I recently polled a group of over 100 CEOs and Business Leaders, asking them the questions that keep them up at night. Here are the top seven with very brief commentary. I hope these questions will be an impetus for further growth in your business.
1. Have we enough cash to survive a major economic or business broadside?
cash is important for the larger business, it is critical for the smaller company or start-up. The most common issue I see particularly with younger and fast-growing companies is lack of cash. Err on the high side if seeking funding and ensure you have a tight handle on cash reserves and needs. Nothing can sink a company faster than insufficient cash.
2. Which employee(s) require replacement that we have not addressed?
The blatant misfits are easy to deal with. The tough cases are the employees who no longer fit because they lack new skills required or are inconsistent performers. In larger companies mediocre employees can also hide in plain sight. A quick exercise will help weed them out. List your direct reports. Give them a rating of 1 to 10 with 10 being superb. Sixes and below require action. No company can afford to provide harbour to mediocre employees but especially so the smaller the company.
3. Do we deeply understand our target customer and the one core benefit we provide to them?
are two concepts woven into this question. A target customer and a single, compelling benefit. Too often companies allow themselves to broaden the definition (if they define at all) of their target customers as well as the benefits provided. With breadth comes lack of specificity resulting in whitewash for your action and communication. Broaden at your peril. You will stand for everything and nothing in the end. The tighter you can focus, the more relevant , compelling and defensible your position will be.
4. Is each of our employees crystal clear on where our company is going and their role in helping to get there.
the need for direction, the biggest leadership shortfall is the belief that employees understand. The more effort expended to educate, converse and gain input, the higher the quality of the engagement and action.
5. Which customers do we need to fire?
Each of us has the Pareto rule when it comes to demon customers. It’s likely that 20% of them are causing 80% of our pain. Conduct a regular review to see them and then take action once you’ve identified them.
6. What is the single greatest impediment to our success and what are we doing to deal with it?
It’s a commonly known secret among consultants that usually the answer to a strategic issue or problem is already known within the organization they serve. It’s often the elephant in the room. Ask yourself what issue your organization is avoiding and you may just strike pay dirt.
7. What aren’t we seeing that could maim or kill us?
Most organizations (and individuals for that matter) see the world through their own lens. Real sight comes from the outside-in not the reverse. As Robert Burns declared, “O would some power the gift to give us to see ourselves as others see us.” Practice this and you or your organization will never be blind-sided by market or competition.
February of 2017 Kraft Heinz bid $143 billion for Unilever PLC . The cultural differences between the two entities couldn’t have been more different. On the one side was Unilever. CEO Paul Polman and its Board had shifted course dramatically in 2009 to favor a longer-term view on corporate growth and development which included refusing to post guidance or quarterly results. Warren Buffett and 3G, the primary owners of Kraft Heinz, were focused on action to drive up share prices. Savage cost reduction was the primary and well documented operating procedure . After only two days following the rejection of the offer by Unilever’s board and recognizing significant other headwinds, Kraft Heinz smartly pulled the deal off the table.
stark contrast between the approaches of the two companies was particularly interesting to me as a spectator because of my former employment at Kraft. During a 25 year career I saw the company morph from a fiercely independent and proud entity (General Foods) to a conglomerate which had been financially engineered in the name of maximizing shareholder value. General Foods, Kraft, Nabisco and Cadbury had been merged. company then split to form Mondelez and Kraft with the latter subsequently merged with Heinz to form the most recent corporate iteration Kraft Heinz. A lot of splicing and dicing which no doubt created a lot of money for a select few but which saw a tremendous amount of employee displacement and little to no improvement in performance. Which brings us back to the myth of maximizing shareholder value.
The mantra and focus on maximizing shareholder value has gradually replaced the stakeholder model (which sought to balance the interest of workers, shareholders and the larger community) in the mid 1980’s. This shareholder ideology is now so pervasive that it’s hard to believe that so few years ago it was non-existent. The original theory of a focus on share price as a key corporate metric traces to Milton Friedman in the early 70’s and followed on in a paper by Michael Jenson of Harvard in 1976. In the mid 80’s it was supported by than Jack Welch (first nicknamed Neutron Jack while re-engineering GE by doing away with a quarter of its workforce). The concept was also popularized and then vilified by Michael Milken of junk bond fame. Still, the ideology didn’t die. It grew stronger.
Most studies now conclude that there is no evidence to support that the ideology of maximizing shareholder value has been effective. The opposite is true. Studies point to this ideology as a prime culprit in the decline of U.S. public corporations and the current sad state of the U.S. middle class. From 1997 to 2008 public companies listed on U.S. exchanges dropped by half.
focus on shareholder value and share price as a primary executive compensation metric has created a monster. Bill Lazonick, President of the Academic Industry Research Center, offers some additional startling facts from research involving the top 500 companies listed on the S & P conducted from 2001 to 2010. During that time a full 94% of the profit generated went to fund dividends and stock buy-backs in order to influence stock price. Put another way, only 6% was re-invested in the operations of the companies. No wonder that the backbone of the US industrial base and the middle class has been eroded so substantially.
U.S. companies are going through a process of financialization, a new term for me discovered in the research for this article. It describes a process which increases the focus on the bottom line to drive profit and thus share prices higher. Capital Extraction was another term used to describe the tactics directed to improving share value. Reduction of sustaining expenses, selling off company assets, employee reductions, dividend and stock buy-backs are all examples of tools used by CEOs to influence stock price. Unfortunately the empirical evidence suggests that these actions create longer-term diminution of stock price and company value. It turns out that short term gain really does create longer term pain.
It’s probably not a great leap to lead one to the conclusion that the current U.S. political situation and populist uprising are directly tied to the development and feeding of the share value ideology. What’s concerning is there is evidence that it is expanding to encompass many of developed and developing countries. Japan, India, the UK and China are catching up. For those of you entrusted with your company’s strategic direction or leadership, it’s time to replace your shareholder value metric or suffer the longer term consequences.
"The difference between God and a Narcissist is that God doesn’t believe he’s a Narcissist”
We all know one. Smartest person in the room. Self-promoter. The arrogant know-it-all who requires an inordinate amount of air-time with little to say that isn’t blatantly self-oriented or self-serving. And the biggest problem? There’s a high probability we’ve just described a few of the traits shared by your direct superior. So now what?
In a seminal Harvard Business Review article in January of 2000, Michael Maccoby addressed the subject of the Narcissist leader. He first observed that there are three basic personality types proposed through Freud’s work. The Erotics (those who need to be loved). Teachers, nurses and social workers would be examples. The Obsessives (Inner-directed, reliant and conscientious). They look to create order and make the most effective operational managers. And finally, the Narcissists. (Independent innovators who seek admiration). The most productive are the strongest leaders, able to think big and create followers. Examples of the productive Narcissist would be Steve Jobs, Bill Gates, Jack Welch. Of course the problem occurs when the coin gets flipped and we encounter the dark side of the Narcissist. It turns out that in extreme cases, Narcissism is classified as a Mental Disorder by the psychological community. Here is the “Diagnostic and Statistical Manual of Mental Disorder” or DSM–5 for the Narcissist. Don’t be surprised if more than a few appear to hit home. For self-preservation, we’ve all got some Narcissist in us.
· An exaggerated sense of self-importance.
· Expecting to be recognized as superior even without achievement that would warrant it.
· Exaggerating achievements and talents.
· Being preoccupied with fantasies of success, power, brilliance, beauty or the perfect mate.
· Believing you are superior and can only be understood by equally special people.
· Requiring constant attention.
· Having a sense of entitlement.
· Expecting favours.
· Taking advantage of others to get what you want.
· An inability or unwillingness to recognized the needs and feelings of others.
· Being envious of others and believing others envy you.
Maccoby added to this list, a summary of the weaknesses of the Narcissist leader.
1. Overly sensitive to criticism.
2. Poor listening skills. Not wanting to hear opposing points of view or thoughts.
3. Lack of empathy. This may work in times of extreme change, but otherwise not.
4. Distaste for Mentoring.
5. An intense desire to compete. Games are not games but tests of survival.
something of a tongue in cheek, Maccoby also noted that there was very little in the way of literature about how to deal with the Narcissist leader because few are really interested in looking inward.
The worst part about the foregoing attributes is that those exhibiting these types of behaviours are blind to their impact on others and surprised when it catches up with them as it most often does. Over time they find themselves alone.
Narcissistic Leadership affects large and small company alike. Entrepreneurial ventures are particularly susceptible because they rely so heavily on the direction of the owner/founder. That individual wields two big sticks: the experience acquired while building the company and the ability to effectively squash dissenting opinion. Too often, the company’s actions are directed toward the preconceived notions of the founder with disastrous results.
Thoughts on Dealing with Narcissist Leadership:
· First and foremost, if you can’t stand it. Leave. You’ll both be much happier.
· Establish a symbiotic relationship. The marriage between the Obsessives and Narcissists can be a very strong and productive bond. Someone needs to stick to the knitting, get stuff done and organized. The Obsessives provide that value and the ability to keep the Narcissist rooted in reality.
· Stick with facts. Whether speaking to new information about the corporate environment or an individual, outside –in information is the most powerful. The objectivity offered by a trusted 3rd party will also increase believability
Don’t go it alone. There is power in “we”. I often counsel leadership teams to step up as a group rather than try to tackle a leader one on one. It’s a lot easier to shoot the messenger if it’s only one person.
· Take the Narcissist out of their comfort zone. Subject experts are a great way to introduce new ideas or infuse knowledge into the mix and start the wheels of change moving. The use of case studies which illuminate similar challenges has the advantage of being both authoritative and non-confrontational
I got a frantic call just the other day from an entrepreneur that had built a new internet start-up from nothing to something. He’d just been given an ultimatum from the VC’s that had been brought into the firm. Relinquish the CEO position in favor of one of their picks (and accept another position) or exit the firm. His question to me? “Should he fight it?” The answer of course was that there was really no fight to be had. He’d already set the wheels in motion when he accepted the resources of the VC in the first place. The only thing he had to decide was whether he should stay with the firm or pursue something else. And that was totally up to him.
What happened here has been a long-time focus for Noam Wasserman of Harvard University starting with a paper entitled “Rich versus King” which was first published in August of 2006 and his most recent work, “The Founder Resource-Dependence Challenge” March 2014. It has also been a key focus in my consulting practice with small and medium sized companies for the last few years and a fundamental take-away from my book, “The Success Cage” launched October of 2013. It’s this. Any business owner has a fundamental question to answer for themselves and their businesses: Do you want to maximize your wealth or control of your business? You can’t have both.
The issue can be gut-wrenching for any business owner. The vast majority have built their businesses from scratch into good companies which provide a decent income for the owner and those associated with the business. To grow beyond the owner/operator-managed company requires different skills and resources than those which brought it success to this point. Two popular sayings come to mind… “What got you here won’t get you there.” “To grow you’ve got to let go.”
The brilliance of Wasserman’s work is that he’s put some hard numbers to support these common refrains. The first work referenced above studied 457 private ventures in technology. Lack of industry sample diversity aside, it came to one major conclusion: The more decision-making control kept by the business owner, the lower the value of the owner’s stake. Wasserman’s more recent study drew from a much larger sample. He used a dataset of 6,130 American start-ups and concluded that retaining full control diminished the organization’s value by an average of up to 58%.
Within the article, he also reprised some important associated observations from others studying the subject. “After the starting difficulties have been overcome, the most likely causes of business failure are the problems encountered in the transition from a one-person, entrepreneurial style of management to a functionally organized, professional management team.” (Hofer & Charan 1984, pg. 2) In order to grow, the needs of the organization move from the specific knowledge needed to build a product or service offering, (in my parlance “high technical” skills) to the more generalized knowledge and processes of managing a more complex firm (“high leadership”).
The key steps along the organizational journey pose a continuous trade-off between attracting the resources (capital & people) required to grow and build company value & being able to control decision-making. The key question for the business owner? In the end it comes to this. What drives you? Is it the need for maximizing wealth or the need for control? The two do not go hand in hand. And without going into a lot more detail…my experience is that most side with the latter. It’s head versus heart and usually the heart wins.
“At some point, your business will teach you that you can’t do it all.”
Although this applies to all leadership positions, it is especially the case for founders and owners of the privately held enterprise. The quote listed above and short story which follows comes from a business owner who learned this all-important lesson. The story ends spectacularly. Last year he sold what started as a reasonably successful business with about $20 million in revenue for over $500 million U.S. More importantly, through the growth process he got his life back. In his words…
“I was at my wit’s end and ready to throw in the towel. The harder I worked the worse it got. It was bad. I was alienating my team, my family and customers. Until I realized that to grow, I had to let go. I needed a road map and someone to keep me focused and out of the minutia. I restructured my role and my team. The magic started to happen immediately.
I’ve now moved away from diving into the day-to-day. I have a renewed trust in my team and they now believe I won’t dive back into the business. Last year I took 12 weeks of holiday and I intend to take more this year. What a change from feeling overworked, stressed and solely responsible for the success of the business. It was the toughest thing I’ve ever had to do but the reward was worth it!”
For those of us who have held leadership positions I venture that the toughest road to climb is that of delegation. We’re wired to focus on ourselves for survival so delegation doesn’t come naturally. The truly great leaders learn the lesson of delegation early and use it to great effect in their business and personal lives.
As careers and businesses progress, there is an inverse relationship between a leader’s involvement with the day-to-day operations within a business and success.
Your goal as you move up the ranks or build your business is to become progressively more operationally irrelevant.
Here are several keys to breaking the operational bonds.
It starts with you.
With apologies to Gandhi, “You have to become the change you want to see”. Moving from “I do it all” to “you do it all” won’t come easily. Your team won’t be ready because you’ve likely trained them to look up before they act. It will take time; perhaps some people changes and likely require an outside resource to act as your guide and accountability stick. Old habits die hard and self-policing is unlikely to be successful.
The leadership team has to believe that change can happen.
An equal challenge is convincing your leadership team that a monarch can become a cheerleader. Most have likely had years of experience to the contrary and rightly go into the process with a jaundiced perspective. While I have found that a formal process of contracting roles, goals and responsibilities can be effective, real change happens only if both sides walk the talk. Direct experience is required and takes time to set.
Introduce new blood.
Instilling someone new who is responsible for the day-to-day is the quickest way to introduce the change. This is a major challenge for the obvious reasons. Fit – with both leader and employee group. Primary to their role must be the development and institution of disciplined process and metrics. The focus is to systematize the business, itself a major change.
Build an operating plan and make it the center of the day-to-day activity.
There must be something that guides the company’s action and can be relied upon to act as a sea anchor (helping the company to stay the course when times become turbulent) in a changing environment.
Police the process
Left to their own, few companies or leadership effect sustained change. The tendency is to drift back to the old ways of doing things . Most times, the introduction of a third party to keep the process on track is required.
The challenge of building a delegation culture is substantial. So too is the reward for business leaders and owners who achieve it. Exponential increases in business value, the ability to step outside of the business to chart exciting new directions and to find time to pursue other avenues of interest are well worth it.
My daughter called me from an upstairs bedroom the other day. "Dad, can you help me hang these three pictures on the wall?" Without thinking, I trundled upstairs and began to arrange the required tools. This, by the way, is about the extent of my expertise when it comes to handyman work...that and correctly replacing light bulbs - sometimes.
Before I began, I had a pang of guilt. "Why was I doing this and not my daughter?" So I asked her. "Because I suck at hanging pictures" she replied, "I can never get them spaced right or hung the right way." That's exactly when I should have stopped and turned the job over to her to complete. Instead, I mumbled something under my breath and proceeded to hang her pictures for her. "Hadn't she just finished painting her whole room by herself, with no help at all from me?" I rationalized. The process however, taught her nothing! I was actually doing her a disservice by hanging those pictures!
There's a new book out by J. Keith Murnighan entitled "Do Nothing". It's a book on leadership that quite correctly admonishes those in executive positions for micromanaging. He uses the metaphor of a vacuum early in the book to describe the process by which work will get done. "In Physics, a vacuum is particularly fragile: to survive, it must be contained. If not, other elements will be drawn to it and will fill up the space. Effective teams work the same way."
I struggle with learning that lesson, particularly so in my role as advisor. I must admit that it doesn't come naturally. My predisposition is to dive in and try to solve. I can think of nothing more exhilarating than to be given a particularly gnarly issue to chew on and spit out potential solutions. But who am I really helping in that circumstance? Of course the answer is me. The real challenge of leadership is to frame the issue or challenge and get out of the way. Great leaders ask open-ended questions and then listen.
My brother (who has a great sense of humour) sent me over the following quote from Aristotle. He opened the email with these words. "I thought I'd send you over a copy of the quote we spoke of, just in case you weren't listening." Here's the quote:
"Wisdom is the reward you get for a lifetime of listening when you thought you would rather be talking."
The biggest challenge I have as an advisor is to help business owners and senior executives delegate. They consistently dive back "into" the business, figuratively pushing their teams out of the way. Teams and employees learn quickly. Pretty soon you've got people sitting on their hands, waiting for the stone tablets from on high. And what do you think I get as questions from these leaders? Questions like, "Why do I end up having to do the work? Why can't they dive in without me?" There's really only one answer. "Because you taught them!"
“It is our job to competently maintain high quality intellectual capital, while continuing to continually facilitate progressive meta- services!”
“Our challenge is to assertively network economically sound methods of empowerment so that we may continually negotiate performance based infrastructure.”
You probably reacted to these statements the same way that the employee population of these two respective companies did. Whoa! I’m willing to bet that we’ve all been exposed to this type of baffle-gab. And yet, at least one person (and most likely several) thought these statements were abundantly clear.
Reading the Globe and Mail the other day, I found an interview which suggested an interesting experiment. Take your company’s Vision, Mission, Statement of Values and if you’ve got one, a Statement of Purpose and cover up the titles. Can you or your employees identify which is which? Most can’t which of course just underscores how well the communication will perform once it hits your corporate stage.
Great communication is short, simple, pragmatic and connects to the heart, not the head. It’s for that reason that I speak of a “Destination” rather than a vision. Here’s a short story to underscore the power of a Destination statement.
Ian, (name changed) had recently bought into a company and became its CEO, soon to be owner. Believing in the power of collaboration, he brought together the employees so that he could share his vision and mission for the company and get their input. Following his presentation, conversation commenced with several individuals taking part. Five minutes into the discussion a hand went up from the back of the room.
“Yes?” queried Ian. An individual who worked on the manufacturing line, stood up and addressed Ian and the rest of the employees.
“I don’t know about your Vision …but I’ve got one myself!” he exclaimed. “Looking at the state of the facilities, it’s to help get this business big enough so we can move out!” And with that, he sat down.
To Ian’s credit, he listened. “Does anyone else feel the same?” One by one, the hands went up. “Here is an opportunity!” thought Ian. I’ll fast forward the story. Ian replaced the vision he had created and took the statement, “Big enough to move.” as a replacement. Once that was determined, he had the rest of the team work on exactly what that meant, what needed to be done to achieve that goal and lastly, how they would measure whether they were making progress. Brilliant!
The Destination was succinct, motivating and abundantly clear to every employee.
It spoke to the heart, not the head.
It laid out the specific actions and measured their progress.
In their seminal work on effective communication, “Made to Stick”, Chip and Dan Heath reinforce the importance of clarity and simplicity using a concept taken from the U.S. army called “Commander’s Intent”.
“CI is a crisp, plain-talk statement that appears at the top of every order, specifying the plan’s goal, the desired intent of the operation. No plan survives contact with the enemy. And in business, no plan survives contact with the customer. It’s hard to make ideas stick in noisy, unpredictable, chaotic environments. It’s got to be simple…the core of the idea. The tough part is weeding out ideas that may be really important, but just aren’t the most important. That’s the challenge of creating a really powerful destination statement. Finding the most important idea.
Herb Kelleher (the longest-serving CEO of Southwest Airlines) once told someone, “I can teach you the secret to running this airline in thirty seconds. This is it: We are THE low-fare airline. Once you understand that fact, you can make any decision about this company’s future as well as I can. That’s his Commander’s Intent or Destination Statement.”
Every summer, my parents used to bundle the family into the car for our eagerly anticipated vacation to our rental cottage in lake country. We loved the wild beauty of the place, the feel that it was tucked into a little corner of the world that time had forgotten.
This was especially true of the picturesque little town nearby, where small mom-and-pop stores lined Main Street. And the best of the bunch was the local “five and dime,” an eclectic little store called Joe’s Emporium. Stepping into Joe’s was an adventure. You didn’t shop, you explored. I still remember the scents, a delightful blend of cotton candy, wood and machine oil that evoked something mysterious . . . something magical.
Joe was the most popular guy in town, always dressed in old jeans and a faded shirt, a smile perpetually on his face and twinkle in his eye. He had a memory like an elephant, always treating our family like old friends — even though he only saw us once a year. And that was why Joe’s Emporium was able to fight off the eventual onslaught of the bigger box retailers when so many others succumbed. He knew and cared deeply for his customers and that respect and appreciation was returned in equal measure.
Despite clamouring for more customer-centric business practices or the mining of Big Data, the sad fact is that old Joe forgot more about connecting with customers than most businesses will ever know. The challenge today is to connect and understand our customers with the intimacy that came so easily for Joe.
Here are some thoughts and questions that I’ve selected from a Harvard Business Review article from nearly ten years ago that have proved helpful for several ofthe companies with which I work. May they help you as well.
1. Which customers use or purchase our product in the most unusual way?
2. Who uses our product in ways we never expected or intended?
3. Do any customers need vastly more or less sales and service attention?
4. Who uses our products or services in surprisingly large quantities?
5. Who else is dealing with the same generic problem as we? Can we copy them?
6. What other products do our customers use in addition to ours? Opportunities?
7. What’s the largest barrier to use for our product or service? Could we eliminate it?
There’s really no substitute for the insight gained through direct customer experience. One of the businesses with which I’m familiar recently opened a retail location simply to gain that deeper connection and insight in support of their product line. A little over the top perhaps, but the benefit of establishing that connection and daily insight is paying off in spades. The bottom line? Despite the lure and attraction of new advances in technology and tools, there’s nothing like direct communication and contact to build customer knowledge and insight. Use the newer tools, but don’t substitute that for the real thing.
One of the most important lessons I’ve learned – the importance of getting your core customer right - came from a colossal mistake. Here’s the story:
I was the marketing executive responsible for leading the charge on one of Canada’s Food icons – Kraft Dinner. To say that Kraft Dinner has a following is an understatement. Canadians have a very special relationship with KD. It starts when you’re young and touches you throughout your life. From child to grandparent. For years it was advertised and targeted to Mom’s with pre-teen kids. It was time for a new television spot to be created, so we tasked J.W. Thompson to create a new piece to be aired that year. The result was a commercial we all loved. It showed photogenic little kids eating KD in various cute ways set to the tune of the song “It had to be you”. We puffed up our chests, certain that we’d created a piece that would build substantive gains for the brand once aired. But, after a number of weeks on air, the needle didn’t move. Nothing. Nada. We’d missed something.
Perplexed, we went back to the drawing board to try to figure out where we’d gone astray. We talked again to our consumer base. We looked into how they used it at home and the relationship they had with the product. And finally, a new learning emerged. As it turned out, most people, regardless of age related KD to a rite of passage: living away from home for the first time. It brought back memories of dorm life, newfound freedom and college apartments. No wonder we hadn’t hit the mark. Cute kids playing with their food was the furthest away from college dorms and university memories! We changed the copy, directed it to the right consumer and the business took off!
There are two important lessons from this story. The first is picking the right core customer upon which to focus. Get it wrong and virtually all of your business activity will be misdirected, not just your communication. Second is laser focus. The tighter you can define your core, the more effective your execution. Avoid the natural tendency to broaden your appeal and extend the core. You’re just watering down your effectiveness and scarce resources.
Here’s a non-exhaustive list of questions you can use to help identify your core customers and better focus your business. The most important thing? It starts with them and their needs…not yours.
How do your customers make their decisions about your products or services?
What’s the competitive landscape? Who are they focused on?
What problems are your customers seeking to solve?
What are your customers’ customers problems? Solving them is a home run!
How have you reduced the barriers to purchase for your customers?
How could you make the purchase decision easier?
Have you set up a system for recording customer transactions and experiences?
Have you sourced and read strategy and industry reports relative to your business?
Are you speaking regularly with your customers? Directly? Through others?
What insight and learning have you got relative to your customer base?
Is your customer base different from others in your industry? How? Why?
Have you spoken with your front-line employees to learn what they know?
Do you understand how your offering fits within the context of their broader lives?
Have you a deep financial understanding of the profitability of each of your customer segments?
The strongest plans and execution starts with deep insight and laser-focus on the right core customer. Get that correct and you’ve upped your probability of success immeasurably. Get it wrong, well, you know what the end of that story is likely to be.
Blockbuster, Dell, Kodak, Motorola, Sears, Sony, Blackberry and now sadly, my alma mater…Kraft Foods. All have now succumbed or are in the process of succumbing to market changes that were recognized but not appropriately addressed.How could this happen to companies that had everything going for them?Organizational inertia.It plagues small business and industry juggernauts alike.Fortunately, the script doesn’t have to play out poorly.
The literature is well-developed in the subjects of organizational inertia and change management.Some research shows that an imminent threat to an organization can become a catalyst for reducing inertia and spurring the company to action.That’s the good news.Unfortunately, the more common organizational responses tend to heighten rigidity and hasten demise as noted by Clark G. Gilbert in his seminal research at Harvard in 2005.
Gilbert’s study concluded that in many cases in which an organization was faced with substantive change, the organization goes into defensive mode.Rather than focus on ways to meet the change directly it retrenches as follows:
Contraction of authority that amplifies the rigidity of routines and processes.
Reduction of experimentation and heightened risk avoidance.
Increased focus on existing resources.
These are just fancy words for tightening of centralized control, risk avoidance and reliance on what’s worked in the past.In a larger company pin it on bureaucratization, in the smaller, the founder and the need to re-establish control if the ship starts to take on water.
1.Take the problem out of the purview of the existing organization.Set up a task team, new venture or division to deal with the threat.Give it structured autonomy allowing it to deal with the threat in new ways and alternatives.
2.Widen Your Metrics.What gets measured gets done.Broadening your market, competitor and product definitions will provide a different view, opportunities and potentially expose new threats.The opposite is also true.We used to joke that every time we lost our share leadership in a category of business, we’d just narrow the definition of the category to re-establish our leadership.Is Kool-aid really a powdered soft drink?
3.Increase Your Tolerance for Failure.Don’t seek silver bullet solutions.Play organizational small ball by seeding several initiatives.Swinging for the fences can reap large rewards but most often, large and costly failure.
The statistics on success of organizational change is quite sobering.70% of these attempts end in failure.By following the steps outlined above, my hope is that you have increased the potential to be in that elite 30% that make it.