Follow Kirk on TwitterWill Any of The Top 12 Warning Signs of Success™ Kill Your Growth?
March 25th, 2010 by Kirk Dando
As a company matures, it often experiences subtle but very troubling growing pains (The Top 12 Warning Signs of Success™). As you might expect, these growth tremors are amplified in a depressed market. Compounding the situation, management, in its haste to maintain growth, often fixes its gaze outward on the environment and toward the future, hoping perhaps that more precise market projections and better ‘relational selling’ tactics will provide the organization with the impetus it needs to go to the next level of performance.
All the while, the company may overlook the Overly Obvious and Embarrassingly Simple repairs it needs to mature and stabilize.
The current market dynamics offer the perfect time to refocus and redefine you and your company’s success strategies. Generally, companies tend to pass through a series of developmental phases (The Business Lifecycle™) as they mature. Transitions between these phases do not always occur naturally or smoothly, regardless of the strength or expertise of top management.
Unfortunately, as a company reaches the point where it needs to move into the next phase of development, it can become vulnerable and operations can become rather chaotic. Morale is down and management feels as if it is losing control.
Also, at this crucial time, some decision-making processes are skewed awkwardly and access to helpful information may be inadequate. In short — a variety of factors combine to prevent opportunities from being seized.
The irony is only successful companies get to experience these Warning Signs.
Below are The Top 12 Warning Signs of Success™ that block a company’s transition to a higher level of performance. When these characteristics present themselves in an organization, they often push it to become what I call a “treadmill” company. A “treadmill” company fights the same battles in precisely the same way, churning on and on, year after year, until ultimately, although the business does not explode, the owners and employees do, often at each other.
What a company does when these crises emerge determines if it moves on and becomes a mature, financially stable, professionally managed and led organization, or simply moves on aimlessly — or worse.
Check Your System
To be prepared for these changes, check DANDO’S Top 12 Warning Signs of Success™. Are any of these Top Warning Signs of Success™ holding your company back? It only takes one to hold back an entire company from meeting its goals.
- Right Idea, Wrong Person: As your company matures, you see the need for new/different talent. You may know what you want for a key position; perhaps you even have a very detailed job description along with specific expectations. But due to unknowingly flawed hiring and promoting practices, friends, family members, partners, “pedigreed” executives hired from the outside or long-term loyal employees – who are not qualified for the job – are in key positions. Also, it becomes apparent that some members of the senior management team are not developing into skilled leaders. Leadership finds itself asking who can and cannot scale, often without any clear answers…until there is a train wreck and it becomes painfully obvious. Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
- Drinking the Chaos Kool Aid: Your company has added too many products/services, or has diversified into new businesses that do not fit its expertise and market experience — probably before the structures/systems are in place to integrate them. Leadership knows this needs to be remedied but may be tempted to sustain rapid growth indefinitely without the necessary systems and appropriate management team in place. This is a classic example of success breeding failure. Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
- Open Door, Closed Mind: Although your company’s leadership team may say they are open to hearing new and innovative ideas, as well as concerns, due to an unknowing lack of true leadership skills, they may have closed their minds and let their actions speak louder than their words. The reality is, great ideas rarely get heard and people who complain become part of the “bad egg network.” Once that situation develops, people start to “play it safe.” Leadership realizes they are now working with a team of passive-aggressives who enjoy watching their leaders and their company fail. You are now dealing with an “I told you sooooo network.” The irony is that this may have started with leadership setting up employees to fail by having an unspoken attitude of ‘I know more than you, therefore’:
– “If it is going to get done right I will have to do it myself” or
– “I want you to fix everything, but you can’t change anything.” (This amplifies Right Idea, Wrong Person and highlights little or no true leadership is in the business.) Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2. - “Look the Other Way” Deals: Your corporate culture has come under attack by frustrated managers and employees who feel like what was once considered an absolute and non-negotiable set of values and way of “doing things” is now being compromised due to “look the other way” deals for special people or brilliant jerks. This unintentionally sets up the start of an underground culture called “Us vs. Them.” Also, employees probably don’t understand that there is a difference between non-negotiable core values and a company culture that matures (like a teenager into adult), along with the company’s success and growth. Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
- Communication Vacuum (aka: It Sucks): If asked, several people in your company say one of the biggest problems is poor communication, despite the fact there are countless emails, newsletters, voice mails, meetings, etc. During growth, senior managers often lack direct contact with day-to-day operations and feel themselves losing control. Also, meetings (strategic and tactical) become awkward, time consuming and, at times, ineffective. The perception is that there is less communication from the top. Picture a cell tower without any signal strength. Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
- Convenient Accountability: Accountability at your company is confused and sporadic because there is a lack of clarity about how to go about creating a culture of accountability that is real and transparent. The only thing clear is that everyone sees the problem and is tired of being fooled by individuals who say one thing and do something else … or never do it at all. It’s also easy for those very individuals to blame the culture for their behavior because they are benefitting from it. Sound familiar? Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
- Hope Is Not a Strategy: Your company lacks a strategic plan or robust problem-predicting process that gets and keeps the proper focus and/or, the plan never really gets implemented. What is called a “strategic plan” is actually a short-term operational plan on how to solve problems. Everyone gets a “strategic planning” notebook full of great ideas and then hopes they will get implemented. Little time is ever spent unlocking the missed opportunities. Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2.
- Incentivizing Failure: Your middle and senior management compensation process is not tied to accountability, results or the “right” metrics. The incentives/rewards do not motivate, drive the right behaviors, or produce the desired outcomes. Leadership starts to give up the hope or belief that incentives actually work, or at least they feel they are not capable of designing incentives that work. Some key employees become disenchanted and leave … to the competition or to become the competition. Most often birthed in Level 1 and 2, but the consequences are often experienced in the Rapid Growth of Level 2.
- SUCKS-ESS GAP: Revenues are growing and are what your company is most focused on. However, subtly and unknowingly, expenses are growing at a faster rate than revenues. There’s a train wreck on the horizon. Also, financial and other key performance data needed to make critical decisions are not available, not appropriately gathered, not easily accessible or not properly analyzed. The absence of a sophisticated process AND proper analysis to predict and prevent crises before they get out of hand causes the executive leadership team to unknowingly be slow to react to and/or understand changing market conditions and increasing competition. Most often birthed in Level 2, with the consequences experienced in the Rapid Growth of Level 2 while trying to get to Level 3.
- Scattered Focus: As your company grew, an Executive Leadership Team was put into place. However, if that team isn’t functioning as a truly aligned team (with maniacal focus), whose members trust and respect one another, it becomes painfully obvious to everyone – especially those depending on them to function as a unified team. “Private” bitch sessions begin and slowly, but surely, paralyze the team’s ability to focus and execute game-changing strategies. Also, it’s often the case that too many people are reporting to the CEO, creating an organizational structure that looks like, and unfortunately performs like, a rake. If the CEO gets worn down, he/she may move the rake under someone else, such as a president or COO, which is not a sustainable solution. Most often birthed in Level 2; if not corrected, you and your company will not get to Level 3.
- Accidental Management: When a company is growing rapidly, and/or the path of least resistance has been chosen, your company’s top individual contributors have teams grow up around them. Eventually these best performers get the title of Manager and collectively become The Management Team. However, some individuals in this group are most comfortable in their technical comfort zones and lack the personal experience and behaviors to truly lead. They are unable to develop other people and the processes your company needs to scale. Therefore, they go back to their comfort zone, which is usually “working in the business” instead of “working on the business.” Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2; if not corrected, you and your company will not get to Level 3.
- Sowing the Seeds of Decay: Systems and processes (accounting, financial performance reporting, work processes, and Information Technology) have become obsolete for the size and complexity of your company. While the systems may have been “very good” during the rapid growth stage, they now have started to sow the seeds of decay, which is not obvious to the naked eye. Leadership, in its haste to maintain growth, overlooks the fact that some results that look like success (rapid growth) ultimately breed failure (outdated systems that cannot support the weight of more growth). Most often birthed in Level 1, but the consequences are often experienced in the Rapid Growth of Level 2; if not corrected, you and your company will not get to Level 3.
Build Your Base
Although obvious, you also need to consider the following for a company to mature, grow and stabilize.
- Strong management team. A senior management and leadership team must be staffed with people who are skilled, established managers, as well as being technically savvy. The right people must occupy ALL key positions.
- Systems. Accounting, financial performance reporting, and control systems needed for the company’s size and level of complexity must be in place, and the information produced by those systems used by the management team in decision making and planning. The operating process systems also must be in place and working capably. These systems are necessary to get the day-to-day work done efficiently.
- Market niche. The company must be focused on a well-defined, viable market niche, stay focused on the business in which it has become expert, and produce or sell products and/or services that are compatible with the company’s market niche. Marketing and sales systems appropriate for the company must be in place and effectively working.
- Financial flexibility. The company must consistently meet a set of financial goals balanced among profit, cash flow and equity building.
The equity capitalization of the company must be balanced with the debt the company carries. The objective is to minimize debt capital and maximize equity capital. Companies that are heavily leveraged with debt may grow quickly, but they fall even quicker! This responsible stewardship of resources requires considerable self-awareness on the part of top management.
The critical task for management in each developmental phase is to find a new set of organizational practices that will become the basis for managing the next level of performance.
Leaders at the top must be ready to work with the flow of the tide rather than against it; and they should be watchful because it is easy to diagnose the symptoms and miss the onset of the disease.
We all need the mediation of others to help broaden our vision and deepen our perspective.
KEY QUESTION:
Why is it with all the business experts, business books, business college professors, MBA’s, iconic business gurus, etc. in the world who provide compelling “how to” and “need to” advice that so many companies and leaders grow themselves into predictable and somewhat preventable problems and never really meet their full potential?