Tuesday, January 10, 2017

As Business Owners and CEOs – Are we our own worst enemy?

Editor’s Note: In our work with middle market companies, we focus on identifying the barriers and obstacles to growth to the next level that that companies can build over time. In a 2016 book, The Founder’s Mentality¹, authors Chris Zook and James Allen identify that when companies “fail to achieve their growth targets, 90 percent of the time the root causes are internal, not external. These include increasing distance from the front lines, loss of accountability, and proliferating levels of processes and bureaucracy, to name only a few. What's more, companies experience a set of predictable internal crises, at predictable stages, as they grow.” As we look at 2017, perhaps we can all benefit from some self-examination. I hope you find this article helpful.         - dpm]
As Business Owners and CEOs – Are we our own worst enemy?
Many times we are our own worst enemy. This is certainly true when it comes to companies failing to grow and thrive. As referenced above, 90% of the root causes that impede company growth are internal. For many years, our consulting business has begun virtually every assignment with a scan of the company to identify barriers and impediments to growth to the next level and recommendations to overcome these barriers. As we identified in a recent article, “Are your Strategic Planning Efforts Doomed to Failure before You Start” the following are some of the typical barriers:
Barriers to Planning Success
  • History of only partially developing plans
  • History of unreasonable expectations and unachievable goals 
  • Lack of internal understanding about customers, competitors, and the market

In addition to barriers to planning, company teams have a lack of confidence and skepticism about their ability to execute plans. This could come from a company history of abandoning projects, a history of unclear objectives and metrics, too many strategies and plans, a history of poor communication, a history of poor delegation and leadership, gaps in management capability, or a lack of true accountability.

Barriers to Execution Success
  •  Gaps in management depth
  • History of abandoning projects
  • History of lack of openness and poor communications
  •  History of poor delegation and leadership development
  • Lack of true accountability

Organizations that have barriers to planning and execution have one characteristic in common: there is little or no connection between the plans they create and management behavior around execution. Most management teams quickly get swept away with the urgency of the day-to-day business and the plan is forgotten.

In the book, The Founder’s Mentality, the authors identify three crisis points experienced by companies:
1.       Overload. The first crisis, overload, refers to the internal dysfunction and loss of external momentum that management teams of young, fast-growing companies experience as they try to scale their businesses.
2.       Stall –out. The second crisis, stall-out, refers to the sudden slowdown that many successful companies suffer as their growth gives rise to layers of organizational complexity and dilutes the clear mission that once gave the company its focus and energy. Stall-out is a disorienting time for a company: the accelerator pedal of growth no longer responds as it used to, and faster competitors begin to gain ground. Most companies that stall out never fully recover. 
3.       Free Fall. The third crisis, free fall, is the most threatening. A company in free fall has completely stopped growing in its core market, and its business model, until recently the reason for its success, suddenly no longer seems viable. The management team often feels it has lost control. It can’t identify the root causes of the crisis, and it doesn’t know what levers to pull to escape it.

The authors go on to describe characteristics of Founders that need to be maintained and encouraged if companies are to continue to be successful:  
1.       Insurgent mission - Founders have the focus of waging war on behalf of under-served customers, or redefining the rules of an industry, or creating a new industry.  If that passion wanes within the company, or the mission becomes unfocused, employees will no longer be operating on the same page.
2.       Owner’s mindset – Founders have an aversion to bureaucracy, a bias for action and a strong cost focus. Their teams tend to feel and act like owners, treating expenses and investments like their own money. Analysis paralysis, multiple levels of decision-making, risk averse and slow to act companies begin to wither as they miss opportunities. Managers and employees who are just getting through the day or picking up a paycheck will slowly suck the life out of a company.
3.       Front line obsession – Founders are obsessed about their customers, always wanting to learn more about their changing needs, making certain that they are well-served. Founders are obsessed about the front-line employees, making certain that they have what they need to be successful providing the best product and serving the customer. When decisions are made at corporate levels with managers who are removed from customers and front-line employees, bad things happen.

As you begin the new year, I would suggest that every business owner or CEO could benefit from reading this book and take stock of what is going on in your company. Does your company have the characteristics of a Founder’s mentality?
If you would like to discuss how to identify and overcome the barriers to successful growth, please contact me.

¹ “The Founder’s Mentality: How to Overcome the Predictable Crises of Growth” by Chris Zook & James Allen, 2016

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