April 27th, 2010 by Kirk Dando.
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Is your company at a strategic crossroads due to growth, changes in management or shifts in the market?
These strategic tremors often introduce a whole new set of challenges. Are you ready? Do you still have the passion and motivation to keep climbing the highest mountains? Do you have a “sherpa guide” to help you find your way?
It’s common for a company to experience subtle but very troubling growing pains as it matures along The Business Lifecycle™.
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.
Why you should read The Warning Signs of Success™ blog:
- You will understand why it is critical that you know exactly where you and your business is on The Business Lifecycle™.
- You will learn why the solutions and systems you implement today eventually sow the seeds of decay as your company grows.
- You will learn how to abandon past practices and to implement the systems needed to grow profitably to the next level.
I’ve worked with many executives and their teams to overcome obstacles and successfully take their businesses to the next level. They recognized The 12 Warning Signs of Success™ — and you can too!
- You will see through the confusion to understand the obvious and simple causes behind the challenges you, your team and your business faces (and wonder why you never saw them before!).
- You will understand how you can make the necessary changes to get through the critical inflection points that every business encounters.
- You will learn how to make big changes with honesty, fairness and stability.
- You will learn how to get rid of the US vs. THEM culture that decays so many businesses and careers.
- You will learn from other people’s efforts by reading case studies.
- You will learn how to become an AUTHENTIC LEADER
If you can identify with what I’m talking about, sign up to have The Warning Signs of Success™ delivered by e-mail every time a new article is posted. Soon, you will see how I can help you:
- Clearly identify the current realities of your business as well as your future goals.
- Understand how to move from where you are to where you want to be.
- Take the Deep Dive into Leadership – analogous to serving as the “sherpa guide” for your team.
- Gain inspiration and insight from thousands of business executives, business leaders, church leaders, coaches, athletes and other people facing the same challenges you face.
- Learn how other leaders grew and developed their organizations and the difficulties they faced by reading case studies.
- Understand the undeniable trends that the all successful leaders use to transform their businesses, themselves and the people they are responsible for leading.
I’ll cover some of those topics more thoroughly in future blogs. In the meantime, I invite you to send me specific questions and concerns about issues you are facing as your company moves through The Business Lifecycle™. I will answer your questions (without mentioning names) in this blog, The Warning Signs of Success™.
Take a moment to leave a question or comment – and don’t forget to sign up (in the box to the right) to have The Warning Signs of Success™ delivered via email each time a new article is posted.
KEY QUESTION:
What leadership skills or traits do you think are most critical to take a business to the next level?
March 25th, 2010 by Kirk Dando.
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As a company matures, it often experiences subtle but very troubling growing pains (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 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 common warning signs of success holding your company back? It only takes one to hold back an entire company from meeting its goals.
- Cultural Decay: The corporate culture is under attack. US vs. THEM becomes more prevalent. What was once considered a non-negotiable way of operating starts to get compromised.
- Unqualified people in key positions.: These include friends, family members or long-term loyal employees who are not qualified to occupy key positions.
- Poor Communications: There is a lack of authentic and transparent communication that engenders trust. Senior managers lack direct contact with day-to-day operations and are losing control. Problem solving meetings become awkward, time consuming and, at times, ineffective.
- Leadership Void: The leaders roles are not appropriately defined considering the company’s size and leadership needs. Leaders do not actively seek out opportunities to challenge and grow themselves along with the business. The differences between a business owner and a business leader have become blurred.
- Careless growth: Diversifications into products or new businesses do not fit the company’s expertise and market experience. Sometimes acquisitions are made or new products are introduced before the company is properly structured to integrate them. This drains cash, time and focus.
- Management Deficiency: The executive leadership and management team spend far too much time “working in the business” versus “working on the business.’
- “Rake” Organization: Too many people reporting to the president and/or other senior staffers. Thus, the senior management team feels overwhelmed and really does not operate as an aligned team to guide, plan, lead and manage the company.
- Strategic Anemia: The company lacks a strategic plan that gets and keeps the proper focus and/or the plan never really gets implemented.
- Systems Outgrown or Obsolete: Accounting, financial performance reporting and control systems and processes are obsolete for the size and complexity of the company.
- Poor Financial Performance: Data needed to make critical decisions is not available, appropriately gathered, easily accessible or properly analyzed. The data is not considered as important as an individual’s personal sense of what is right.
- Poor Rewards: The middle and senior management compensation process is not tied to accountability and results or the metrics do not drive the right behaviors.
- Imprecise Accountability: Clarity is lacking in management accountability and in designing and using the data needed for creating accountability.
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?
March 2nd, 2010 by Kirk Dando.
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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 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 develoment 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?
January 20th, 2010 by Kirk Dando.
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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.
- Initial capitalization consists of credit card debt, loans from Mom and Dad and angel investors.
- The primary emphasis is on developing a product or services and selling them and securing additional funding.
- Management, systems and planning receive minimal emphasis.
- Communication is informal.
- Employees work long hours and are paid modest salaries with promises of future wealth through equity.
- 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 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, managment, in its hast 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: The 12 Warning Signs of Success™
- When there are two or more founders or partners in the business, it is not clear who is in charge.
- 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 planning.
- Entrepreneurial founders are often tempted to diversify into unrelated businesses or expand into new and more products before the company is ready to integrate them.
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?
January 10th, 2010 by Kirk Dando.
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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 has secured its first round and is preparing to secure additional funding.
- Number of employees increases significantly.
- More detailed attention is given to areas (in addition to developing a product or service and selling them) such as:
- Marketing and sales
- Inventory management
- Culture and Personnel
- Accounting, budgeting and finance
- Systems support
- Departmentalization
- 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.
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 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: Warning Signs of Success™
- Delegation becomes increasingly difficult for the leader (CEO).
- Access to the leader (CEO) becomes difficult for managers and employees.
- Due to recent changes in leadership the “cultural” impact is understood but minimized as a real impediment to success.
- Managers feel better qualified than the leader to make decisions in their technical areas, but they are not permitted to make them.
- Managers are technically oriented and therefore not skilled at making their own decisions.
- Poor decisions are often made in areas, such as:
- Systems improvement
- Facilities expansion and purchase
- Recruiting and hiring key employees
- Use of cash
- Commitment to new products
- 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.
- Indefinitely and simultaneously tempted to diversify into unrelated businesses.
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?
January 1st, 2010 by Kirk Dando.
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Part 4 in a Series of 4
Below are the characteristics and warning signs of a Level III Company, a Market Leader. This is the third of three defined company stages as part of The Business Lifecycle™.
CHARACTERISTICS
- The company’s business niche is clearly defined and its products and services fit the niche.
- An aligned management team is in place (Level II crisis is resolved).
- A clearly defined organization is in place.
- The company has an identity beyond the founder(s) and the current leader (CEO).
- Efficient financial control and work process systems which produce quality end products are in place and operational.
- Short and intermediate term plans to focus the company are in place and followed.
- Managers are doing more managing than technical work.
- Profit centers are established.
- Growth rate remains rapid, however it is under control.
- Profitability is strong or trending towards positive EBITDA (Earnings before Interest, Taxes, Depreciation and Amortizaton).
- Cash flow works well.
- Equity capitalization is sufficient for the company’s size, revenue model, and burn rate.
Benefits of Becoming a Level III Company
- Survival and continued development of the company are not dependent on one or a few people.
- Successful Liquidity Event/Exit strategy.
- Management and ownership succession are more assured.
- Record Breaking ROI’s.
- More capable employees can be hired and retained.
- Existence of a strong middle management team frees ownership/ executive management to plan, pursue additional markets and react to major opportunities and problems.
- The company can more effectively expand product lines and markets.
- The company is more able to react to a rapidly changing economy or market.
- The increased flexibility and stability usually makes the business more enjoyable for the owners/managers and key employees.
- The owners can spend more time away from the business if desired.
- Smaller companies in the same industry can be successfully acquired.
Qualities of a Level III Company
CULTURE AND PEOPLE
- CEO
- The company has a well-defined leadership (CEO) role.
- The company has an effective and humble leader.
- The leader understands his/her talents and blind spots.
- MANAGEMENT
- The key management positions are right for the company’s size and growth rate.
- Right people are in all key positions-management and technical.
- Managers are systems oriented.
- COMMUNICATION
- Meetings are productive and efficient.
- Managers receive productive feedback, coaching, and training.
- Leaders and managers are available to employees and customers.
SYSTEMS AND PRODUTIVITY
- ACCOUNTING
- All accounting, financial performance reporting and control systems are in place and working
- Financial and non-financial performance information is produced and used by key employees
- WORK PROCESS SYSTEMS
- All work process systems are efficient and produce quality end products
- The difference between marketing and sales is understood, and systems for both are in place and successfully working.
SALES AND MARKETING
- BUSINESS NICHE
- The company is focused in a well-defined business niche
- Products and services fit the company’s business niche
- Diversification into unrelated businesses has been avoided
- The leader and key managers are externalized in their industry
- CUSTOMER SERVICE
- Product and service quality are continually evaluated and improved
- What constitutes superior customer service is clearly defined
- Superior customer service is continually practiced throughout the company
MONEY AND FINANCE
- CHIEF FINANCIAL OFFICER AND CONTROLLERSHIP
- Product and service quality are continually evaluated and improved
- The company has the effect of a strong accounting and finance department
- The CFO and controller are an integral part of the management team
- EXPENSE CONTROL
- Budgeting is successfully employed
- Expenses are closely monitored and controlled
- Key performance measures are established and performance monitored
- FINANCIAL MANAGEMENT
- Debt/equity objectives are established and performance monitored
- The company is committed to minimizing if not eliminating debt capital in relation to equity capital
- Mature cash flow plan in place, understood and working
KEY QUESTION:
If you were to score your entire company (not just parts of the business) on a scale of 1 to 10 (1 being “does not have any of the qualities or characteristics of a Level III Company” and 10 being “meets every single quality and characteristic of a Level III Company”) – What score would you give your company, is that the score you want? What score would everyone else in your company give? What do you need to do, specifically, to get your score to a 9 or 10?
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Is your company at a strategic crossroads due to growth, changes in management or shifts in the market?