part 2 in a series of 4

Below are the characteristics and warning signs of a Level I Company, the Entrepreneurial Startup. This is the first of three defined company stages as part of The Business Lifecycle.™
 

CHARACTERISTICS

• The founders are usually actively involved in running the company.
• The primary emphasis is on producing products or services and selling them.
• Management, systems and planning receive minimal emphasis.
• Communication is informal.
• Employees work long hours and are paid modest salaries.
• Management reacts more to customer needs than to employee needs.
• The founders are either technically oriented or market builders and are usually not skilled managers.
• The company culture – the non-negotiable values and how to treat customers and each other – is generally understood and does not require a lot of reinforcement.
• The growth is greater than inflation but usually slow to moderate.

As a company matures, it often experiences subtle but very troubling growing pains.  Compounding the situation, management, in its haste to maintain growth, often fixes its gaze outward on the environment and toward the future, hoping that more precise market projections and higher sales will provide the organization with the impetus it needs to go to the next level of performance.  All the while, the company may overlook the repairs it needs to implement in order to mature and stabilize.

LEVEL I: Top Warning Signs of Success™
If these problems are present in a company, they will eventually cause “train wrecks” that slow dow or stop the company’s ability to scale. It is the role of the leader(s) to predict and resolve these problems before they show up in the results.

• When there are two or more founders or partners in the business, it is not clear who is in charge and where accountability lies.
• Conflicts between founders or partners often arise and remain unresolved.
• New employees are less motivated by dedication and more motivated by money and status.
• Budgeting and cash control are often insufficient.
• There are often working capital shortages due to minimal cash planning and/or misuse of cash.
• Financial reporting is often slow and inaccurate and use of key performance data is not sufficient to predict problems and develop necessary coping strategies.
• Entrepreneurial founders are often tempted to diversify into unrelated products, services or businesses. 

GROWING PAINS: Leadership and Systems

KEY QUESTION:

What do you think defines a sucessful startup?  If you had to narrow it down to 2 core problems/issues that consistently hold companies back from going to the next level what would they be?

The Level II Company: "Rapid Growth"

Part 3 in a Series of 4

Below are the characteristics and warning signs of a Level II Company, the “Rapid Growth” stage. This is the second of three defined company stages as part of The Business Lifecycle™.
 
 
 
 
 
 
CHARACTERISTICS

• A capable leader is at the company helm (Level I growing pain resolved).
• The business often has multiple locations, such as: 
  • Sales offices
  • Branch offices
  • Warehouses
  • Etc
• More detailed attention is given to certain areas (in addition to producing products or services and selling them), such as:
  • Marketing and sales
  • Inventory management
  • Personnel
  • Accounting, budgeting and finance
  • Systems support
• Employee jobs are more specialized.
• The company becomes more impersonal due to having more employees.
• The growth rate is faster than Level I; sometimes accelerating at a very fast rate.
• The company culture – non-negotiable values and ways of treating the customer and each other – start to need to be communicated and reinforced in words and actions that match.

Usually one or more problems block a successful company’s transition to a higher level of performance.  If company leaders fail to address these problems (actually The Top 12 Warning Signs of Success™!), the company will fight the same battles in precisely the same way, churning on and on, year after year, until – finally – although the business does not explode, the people often do.

When these crises emerge, it is what a company does in response that determines if it moves on and becomes a mature, financially stable, professionally managed and led organization, or if it simply moves on aimlessly — or worse.

LEVEL II CRISIS: Top Warning Signs of Success™
If these problems are present in a company, they will eventually cause “train wrecks” that slow dow or stop the company’s ability to scale. It is the role of the leader(s) to predict and resolve these problems before they show up in the results.

• Company starts feeling the effects of not being run by a qualified and experienced management team:
  • The company’s top performing individuals are brought together to become the management team. However, this group has little experience working as a team and lacks the expertise necessary to scale a business by predicting and resolving the problems before they show up in the results.
  • Delegation becomes increasingly difficult for the leader (CEO).
  • Access to the leader (CEO) becomes difficult for managers and employees.
  • Managers feel better qualified than the leader to make decisions in their technical areas, but they are not permitted to make them.
• Senior management feels it is losing control as a result of having less direct contact with day-to-day operations. Start to see/hear about US vs. THEM.
• It becomes apparent that some of the senior management team members are not developing as skilled leaders or executives.
• One or a few customers represent a disproportionate amount of the company’s business.
• Increased vulnerability to competition.
• Increased internal problems that threaten the company’s ability to scale, such as:
  • In-fighting among managers and supervisors.
  • Outdated corporate culture.
  • “Look the other way” deals on non-negotiable values for certain “special” employees.
  • Inefficient or outdated systems and processes
  • Bureaucracy sets in
• Results that look like success often breed failure due to poor decisions being made by unqualified managers in areas such as:
  • System design and development.
  • Facilities expansion and purchase
  • Recruiting and hiring “the right” key employees
  • Use of cash
  • (Over) Commitment to new products and/or services
• There is less communication from the top.
• Accountability becomes confused and sporadic.
• Problem-predicting and/or problem-solving meetings and processes can be awkward, time-consuming and, at times, ineffective.
• Some key employees become disenchanted and leave.
• Financial performance reporting and control systems are often inadequate for sales volume.
• Major shortages of management time and cash often occur.
• Entrepreneurial owners and leaders are tempted to sustain rapid growth indefinitely without the systems and management team infrastructure needed to scale the business

CRISIS: Executive Leadership Team, Middle Management Team and Systems

KEY QUESTION:

Pretend for a moment that you are THE most experienced, admired and respected business guru in the world, (I know for some of you, you do not have to pretend) .  Your child or key family member has come to you for guidance on what they can do in order to make their business and personal lives wildly successful.  Now assume you can only give them 1 piece of advice on “what to do” in order to be wildly successful and only 1 piece of advice of “what not to do” in order to be wildly successful, WHAT WOULD YOUR ADVICE BE?