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“The toughest thing about the power of trust is that it’s very difficult to build and very easy to destroy.”

Renowned business author Patrick Lencioni likes numbers.  You can tell by the way he titles some of his books: The Five Dysfunctions of a Team, Overcoming the Five Dysfunctions of a Team, The Four Obsessions of an Extraordinary Executive, The Three Big Questions for a Frantic Family, The Five Temptations of a CEO, and The Three Signs of a Miserable Job.  So it came as no surprise when I recently happened across a brief article by Lencioni titled, “The Five Behaviors of a Cohesive Team.”  I don’t want to outline his entire team-building program for you (it’s copyrighted), but I do want to use it as a springboard for a discussion about the foundation of Lencioni’s or anyone else’s team-building program.  If your company as a whole doesn’t function as a team as well as you’d like, or if individual teams within your company don’t function the way you think they should, please continue reading below.

“The toughest thing about the power of trust is that it’s very difficult to build and very easy to destroy.”     – Tom Watson, IBM

Any team-building program I’ve ever come across (and I’ve come across a lot of them) starts with getting team members to count on one another, to depend on one another.  In short, it starts with building trust.  Some programs try to jump start the process of building trust with some gimmicky exercises (like asking each team member in turn to fall over backwards and “trust” his teammates to catch him), but in my experience, building trust takes time and it takes effort.  Shortcuts and gimmicks don’t lead to the kind of deep, long-term trust that a truly effective team must have.  So let’s look at a few of the things that, over time, will build a strong bond of trust.

Consistency.  Honor your promises.  Make your word your bond.  Team members need  to know that that they can count on their fellow team members to do what they say they’re going to do . . . not some of the time, not most of the time, but every time.  And this needs to apply to every commitment a team member makes whether it’s bringing a big project in on time and on budget, or stopping for donuts on the way in to work.  The attitude needs to be, “If Mary says she’s going to do it, it’s as good as done.  You can take it to the bank.”  NOTE:  Just to be clear here, we’re talking about “consistency” in a positive context.  If I can always rely on a fellow team member to throw me under the bus every time he or she has a chance, that doesn’t count and is unhelpful to the whole team-building effort.  But you already knew that, right?

Accountability.  This goes right along with consistency.  If team members are not willing to be held accountable to do what they say they’re going to do, how can anyone trust them to do it?

Familiarity.  It’s a lot easier to build trust if team members relate to one another as friends and colleagues than it is if they only see themselves as co-workers.  Trust doesn’t grow very readily if the only bond between team members is that their cubicles happen to be adjacent to one another.

Respectful communication.  When trying to solve problems or explore new ideas, robust, even emotional, debate within a team is a healthy thing . . . as long as it stays respectful and professional.  But if the debate becomes personal and abusive . . . if team members start attributing unworthy motives to one another . . . trust breaks down.  Effective teams learn to disagree without being disagreeable.

Integrity.  Be honest.  Don’t hold back information or omit important details.  Don’t try to take personal credit for what the team does.  And when you screw up (as we all do from time-to-time), don’t try to cover it up, offer excuses, or shift blame.  Just own it, do what you can to fix it, and move on.

As noted earlier, this stuff takes time and it takes effort.  None of the things discussed here will generate trust overnight.  They must be demonstrated over and over and over again until they become ingrained in the team’s DNA, until they become habits.  But once real, long-lasting trust has been built and maintained, you will have created the strong foundation for a truly effective, results-oriented team.

 
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“Bigger isn’t better if it isn’t making money.”

In the life of every successful small business, there comes what the mathematicians would call an “inflection point” . . . it’s the point on a curve where the curve changes direction.  In a business, it’s that point where an owner must decide whether to keep the business at a relatively small size, or pull out all the stops and try to see how big he or she can grow it.  Either way, there are risks.  If you stay small, you’re at risk of being squashed, or at least marginalized, by larger competitors.  Consider what it’s like to be a friendly, neighborhood, mom and pop hardware store when Home Depot comes to town.  On the other hand, pursuing a growth strategy carries a whole host of risks that an owner had better understand before going down that road.  For a discussion of those risks, please continue reading below.

“Bigger isn’t better if it isn’t making money.”        – Pat Flinn, ValueJet

That’s just another way of saying, “Growth for the sake of growth is a fool’s errand,” isn’t it?  Depending on the industry you’re in and the prevailing market conditions in that industry, a growth strategy may not make much sense . . . it may be a much better decision to remain a small, profitable niche player.  But even if the industry and the market conditions do favor a growth strategy, growth always carries risk.  So before embarking on such a strategy, an owner should carefully consider the pitfalls and landmines that could cause him or her to fail.

Below are some of the factors . . . not all, but the most common culprits . . . that cause growth-oriented companies to fail.

  1. An inability to set priorities.  Priorities are not organized in a logical, top/down fashion.  Instead, everything is a “top” priority.  When everything is a “top” priority, nothing is.  As a result, the organization becomes paralyzed in the confusion over which “top” priority they should be working on.
  2. A failure to stick to the strategy.  At some companies, the corporate strategy is fluid as top leadership endlessly tinkers with it.  In this situation, the organization can’t support the strategy because no one (including top leadership) knows what it is.  It’s a moving target.
  3. A reckless disregard for the risks.  If a company has been successful and is well-capitalized, an arrogant, damn-the-torpedoes-full-speed-ahead mentality can set in.  So it piles on overhead in the form of new people, plant, and equipment, but revenue growth can’t keep up, and just like that, bank accounts are dry and the company is in trouble.
  4. An inability to assimilate strategic acquisitions.  Organic, internal growth can be frustratingly slow, so growth-oriented companies frequently choose to grow by acquisition.  While their large company brethren may engage in acquisitions routinely, small company managers probably don’t do enough of it to become proficient.  As a result, they don’t fully appreciate the difficulty of merging two separate cultures, compensation systems, operating procedures, IT systems, etc.
  5. Operational failures.  When a growth strategy is very successful from a revenue standpoint, it can outrun the ability of people, plant, and equipment to keep up.  People become exhausted, frustrated, and may eventually quit.  Deadlines are missed as are delivery dates.  Customers start seeking alternative providers.
  6. A cash crisis.  Growth always has an impact on cash . . . the more ambitious the growth plan, the more risk that cash flow will go from positive to negative.  This happens too often when owners try to get by on a shoestring budget, and find out too late, they can’t.  Under-funded growth strategies have sent more than one small company to the bottom.
  7. A crisis in leadership.  Some of the people who got us to this point are out of gas.  They have risen to the level of their incompetence.  As a result, our growth is stalled, and we may be experiencing the sort of operational problems mentioned in #5 above.
  8. Market misalignment.  In its early, smaller days, with a smaller customer base, the company’s owner and managers are able to be agile, responding quickly to changing trends and customer demands.  But as the customer base grows and customer demands become more varied and complex, the company may find it’s difficult to maintain the intimate relationships it formerly enjoyed with its customers.  As a result, the company finds it is out-of-touch with its customers’ needs, and probably ill-prepared to meet those needs quickly.
  9. Outgrowing the business model.  While successful companies may have a deep understanding of their business model, and while they may rigorously follow it, over time, it will become outmoded.  As customers change, competitors change, technologies change, governmental regulations change, so too must the business model change.  As business owners frequently say, “What we did and how we did it when we were a $5,000,000 company don’t work very well now that we’re a $10,000,000 company.”  Owners who fail to recognize the need to regularly review their business model, and to make appropriate changes to keep it current, will soon find their company is no longer relevant to the market it is trying to serve.

Business speaker Richard Palmer has said, “Most companies grow themselves out of business.  They either can’t finance it, or they can’t manage it.”  That’s why 9 out of 10 small companies fail within their first three years . . . a daunting statistic.  Still, if you’re determined to get on the road to growth, and if you know where the potholes are and are prepared with plans to avoid them, you stand an excellent chance of being the 1 in 10 survivor.

 
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“What we have here is a failure to communicate.”

Today we have more ways to communicate with one another than ever before.  Of course, we have face-to-face spoken communication which we have had for thousands of years (although we seem to be doing that less and less).  We also have old-fashioned written communications such as letters, newspapers, magazines, books, etc.  These too we’ve had for a very long time.  But now we have a whole host of other communications tools available to us . . . radio and television, obviously, but also email, texting, and Skype.  We can blog, we can tweet, and we can post all manner of stupid stuff on Facebook.  We can host webinars.  With cell phones, we can communicate with one another whenever and wherever we want to.  Yet all these wonderful communication tools have nothing to do with the quality of our communications, only the quantity and frequency of them.  Poor communication is still poor communication whether it arrives by email or by pony express.  For those of us in business, that’s important to remember because honest, complete, timely, effective communication is at the heart of sound leadership, building trust, accountability, and effective delegation.  For more on this, please continue reading below.

“What we have here is a failure to communicate.”

That is a famous quote from the movie Cool Hand Luke.  While the movie was about a prison chain gang and had nothing at all to do with business, the quote itself is still instructive for us.  Why?  Because when our plans don’t quite unfold the way we want them to, when a project or a new initiative struggles to get on track, there is probably a “failure to communicate” in the mix somewhere. 

Effective communication is a starting point, of sorts.  It’s an essential tool for building trust, and if we can’t build trust up, down, and across the organization, it will be very tough to get anything done.  So honest clear communication builds trust, and trust allows strong leadership to flourish.  After all, who’s going to follow someone they can’t trust.  Strong leaders will bring accountability to the organization.  They understand that if we can’t hold one another accountable to honor our commitments, the trust that we worked so hard to establish starts to crumble.  And finally, company leaders can delegate work confidently, knowing that the person to whom they have delegated the work will “own” it and will hold him or herself accountable for completing the work successfully.

If we were to graph this sequence of events, it would look like:

Good Communication → Trust → Strong Leadership → Accountability → Effective Delegation

OK, so let’s look at what distinguishes “good” communication from communication that is less than optimal.

  1. It’s well targeted.  That is, it goes to everyone who needs to know.  While that may seem obvious, this is the birthplace of “unintended consequences.”  Somebody’s ox gets unintentionally gored because that somebody should have been included in the communication loop . . . but wasn’t.  When in doubt, send it to everybody.
  2. It’s honest and complete.  You may think it’s a kindness to shield others from the unvarnished truth (particularly if the unvarnished truth is ugly), but it’s not kind at all.  Tell it like it is.  Don’t “spin” it, don’t color it, don’t make it unduly pessimistic or overly optimistic.  Just tell it like it is.
  3. It’s clear and concise.  There’s a fine line between providing too much information and not enough.  If your communication is too brief, your message may not be fully understood.  If it’s a “brain dump,” your message may be lost in the details  It’s important to get this right, so if you doubt your ability hit the right balance between too much information and not enough, get help.
  4. It’s timely.  Whatever the message, give your organization as much time as possible to digest it, to react to it, and to take appropriate action.  If your people feel they are constantly being blind-sided by last-minute communications, they will be unnecessarily stressed and probably not as productive as they would otherwise be.

Effective communication is not complex, but it can be hard work and it can be time-consuming.  Still, if the payoff is a culture of trust, strong leadership, and accountability, I’d say that’s a pretty good ROI.

 
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“How High Is Your XQ?”

Earlier this year, Eliza Gray, a staff writer for Time magazine, wrote an article about the “era of optimized hiring.”  In it, she explains that many companies today are requiring job applicants to submit to personality tests.  And we’re not talking about just applicants for upper management jobs, we’re talking about everybody from the executive suite to the loading dock.  According to proponents of such testing, if we can understand the psyche of job applicants . . . their likes and dislikes, fears, aspirations, motivations, etc. . . . we can select those who will be the happiest and most successful in the jobs we have to offer, and who will thrive in our environment (our company’s culture).  As a result, so the argument goes, employee turnover will go down while both productivity and customer service will go up.  Sounds reasonable, doesn’t it?  After all, it’s in keeping with business guru Jim Collins’ admonition to get the right people on the bus (people who fit the company culture) and to put them in the right seats (jobs).  But is it really that simple?  Maybe not.  Maybe there’s another side to this personality stuff we ought to take a look at.  If you want to take that look, please continue reading below.

“How High Is Your XQ?”

That’s the question posed by the Time magazine cover story.  “XQ” is a term coined by Eliza Gray for her Time article.  If IQ tests measure intelligence and EQ tests measure emotional stability and sensitivity, then there should be a term for tests that measure someone’s fitness to perform well in certain jobs.  Finding none, Gray decided to call it “XQ.”

In the interest of full disclosure, I myself have written many times about the benefits of looking beyond a person’s skill sets and taking a close look at their behavioral and personality traits . . . benefits in terms of job satisfaction, retention, productivity, and so on.  And I am an ardent believer in getting the right people on the bus and putting them in the right seats. 

The problem comes in defining who these “right” people are.  How high an “XQ” does someone need to be considered “right?”

If by “right” we mean someone who thinks and acts just like us . . . if in fact we want clones of ourselves . . . that can be a real problem.  As General George Patton once said, “If everybody’s thinking alike, somebody’s not thinking.”  If we hire people who are just like us, where will innovation and creativity come from?  Who will be the maverick who will shake us out of our comfort zones once in awhile?

So how do we balance our need to hire people who “fit” our culture with our need to bring in innovation, creativity, and fresh ideas?  It’s a conundrum.  Either we want people who think and act like us or we don’t, right?

The answer lies in how we define our company culture.  Done correctly, our culture is defined by our values and by what behaviors we tolerate or don’t tolerate.  It doesn’t say anything about what we do, only about how we do it.  For instance, if our culture requires that we treat everyone with dignity and respect, that doesn’t do anything to screen out people who think differently or who bring fresh, creative ideas.  But it does screen out people who would try to push their own ideas by belittling others who may disagree with them.  What vs. how.  We don’t want to restrict what ideas people bring to the table, only how they bring those ideas.

What vs. how.  We’ve all seen it happen.  Someone could have an absolutely brilliant idea, but presents it in a way that is so repugnant to the organization’s cultural norms, the idea gets lost, and everybody suffers.  The individual bringing the idea loses the opportunity to see his or her idea implemented, and the organization loses whatever benefit the idea may have brought.  When we keep the what vs. how in balance, the exact opposite happens and everybody wins.

So is all this XQ testing worthwhile?  Yes, but only if it’s aimed at the way people behave, not at the way they think . . . only if it is focused on how, not what.

 
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Five Things To Do Before December 31

Two years ago, I wrote a piece about things that ought to be done to close out the current year cleanly, and get a strong start in the new year.  Since this is the time of year to do those sorts of things, I thought it would be appropriate to post a similar piece.  So I went back and reviewed what I had written two years ago, and decided the material is still relevant and that I really couldn’t say it much better now than I did back then.  While I did make a few small additions and changes, it is fundamentally a repost from two years ago.

January is a time of renewal.  It marks a new beginning, a fresh start.  But there are things you should be doing now, before December 31, to get you out of the blocks fast when the year turns over.  If you’re on a roll, you need to think about how to keep that roll going.  If the year now ending is one you’d like to forget, then you need to think about how to make the new year better.  Either way, there are five things you should do before we say goodbye to the old year and ring in the new.  Actually, there are probably more than five things on your to-do list before the end of the year, so I hope the five I have in mind will be included.  For more on this, please read below.

 

Five Things To Do Before December 31

 

First, you need a written Annual Plan that outlines the three to five strategic initiatives you intend to implement next year to move your company forward.  Hopefully, this is already done, but if it isn’t, there’s still time.  This needs to be done thoughtfully, but it doesn’t have to be a complicated or time-consuming task.  A single page per strategy should do the trick.  Just start with a paragraph that describes the strategy, explains why you’re implementing it, and lays out the benefit(s) you expect to come from it.  Then break the strategy down into individual tasks, assigning responsibilities and deadlines for each, and TA DA! . . . you’re good to go.  I assume you would be making this Plan with the help of key managers, but if you’re very small and doing this solo, then run the Plan by your attorney, banker, accountant, or other trusted advisor for their input. 

(*) Second, you need a Profit Plan . . . sometimes called a budget.  I prefer Profit Plan because “budget” has a negative connotation.  It sounds restrictive, confining.  Profit Plan, on the other hand, is more positive.  It says, “Here’s the profit we intend to make next year, and here’s how we intend to do it.”  Start with a month-by-month sales forecast which is always the dicey part because sales forecasting isn’t an exact science.  Be guided by your sales history, adjusting as necessary for current conditions.  The trick here is to come up with a forecast that’s realistic, neither unduly pessimistic nor overly optimistic.  Once you know what you expect to sell, determining your costs to complete your Profit Plan is relatively easy.  If necessary, get help from your accountant.  The strategic initiatives in your annual plan will almost certainly have cost and revenue implications, so be sure your Profit Plan takes those into consideration.

(*) I imagine some of you are saying, “No duh Sherlock!  Of course we’re preparing a 2016 Profit Plan!  Who isn’t?”  Unfortunately, more business owners than you would guess operate without the benefit of a Profit Plan. If you’re such a CEO who doesn’t use a Profit Plan (and you know who you are!), make 2016 the year you start using this fundamental business tool.  

Third, do a customer review with the objective of ferreting out unprofitable customers.  You know who they are.  They’re the ones who demand $100 worth of service for their $10 order.  Wouldn’t it be nice to start the new year by making those problem customers available to your competitors?

Fourth, do an audit of your products or services.  Sometimes subtle changes in the market, in your customer mix, or in your labor and material costs can chip away at gross profit margins.  Take a look.  Are all your products or services producing their fair share of the company’s gross profit.  Is it possible one or two have lost some of their luster?  If so, your Annual Plan should include a strategy to return the underperforming products or services to their proper level of profitability, or if that’s not possible, you may want to consider a strategy for phasing them out.

And finally, do an audit of your general ledger.  In part, you’ll be doing this anyway to prepare your Profit Plan.  But this additional scrutiny will tell you if any waste has slipped into the system that needs to be curtailed, or if costs are creeping up and need to be more carefully managed.  You can almost always find something here to add to your bottom line.

So those are the five to-do’s I recommend before December 31.

  • Write an annual plan covering three to five strategic initiatives.
  • Create a Profit Plan to act as your road map to the profitability you expect.
  • Do a customer review and get rid of those who are not a good fit for you.
  • Audit your products or services looking for any that are underperforming.
  • Audit your general ledger looking for waste and/or costs that are creeping higher.

As I’ve said, this is not intended to be a definitive list of all the things you need to do before the year is out, but if you do these five, I guarantee you’ll have a better year next year than you will if you don’t do them.

For some small business owners, all this planning and financial stuff can be a bit intimidating.  If that’s you, call me.  We should talk.

 

 

 
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Are you a bad boss? (Part 2)

My previous posting asked, “Are you a bad boss?”  I then offered a number of bad boss behaviors (poor emotional control, indecisiveness, micromanaging, etc.) for your consideration.  Well, I apparently missed a few.  I have gotten some notes (from people, I assume, who are bad bosses themselves, who are recovering bad bosses, or who at some point worked for a bad boss) asking how I could overlook a particular bad behavior when it is so egregious, so obvious, and such an affront to hard-working employees everywhere.  So OK, we need an addendum to “Are you a bad boss?” in order to include those most heinous bad boss behaviors that I somehow missed.  So if you were not guilty of any bad boss behaviors I described previously, you’re not out of the woods yet.  Please read on to find out if any bad boss behaviors in this fresh batch resonate with you.

Are you a bad boss? (Part 2)

Let’s face it, we all slip up once in awhile and behave in a way that is counterproductive.  But those occasional lapses won’t earn you the “Bad Boss” label.  It’s when bad boss behaviors are the rule rather than the exception, that’s when you earn your Bad Boss stripes.  So take a look at the behaviors below and ask yourself honestly if any of those is a match for the way you do things.

Workaholic.  If you choose not to have a life outside of work, that’s your choice and that’s fine.  But if you demand the same of your employees, you can expect someone to put a “Bad Boss” bumper sticker on your car.  And you’ll deserve it.  When people are over-worked, energy, productivity, and creativity drop to very low levels.

Fails to prioritize.  Are you into instant gratification?  When you want something done, do you want it done right now?  Is everything a “top priority?”  If that’s the case, you’re definitely a Bad Boss.  When everything is a top priority, nothing is.  And there will be chaos as your employees scramble to figure out which top priority really is the most important.

Fails to communicate.  Are you secretive?  Do you keep most company information to yourself?  Do you treat your employees like mushrooms, keeping them in the dark?  Most companies don’t share everything with everyone, but you at least need to give people the basics.  Is the company doing well?  Where are we going and how do we expect to get there?  What are our goals and are we on track to achieve them?  When people are denied that basic kind of information, what’s the clear message?  The boss doesn’t trust us.

Doesn’t recognize and reward good work.  Have you ever said (or even thought), “Why should I have to congratulate people for doing their jobs?  That’s what I’m paying ‘em for!”  If so, you really need to go stand in a quiet corner for awhile until you can get your head on straight.  You are a Bad Boss.

Fails to provide a learning environment.  People want to learn and grow in their jobs.  They want to hone their skills and learn new ones.  They want to get thrown into the deep end of the pool once in awhile . . . to be challenged to climb a really big mountain.  If you give them only a steady diet of the same old mundane tasks, you are a Bad Boss and they will leave you.

Scores zero on the empathy scale.  Good bosses learn to “read” people.  They pay attention to body language, tone of voice, and other signs to know if someone is happy or sad, tired or energized, frustrated or content.  If you’re unable to do that, or unwilling to make the effort . . . if you’re blissfully ignorant about how the people around you are feeling . . . you’re a Bad Boss.  You come off as being cold and uncaring, able to relate to people only as employees, not as human beings.

If you are guilty of any of the aforementioned bad boss sins, do something about it!  Make it a personal mission to improve your leadership skills by eliminating, or at least mitigating, your bad boss behaviors.  But maybe you don’t want to change.  Maybe you’re one of those individuals who says, “Hey!  That’s just the way I am.  If people don’t like it, they should find a job someplace else.”  If that’s the case, you really are a bad boss, and your best performers really will find a job someplace else.

 
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Are you a bad boss?

An old adage says, “People don’t leave their companies, they leave their managers.”  There are lots of reasons an employee may leave a company . . . higher pay, better hours, shorter commute, etc. . . . but in many cases, a bad boss is in there too.  Think about your own work experience and you’ll probably be able to recall a boss or two (or more) that you really wouldn’t want to work for again.

At a recent meeting of the Schaumburg Business Association, Jeff Anderson, President of the Lake Forest Graduate School of Management, spoke about bad bosses and how badbossmanship (my made up word, not his) can cause good people to leave their companies.  He outlined the most prevalent bad boss behaviors in hopes that bosses in the room might recognize some of those behaviors in themselves and try to mitigate them.  I have listed those behaviors below.  If you have the honesty, courage, and self-awareness to learn if you are guilty of any bad boss behaviors, please read on.  If not, better stop right here.

Are you a bad boss?

Business owners and upper level managers I’ve known over the years would rarely own up to being a “bad boss.”  Demanding?  Yes.  Challenging?  Absolutely!  But bad?  No.  The problem with terms like “demanding” and “challenging” is they are often an attempt to mask negative behaviors that the boss knows he or she has, but doesn’t want to acknowledge or change.  So let’s take a look at these bad boss behaviors and you can decide whether you own any of them or not.

  • Poor emotional control.  Are you easily upset by the faults of others?  Probable bad boss (BB).  Do people keep their heads down each day until they figure out what sort of mood you’re in?  Most likely BB.  Under stress, do you yell, scream, turn red in the face, slam doors, even throw stuff?  Definite BB.
  • Lack of integrity or consistency.  Do you ignore rules you hold others accountable to follow?  Do you fail to honor your promises or follow through on your commitments?  Either one of these will earn you a BB plaque for your wall.
  • Poor at building or leading teams.  Are you unable to clearly communicate what you want your team to do and why you need them to do it?  Probable BB.  Do you ignore alternative ideas and opinions from your team members?  No doubt BB.  Do you hog the limelight and take credit for the work of your subordinates?  Oh yeah, big time BB.
  • Doesn’t nurture relationships well.  Have you ever said, “I don’t care if they like me as long as they respect me?”  Automatic BB.  Do you like to work alone or only with your most inner circle?  Probable BB.  Do you know your employees on a personal level . . . what their aspirations and challenges are?  If not, probable BB.
  • Indecisive.  Do you procrastinate when confronted with a tough decision?  Likely BB.  Do you consistently ask for more and more information . . . more than is necessary to make an informed decision?  Likely BB.  Do you ever delay making a decision in hopes the situation will somehow resolve itself?  That will earn you a BB label every time.
  • Micromanager.  Are you a perfectionist (c’mon, be honest)?  Almost certainly BB material.  Have you ever said, “By the time I show somebody else how to do this, I could have done it myself?”  Yep, BB.  Is it difficult for you to trust others?  Also an almost certain BB.
  • Poor at managing change.  Do changes in your industry or market tend to sneak up and bite you without your seeing them coming?  Way BB.  Are you in denial, telling yourself, “Aw this is just a blip that will pass and then it will be business as usual?”  Another way BB.  When change is upon you, are you able to fully and honestly communicate the change to your employees and what the company’s response will be?  If not, another BB plaque for your wall.

The key here is awareness.  Sometimes we may exhibit some of these behaviors unconsciously, or at least we may be unconscious to the pain these behaviors can cause our employees.  But once we become aware of our negative behaviors, as thinking, intelligent beings, we can do something about them.  We may not be able to change our spots entirely (after all, these behaviors began forming when we were in the cradle), but we can come up with coping mechanisms or workarounds.  If you’re a boss and are comfortable in your leadership role, you can even enlist the aid of your employees.  Tell them, “Hey, I’m not happy with the way I handle myself in these kinds of situations, but I’m working on it.  You can help me by telling me if I’m making progress and by letting me know if I start to slip and fall back.”

Even one of these behaviors can be toxic to an organization, and the more of them there are, the worse it gets.  Good people will tolerate them for a little while, but ultimately, they’ll leave in search of something better.  If you’d rather spend your time recruiting to fill empty seats than try to change your behavior, fine.  That’s your conscious decision.  But since it’s easier to hold onto good people than it is to find new ones, it makes more sense to try to purge these behaviors not only from yourself, but from all your managers as well.

 
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“You’ve got to know when to hold ‘em, know when to fold ‘em . . . “

In the last few postings, we have been talking about entrepreneurs . . . what the profile of an entrepreneur looks like and how successful entrepreneurs tend to behave.  But entrepreneurs, like all business owners, need an exit strategy, and it doesn’t matter if the owner is 26 or 66 . . . he or she will exit the business sooner or later, so it only makes good sense to plan for that event.  Venture capitalists do it.  When they invest in a business, they have a pretty good idea about how and when they expect to get their money back.  Multi-generational family businesses do it in the form of a “succession plan.”  But an exit strategy is something entrepreneurs often overlook.  They are so busy trying to get their company out of the starting gate that they have no time to think about crossing the finish line.  Yet clearly, that’s no way to win a race.  For more on how and when an entrepreneur should ride off into the sunset, please read below.

“You’ve got to know when to hold ‘em, know when to fold ‘em . . . “

  • Kenny Rogers

It’s probably unfair to make broad, general statements about entrepreneurs because they are a diverse group, and what’s true for some of them may not be true for all of them.  Still, there are some tendencies that show up more often among entrepreneurs than in other types of business people.

Serial entrepreneurs (those who start multiple businesses) in particular may have short attention spans.  They bring energy and creativity to the birthing of a business, but their real interest is in “proof of concept.”  They want to prove to themselves and to the world that their idea for a product or service is a good one that can thrive in the marketplace.  So they want to get to a place where they know they have a profitable, sustainable business.  But having achieved that, they may lose interest.  They like the excitement of getting that first widget out the door and into the hands of a happy customer, but then the repetitive nature of a mature business sets in and the entrepreneur may become bored by the daily grind of just pushing more widgets out the door.  If that happens, a smart, self-aware entrepreneur will either sell it, or bring in a talented COO who can manage the daily affairs of the business and grow it to its potential.

Even if an entrepreneur is excited about growing and operating the business on a daily basis, he or she may not have the right skill set to do it.  Creative visionaries . . . “big picture” people, if you will . . . often struggle with the minutia of managing a business every day.  In other words, a visionary leader who can spot an opportunity and take advantage of it may not be the organized, detail-oriented manager who can run things day-to-day.  So once again, if a business is not reaching its potential because the founder is an inept manager, then the founder needs to recognize that fact and get out of the way . . . either by selling it or by bringing in a talented manager.

In either scenario . . . the entrepreneur has no interest in managing the business or the entrepreneur has no talent for managing the business . . . the exit choices are the same: sell it or step down and let someone else run it.  If the founder anticipated these exit choices and planned for one of them in advance, the business will be able to handle the transition smoothly.  But if there is no exit plan and the founder exits in the heat of battle because the business is under-performing, the transition will be chaotic.

If you don’t have an exit strategy, get one.  Even if you’re that rare individual who launched your company, navigated it through childhood,  and are still successfully at the helm in adulthood, you will have to leave it someday.  Plan for your exit now.

 

 
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Do you have the “right stuff” to be a successful entrepreneur?

In our last posting entitled, “Entrepreneurship by the numbers.  How do you measure up?,” we took a statistical look at entrepreneurship based on Inc. magazine’s “Inc. 500” (the 500 fastest growing private companies in America).  So we talked about how old entrepreneurs tend to be when they start their first business, how long they wait before drawing a first paycheck, how many hold college degrees . . . that sort of thing.  Now we want to look at them more qualitatively, at their behavioral traits, their leadership styles, and at what they do (or don’t do) that makes them successful.  But as it turns out, putting entrepreneurs in a nice, neat box of common behaviors is tougher than I would have thought . . . as you’ll see if you continue reading below.

Do you have the “right stuff” to be a successful entrepreneur?

Below we discuss some of the behaviors that successful entrepreneurs tend to have, but they are not absolutes.  That is, for each of the below behaviors, there are exceptions . . . entrepreneurs who don’t exhibit that behavior at all, or may even exhibit the opposite behavior, yet are still successful.  Nor are the behaviors below intended to be a definitive list.  I’ve included those that I believe are the most impactful, but clearly not all of them.  That said, let’s look at these behaviors and see which of them you can see in yourself.

  • They are visionary leaders.  They have a clear vision for where they want to take their company, and they are able to communicate that vision in a compelling way that makes people want to follow.  As we said above, an entrepreneur doesn’t need to have all these traits, but this one would be difficult to do without.  Good people won’t join you and sources of financing won’t lend you money if you don’t know where you’re going.
  • They are endlessly curious.  As they approach a market with a new idea, they are interested in insights, not in validation.  That is, they search out candid thoughts, opinions, and concerns, even when they don’t support the entrepreneur’s own thinking.
  • They are determined to achieve their goals.  They will go around, underneath, over the top, or just bust straight through obstacles, but they will not be stopped.
  • They are clear about their company’s mission (how the company intends to serve its market).  They are committed to it and surround themselves with people who are likewise committed to it.
  • They have a higher-than-average tolerance for risk.  Strangely, many entrepreneurs over the years have told me that they are risk averse . . . even though they’ve got their home and everything else they own tied up in their business.
  • By definition, they are creative.  They have to be.  After all, they’re trying to create something new in the market . . . at least they better be.  If they’re going to market with a “me too” product or service, they’re going to have a problem right off the bat.
  • They have “personal mastery.”  That is, they know their strengths and how to leverage them, but they also know their weaknesses and how to work around them.
  • They have a deep understanding of their industry, but are always seeking more.  They want to be the first to spot something that will disrupt the industry and be in a position to take advantage of it.  They’ll be at every relevant trade show and are often active in their industry trade association.
  • They are often their company’s best sales person . . . not necessarily because they have the best sales skills, but because they know their company’s value proposition, its market position, and its customer base better than anyone else.
  • Entrepreneurs are notorious for playing things very close to the vest, preferring to keep the important activities and decisions to themselves.  But the successful ones know how to delegate important work and how to empower people to do it.

As I have said, there are other behaviors . . . no doubt lots of them . . . that help entrepreneurs become successful.  But if you’ve got those listed above in hand (or are working on ‘em), you should expect your business to have a very good, long, prosperous run.

Next time we’ll talk about when the founding entrepreneur should exit the business and the factors that will drive that decision.

 
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Entrepreneurship by the numbers. How do you measure up?

The September 2015 issue of Inc. magazine is devoted to the “Inc. 500 – the 500 Fastest Growing Private Companies in America.”  Over the next several postings, I’ll try to glean some wisdom from the leaders of the Inc. 500 companies . . . try to discern what they believe made them successful.  But first, let’s talk about entrepreneurship in general.  Inc. has collected some statistics which, taken together, outline what we might call the “traditional” path to entrepreneurship.  You may be interested in learning whether your entrepreneurial journey followed this “traditional” path, or followed a path entirely of your own making.  If so, please continue reading below.

Entrepreneurship by the numbers.  How do you measure up?

Growing up, almost 2/3 of the Inc. 500 founders had parents, siblings, or other extended family members who were entrepreneurs.

88% hold college degrees or higher.

Over 2/3 of those founders started their first business before their 30th birthday.

60% of all Inc. 500 founders have started more than one business, and 76% of all have never had to close a business.

57% of Inc. 500 companies were founded by their CEO, while an additional 36% we’re started by co-founders.  Of those co-founded companies, 43% of the co-founders were close friends . . . only 14% were co-founded by family members.

Over 2/3 of Inc. 500 founders say their founding team is still intact.

58% of Inc. 500 founders started their first business with less than $10,000.  86% have never used venture capital funding.  Apparently a debt averse crowd, 71% started with their own personal savings.

24% of Inc. 500 CEOs waited three years or more before drawing a paycheck.

Only about 1/3 of Inc. 500 companies came to market with a unique product or service that didn’t exist before.  The remaining 2/3 began by bringing improvements to existing products or services.

89% sell their products or services to other businesses while only 34% sell to consumers.

Where did Inc. 500 founders decide to locate their new company?  44% chose a location near friends and family.  30% were influenced by a pre-existing customer base.  19% wanted to be in a community friendly to startups, or where there was a concentration of similar businesses.

Now remember, these stats are taken from what Inc. magazine believes are the top 500 entrepreneurial companies in the country . . . the best of the best.  If we were to look at the same stats for all privately held, entrepreneurial companies, we would probably see some significant differences.  Still, if you want to compare yourself to something, wouldn’t you want to compare yourself to the best?

In the next several postings we’ll look at some of the Inc. 500 leaders . . . at their behavioral traits, their leadership styles, and at what they did (or didn’t do) to earn a place in this very elite group of companies.  Stay tuned.

 
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