Are you in growth mode, or survival mode?
I have some clients who are growing, some who are hanging on – and some who are transitioning from one to the other. Although most businesses would like to be in growth mode, the point isn’t to say that one is right and the other is wrong – it’s to understand that different situations call for different approaches. And that can be an issue when transitioning from one situation to the other.
HOW GROWTH MODE AND SURVIVAL MODE DIFFER
I did a chart recently for a client of the differences that their company would see as it switched from survival mode to growth mode. There were 15 different areas that would see changes!
In survival mode, your “strategic horizon” (the timing you take into account when making decisions) is the next quarter. In growth mode, that horizon stretches out to 3 years.
And a lot of areas can be “good enough” in survival mode – but need to be tightened up when growing. Those areas include accountability, processes, and hiring. And the inverse is true, too – things that need to be tightly managed in growth mode should be loosened up in survival mode. (Why would you want less accountability or process? Because that takes time, and in survival mode, that time can be better spent talking with customers.)
THE IMPORTANCE OF FRAMING
When you’re having strategic discussions, one of the most important steps is to pick the right “frame” for the discussion. A more tangible way of saying that is, you have to know the right question to ask. This is something that you can do intuitively most of the time. But when companies are going through change, picking the right frame is much harder. And picking the wrong frame can be very costly.
Here’s a simple example. I can create a very different conversation, and a very different outcome, if I ask the question, “What should we do more of next year?” rather than, “What do we need to do differently next year?” The first question is appropriate for a company continuing in the same mode it was in the prior year – baked into the question is the idea that we already know the right “model” of how we do things, we just need to pick areas to emphasize. The second question is appropriate for a company in transition – and in that case, doing more of something you’re already doing may actually hurt you more than help you.
(And, yes, it often makes sense to ask both of those questions in your annual planning.)
As a leader of strategic discussions, you need to be aware of what frame you’re using for each discussion, and you need to build your toolkit of frames, so that you can bring the right one to bear in whatever situation you find yourself in.
One of the precepts of the EOS program is, “The answer is in the room.” It’s a phrase that’s used to emphasize the importance of discussion in addressing important issues, and I am a full supporter of that idea.
The problem is, the phrase itself is not quite right.
WELL…SOME KIND OF ANSWER IS IN THE ROOM
A more accurate phrase would be, “An answer is in the room.”
And it’s the job of the CEO to know whether it’s the answer or an answer that is in the room – whether your team has the right stuff to understand and evaluate the issue and the options for solving it…or not. Because if they don’t, but they think they do, then you are wading into dangerous territory.
It’s not that dangerous if the issue is minor. But if it’s a major strategic decision…having the wrong answer is a big problem.
EVALUATING THE QUALITY OF YOUR TEAM’S ANSWER
So, how do you gauge whether you are getting an answer (a poor or bad decision) or the answer (a good decision)? Here are some questions you can ask:
- Have we seen this situation before? Or something similar? Or has someone on our team?
- Can we come up with a list of risks that would make our banker (or some other knowledgeable skeptic) proud for how pessimistic the list makes us appear?
- Can we come up with 3 strong options for handling the situation?
- Is there more than one person who is worried that the answer may not be in the room?
A CAUTIONARY TALE
Let me talk more about that last one. The biggest business mistake that I have witnessed was when a client decided that the answer was not in the room for them. They hired me to write a plan for a new initiative, discussed and agreed to the plan as a team…and then 2 weeks later the CEO came up with an alternative “short cut” approach.
That short cut ended up costing the company between $2MM and $10MM, depending on how much you count the indirect impact that decision had. At the time the leadership team was discussing the short cut, there were 3 members of the team who said, “We just paid for a plan, and we all said we liked the plan – why are we not following the plan? Why do we think we have a better answer than the plan now?” (Which is another way of saying, “The answer is not in the room.”)
HOW THEY GOT IT WRONG
Why did most of the team change their minds? Because the CEO had a long history of running and building the business, and the majority of the leadership team said, “If you think this is the right thing to do, we trust you.” What they missed was that the CEO had not pursued a strategy like this before – it was a new area for him, and it was more complicated than anything he’d worked on before.
The team needed to listen to the skeptics more – and there’s a lesson there for you, dear CEO, if you find yourself in a similar situation.
YOU BE THE JUDGE
If you’re a CEO listening to your team debate a topic, you have another role you need to play – you need to raise yourself above the discussion, and look down on it, and critique whether the sophistication of the discussion matches the complexity of the issue and the quantity of the resources you’re going to commit to the answer.
I got to spend a couple hours talking about hiring last week with Miche Rayment, who runs The Hire Effect and wrote a book by the same name. Since we’ve both worked with growing companies to define hiring processes and hire key positions, we shared some stories and developed some tools to help people decide how they should approach hiring.
I had the most fun when we were brainstorming what to call the “hiring strategy” of the many companies that, well, don’t have a hiring strategy. It went something like this…
“They just decide they’re going to hire someone, and start looking, and then find somebody and hire them.”
“It’s like they just go pull someone in.”
“It’s like a vacuum. They flip a switch, and then wave around a tube that’s sucking in whatever gets near it.”
“That’s it – it’s the Suck Strategy of hiring!”
“How do you hire? We suck! Hahahaha.”
That was the most fun part of the conversation. The most interesting to me was when we talked about how much time a company should spend on a hire.
Let’s be honest – most companies don’t have the flexibility or discipline to go through a highly rigorous process with every hire. (Some hiring guides espouse taking months with each candidate! That is just unrealistic for most companies.) On the other hand, some roles and situations demand a lot of structure and steps in the hiring process.
So, what are the factors that a small company leader should look at to decide how much time to spend on a hire? There are just a few I look at:
- Importance of the role: bigger impact of the role = more time hiring
- Newness of the role: uncertainty of what the role is and what kind of person to hire for it = more time hiring
- Availability of talent: hard to replace a bad hire = more time hiring
- Pace of growth: faster growth = more growth issues coming up faster = more need to hire the right person = more time hiring
- Degree of competition: more competition = higher need to perform = more need to hire a strong performer = more time hiring
There are many situations when a company can just Suck to find an acceptable employee. But if any of the factors I list above apply to you or a position you have available, you should spend the “extra” time in your hiring process to find the right/best person. In those situations, the consequences of hiring are significant.
I recently gave a webinar for the SPARK.grow program on high-potential employees – how companies can identify, foster, and be attractive to high-potential employees, and how high-potentials can identify, develop, and be attractive to high-potential roles. (The recording of the webinar is here.)
I described a “High-Potential Talent Stack.” That stack has 6 levels – the bottom 3 are the factors that enable someone to perform at any job, and the top 3 levels are the factors that enable someone to perform as a leader. I want to describe each level…
Performance – this is how well the person gets work done
Results Focus – this is the ability to not just put in the effort, but to figure out a way to go around roadblocks and keep at a task until you get the result that is needed
Learning – high-potentials are always expanding their toolkit of skills, and learning about the work they do
Investment Thinking – this is the ability to think in terms of Return on Investment
Maturity – high-potentials handle themselves well, in different situations and with different people
Leadership – this is the combination of skills that are needed to get a team to perform at a level and in a direction that they wouldn’t get to on their own
This stack is a powerful tool. It shows what a company can look for when hiring new staff, and what they can train and develop to improve their high-potentials – and shows high-potentials what skills to develop for further growth.
Each level of the stack has 3 more specific components. The target is to score a total of 12 or higher when each of those components is rated on a 1-5 scale. Scores of 4-4-4, 5-4-3, or 5-5-2 would all qualify; scores of 5-3-3, 4-4-3, 5-5-1 would not qualify. It’s a high hurdle – but the people that meet that standard are often the “10x-ers” – the ones who have 10x the impact on your business than your typical employee.
Almost universally, small businesses underinvest in their high potentials. There’s too much potential ROI for you to do that.
How could I not take up the challenge of finding the link between the 50 Shades juggernaut and my beloved Stage 2 small business clients!?!
Putting aside the more mundane topics of what Christian Grey’s DISC profile is, the importance of proper inventory processes, and the merits of NDAs, I’m struck by the similarity between Christian’s dominant role and how Shane Yount, owner of the Process-Based Leadership system, describes some companies:
[Managing by position, proximity, or persuasion] creates dependency. Employees become dependent on their leaders to make the decisions, to solve the problems, to show them what to do and when to do it. Certainly managing by position, proximity and persuasion gets short-term results. But dependency is dysfunctional.
It may seem extreme to draw a parallel between 50 Shades’ dominant/submissive relationship and how many small business leaders operate, but there’s probably more truth to it than many owners would like to admit.
Recently I talked with a group of Stage 2 company CEOs, and one of their big a-ha moments was when they realized how dependent their organizations are on the leader’s opinion, intuition, and judgment.
If you realize that your leadership is out of balance, or if your employees start to refer to you as Mr/Ms Grey…what can you do?
The first step is creating a dialogue with your managers. You want a process to be guiding the company, not a person, and to do that, you need to start a process that involves your leaders in key decisions – and then you need to stay committed to it. And, if you’ve been doing a lot of the talking, start listening more. Don’t totally hand over the reins, but start to share them.
What should you talk about? To start, I like to focus on today – what is working, what isn’t working? Once you have things working OK, then you can start looking out farther on the horizon – to the next few months, and then to the next year, and then to the next 2-3 years.
Let’s be honest about something Christian Grey knows – it’s fun and exciting to be in charge, to be The One Who Makes the Calls. But it’s also not sustainable, and if you’re looking for your business to prosper for the long-run, you need to mature as a leader and expand how you relate to your business.
You don’t need to hire every position with the same approach. Sure, some companies have the same hiring process for everyone, and it often involves spending 6 months on each hire and only hiring A+ people. In theory, that’s what you should do, but in practice, there are some hires that deserve more effort and some that deserve less.
How do you tell when to invest more or less? I’ll be talking about that on my webinar this month – the 3 different approaches to hiring, and when each one is appropriate.
For this column, I want to focus in on the highest-investment approach.
When does a hire deserve a heavy investment? The primary drivers are (a) the impact the position can have on the organization, and (b) the experience your company has with hiring that specific type of position. In other words, you should invest more heavily in your recruiting process when you’re hiring:
- Executive or key manager positions – because the impact of that position will be a multiple of the costs of even an elaborate hiring process
- New positions – because you don’t know what you’re looking for, and because you need to train your organization on what the new position will do
What does it mean to invest heavily in a hiring process? You should spend more time…
- Planning the position before even starting the recruiting process
- Choreographing the hiring process – who to include when
- Building a bigger candidate pool
- Interviewing candidates
- Confirming your final choice
It’s OK not to go all-out on every hire. What’s important for growing companies is having the wisdom to know when a more extensive recruiting process is needed, and having the discipline to invest the time needed when it is required.
If you do that, you’ll avoid the costs of a bad hire, which can be dramatic – around 2-3x the person’s compensation for a manager, and 5-10x the person’s compensation for an executive.
Leadership and the under-communication crisis
As the writer of this article, I’ve evaluated all of the possibilities I could focus on, and decided that we should give our attention to communication.
We all need to communicate more, and will be doing things in the coming months to do that.
Not enough for you? Keep reading to see what you should be doing to communicate as a leader.
When I was a debater in high school, my coach gave me the following formula for success:
Tell them what you’re going to tell them
Tell them what you told them
As a company leader, the same formula applies, with a change:
Tell them what you’re going to tell them
Tell them what you told them
This is the time of year when you’re setting your annual priorities, which will be followed in a few weeks by the need to communicate those priorities to your team. I was meeting with a COO last week, and after spending an hour talking about one of his 2016 company goals, I asked how he was going to communicate the goal to the organization.
“I’ll have the VPs tell their groups.” (Mind you, last year, some VPs told me that their colleagues would often communicate very different messages about the same topic.)
“Can you spend time on this in the company meeting?”
“No, we don’t have time. We need to keep those to ½ hour, and we have too many other things to cover. The VPs can cover it.”
Huh? Um, no they can’t – at least not by themselves. In addition to the VPs’ communication, all company staff need to hear a single version of the message directly from the highest leader. It ensures consistency of the message, and ensures that people know it’s important.
The closer a message is to something that people already know and already do, the less energy you need to spend on it. However, it would be unusual for a topic that rises to the level of an annual priority to be something that people already know and already do. So, it’s going to take energy to communicate.
And probably extra extra energy.
Here’s what most annual priorities should get:
- Monthly review by the CEO in a company-wide forum (ideally a meeting, but could be a newsletter)
- Monthly review by the VPs in their department or team meetings
- More frequent attention as needed by the relevant manager – such as the head of HR or Sales
“That’s a whole lot of communicating,” you may be thinking. But it’s actually still a small proportion of the overall communication that your employees are exposed to in all of the hours they’re at work. And we’re talking about a message that’s really important.
“People are going to be bombarded by too many messages,” you may be thinking. And if that’s true, then it highlights the need to reduce the number of priorities. The need to communicate is the need to communicate. If you’re not able to meet that need, then you have to focus your attention more.
Most business leaders are going to under-communicate their 2016 goals to their organizations, and that’s going to hurt their companies in an environment that requires as much efficiency and effectiveness as your team can muster. Are you going to make that mistake?
Making Better Goals with a Strong Annual Planning Process
Although it seems like just yesterday that the days were hot and we were at the local swimming hole, this is the time to start thinking about annual planning. Some of my clients have small, simple businesses and handle their planning in an afternoon. Others are larger and more complex, and we spend 4 days over the course of 3 months.
No matter the extent of the process, they all have the same underlying process:
– Assess the environment and identify areas that have potential to improve the performance of the business
– Select the areas that have the best potential impact, and create initiatives to address those areas
– Define and justify the investments needed for the initiatives
– Develop action plans
– Launch the initiatives with managers and staff
There’s a rich set of best practices and tools for each of those steps. For example, many people like to use the SWOT framework to assess their situation. But I’ve found that reviewing hits and misses often provides better insight into areas of improvement.
On my Monthly Strategy Slice webinar, we’ll be looking at a small slice of the annual planning process – how to make sure you have a strong set of initiatives to focus on. On the webinar, we’ll talk about tools to evaluate your initiatives along 4 dimensions:
– Are you focusing externally (e.g., developing new markets), internally (e.g., reorganizing), or a combination of both?
– Are you focusing on initiatives with short-term payoff (e.g., a marketing campaign to existing customers), medium-term payoff (e.g., hiring an important new position), or long-term payoff (e.g., launching a new product)?
– Do you have a mix of initiatives that will have a big (transformative) payoff and smaller (incremental) payoffs?
– Do you have a mix of initiatives that have different investment profiles – some requiring relatively little investment, and others needing heavy investment?
We’ll talk about how to evaluate annual priorities, and how to apply the evaluation tools to your business on my webinar – please join us if you want to see these in action.
If there’s one thing in Stage 2 companies that does not take a lot of thinking, it’s identifying who your “High Potential” staff are. They come to mind immediately whenever I ask leaders who they are.
But, as much as it’s a no-brainer to get the most out of the people who offer the most, Stage 2 companies do a consistently horrible job of actively developing their High Potentials. Why? Because the Well-Oiled-and-Balanced Wheel is easy to ignore (and besides, it has a lot of weight to carry and can’t afford much “down time”.)
The first step I’d recommend in developing your High Potentials is to come up with a model that you can use to identify your High Potentials. Since it’s always obvious who they are, why would you need a model? Two reasons.
First, you need a program to develop your High Potentials, both to get the benefit of the full value that they can give you, and to keep them engaged and hopeful about their future at your company. And in order to have a program, you need to explain to people who is part of the program and who is not.
Second, you also have people who are Good Potentials. Most of them will never make the jump to High Potential – but some of them will. And to do that, they need a model of what they’re aiming for – what a High Potential is.
I have a 1-page model for talking about High Potentials. It’s a graphic that you can put in front of High Potentials to talk about why you value them so much and how you want to continue to develop them. And you can show it to Everyone Else to explain in simple terms what it takes to be (and be treated like) a High Potential.
If you want to see my model and learn some tips for using it, sign up for my upcoming August Strategy Hour webinar (even if you can’t make it you’ll get a copy), or go to the Contact Us page and reach out to me to request it.
Not all strategic decisions need the same amount of analysis. This is something that many founders understand intuitively. But it’s also something that becomes more complicated as a company grows.
Why? Because the decisions get bigger and more complicated, what worked for a Big Decision in the past often doesn’t work for the Big Decisions of a bigger company. In addition, the “decision environment” gets more complicated, with more potential participants and more dynamics among them. Who do you include? When? How? Who provides input and who participates in the decision? How is the decision actually made?
What qualifies as a Big Decision? Something where the payoffs are extraordinary – say, it could have an impact of 20% or more of a company’s revenue, or it could impact more than a third of the employees – and/or where the risks are extraordinary – say, it could take 20% or more of a company’s discretionary resources to implement.
Decisions fall on a continuum – as the stakes rise, so does the need to treat the decision more seriously.
And how do you do that? As the decision gets bigger, you should add more information, more structure and process, and more focus and energy on the decision before its made. If you don’t, you can be pretty sure you’ll be spending more time than you’d like or expect after the decision.