Wait I Am An Entrepreneur, Not A CEO!

by Elisa SpainNo Comments

In my practice as a Vistage chair, I often hear entrepreneurs say, “I don’t want to lose the culture as I grow this company” or “We are like a family; I want to keep this feeling as we grow”. And yet as the company grows, the culture inevitably changes and the owner no longer knows the name and the family of every employee.

In the early days, everyone is equal and it is all about getting the job done, getting the orders out, meeting the customer needs. Typically the owner is the chief sales officer and innovator. As a company adds more people, “management” becomes necessary and terms like “building a leadership team” come into play.

Suddenly the owner is thrust into the role of CEO. Some enjoy the change, and most long for the simpler days when everyone was pulling together without any hierarchy. And, while longing for the “old days” s/he is excited about the growth and excited about having a broader impact.

So… s/he hires some executives and asks them to show the way. All well and good, except these folks are focused on their own career path. These key executives want the opportunity to innovate and have an impact themselves. The CEO while still expected to define the vision, must also become a coach and mentor, allowing others to grow and develop as leaders.

This transition from entrepreneurial management to professional management is what Vistage is all about. Members come together to discuss these challenges and inspire each other to make the necessary changes to achieve the results they desire. The ultimate goal for most is to build a sustainable enterprise, one where the CEO’s vision can be achieved without the CEO’s handprint.

Those that are able to make these changes are those rare few that build and lead the less than 1% of companies >$100mm in revenue.

 

Why Vistage Works

Elisa K. Spain

 

Are You Willing To Wait For Transformation?

by Elisa SpainNo Comments

Change is hard; it taxes the soul of both leaders and followers.

And, for many of us leading change, I wonder if this frustration sometimes leads to giving up or giving in too soon?

Two years ago I began a transformation process with one of the peer groups I lead. The change was disruptive. Some folks stayed, some folks left and we began the hard work as described by Dr. Bruce Tuckman in his elegant model of team development and group behavior, i.e. forming, storming, norming and now performing.

At the beginning, the task seemed daunting, and I often wondered if we would be adjourning, rather than transforming.

And then… the process took on its own life. We stormed through to norming and today we are congratulating ourselves on how well we are performing. Looking back, the time flew. Looking back, it wasn’t all that hard. Once I articulated the vision, communicated it often and asked each member to own it, the change began to happen. We were mindful of celebrating our wins and mindful of institutionalizing our new approaches. And most importantly, we continue to be mindful that while the present is to be celebrated; it must also be monitored and evaluated. We must follow the DIME model to prevent the new practices from becoming stale.

Biggest learning for me: stay the course; transformation takes time. Allow it to unfold at its own pace.

Why Vistage Works

Elisa K. Spain

SWOT And Risk Management

by Elisa SpainNo Comments

 

Most every business at one time or another, most often annually, spends a bit of time on a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats). This is simply good governance. And, as I discussed in a recent post, Are You Prepared to Govern in a Changing World?, successful companies focus externally on the O and the T, because they know internal actions must be based on these.

An often missed corollary to SWOT, is the broad topic of Risk Management. Business owners sometimes believe that by purchasing insurance they have addressed this topic.

While insurance is available to mitigate some risks, there are many business risks for which insurance is neither available nor financially practical. Instead, it is management practices that are the key ingredient to managing many, if not most, risks.

How are you, as a leader, managing each of these?

Reputation Risk
  • Does the behavior of your employees reflect your company values?
  • Have you articulated these values and do your own actions consistently reflect them?
  • What do you want to be known for? (your brand)
  • If you surveyed customers, vendors and others who have contact with representatives of your company, what would they say you are known for?
Operational Risk
  • Simply put, does your product and service work?
  • Do you have quality standards, and do you measure them?
  • Is it easy to do business with you?
  • In short, do you have operational excellence and if you don’t, is doing something about it a priority?
Legal Risk
  • Are you keeping current on HR and other regulations that impact your business?
  • What actions are you taking in your hiring, promotion and other business practices that may inadvertently create legal risk?
Human Capital Risk
I am fond of the saying, “Take care of your employees and they will take care of everything else.”
  • Are you focused on retaining your key employees?
  • Do you deal effectively and swiftly with behaviors that are not consistent with your culture?
Business Model Risk
  • What is happening in the marketplace (competitors, regulators and customers, etc.) that may impact your business model?
  • Is your business model sustainable? How do you know this?
  • What have you done, or need to do, to diversify this risk?
Financial Risk
Financial risk is the primary (ultimate) risk to business owners and their investors, and it could take awhile for the impact of each of these risks to show in the numbers and…. it may not happen. The question is, “how much financial risk are you taking by not focusing on risk management”?

Elisa K. Spain

 

What Happens When Steady-Growth Companies Stomp On The Gas Pedal?

by Elisa SpainNo Comments

Opt 3 Sept 14

When steady-growth companies decide to stomp on the gas pedal, especially with new leaders, it is convenient to assume the “old timers” are just fine and will take care of themselves while all else goes to growth. Be wary of unintended consequences…

When a company is young – it is all about growth – and everyone is in the same place. It is all about hunting (in the hunter/farmer view of sales). When a company is in steady growth, there is a mix of hunters & farmers, with an emphasis on farmers.

 

Then when there is a shift to fast growth, frequently with a new leader and/or new ownership with a new approach to governance, the focus shifts back to hunting, as with a start-up.

 

Except, it isn’t a start-up. There still are these established relationships between account managers and their clients. The needs of the tenured account managers and their tenured clients are different from the hunters bringing on new clients. Similarly, long tenured employees in operations, and other support areas, are particularly impacted by the refocus on growth.

 

It is convenient for leaders to assume the “old timers” are just fine and will adapt, while all else goes to growth. Not true. We all want to feel valued and important.

 

So the question for the leadership of any established company on a fast growth path is, “How do you engage, (i.e. win the hearts, not just signatures on legal documents) of high performers and key clients?”

 

And the question for a board of directors is, “What responsibility do you have to steward the growth strategy in a manner that does not result in unintended consequences to the culture?”

Are You Prepared To Govern In A Changing World?

by Elisa SpainNo Comments

Opt 1 Aug 10

Arguably the most important ingredient is good governance is having a vision and a strategic plan. I often notice that these plans are based primarily on what is within our control. In short, these plans often consider only internal factors, the SW of the traditional SWOT analysis, while ignoring the OT portion or external factors.

And, I find these same companies are excellent at identifying their weakness and occasionally good at identifying their strengths and true competitive advantages.

I have had the privilege to work with several successful companies and I find, despite their success, they enjoy telling me everything they could be doing better. It is only when I hear them talking with customers, or preparing for these customer conversations that I hear their strengths. In the category of “only the paranoid survive” (Andrew Grove), perhaps this focus on what we can do better leads to stellar results. I certainly can’t argue that in these companies, it certainly has.

And.. what I also notice, in the few consistently high performing companies, is they are equally paranoid about their external environment, not just what their competitors are doing but also regulatory changes, environmental changes, technology changes, etc. They consider all factors that present both opportunities and threats to their current strategies.

It is these companies that focus externally that truly innovate and maintain consistent results.  And effective governance requires this external focus. Without it, sustainability is a question. With this in mind, as you begin to consider your plans for 2015, I ask you to consider the following questions:

  • When was the last time I visited a customer just to understand more about their business? Is it time?
  • What changes are happening in my industry – new technology, consolidation, regulation, etc.?
  • What is happening in other industries, perhaps ones more/less mature than mine, that I can learn from?
  • How are the demographics of my customer base changing?
  • How might all of these changes present both opportunities and threats as we plan for the next 3-5 years?

Elisa K. Spain

 

 

If You Don't Watch the Numbers, You Don't Have Governance

by Elisa Spain1 Comment

Opt 4 Aug 3

Publicly held  U.S. company governance dictates the requirements for financial reporting and many of these companies give “guidance” as frequently as quarterly. While this approach is sometime criticized as being short-term focused, the important upside is all stakeholders know, at any given time, how the company is performing and can respond accordingly.

Privately held companies, on the other hand, have a choice. There aren’t any governance mandates.

  • They can choose to focus on the numbers, or not
  • They can choose to report performance to all stakeholders, or not, and
  • They can choose to forecast and adjust accordingly or not

Owners sometimes question the need for forecasts and state that sales focus is primary.  After all they say, isn’t it all about growth, i.e. how much we sell this year compared to last year?

While most awards for privately held companies focus on top line (Inc. 500/5000, Crain’s Fast Fifty, etc.),  in my experience the businesses that follow the following five tenets, are the ones that achieve sustainable growth.  And for my Vistage CEO’s it is the reason members voluntarily report their financials quarterly, are accountable to each other for providing guidance, and adjust their actions accordingly.

Five Truths of Profitable GrowthTM

  • If you don’t know how you make money, you won’t make money.
  • If you don’t set goals for wealth creation, you won’t accumulate wealth.
  • Operating budgets and capital budgets are not the same; if you use debt to finance operating expense rather than for growth, you will not grow.
  • Top line growth does not equal bottom line growth.
  • Without a culture of accountability and measurement, you will underperform.

Elisa K. Spain

In Good Governance, When Does Culture Come Ahead Of Revenue?

In Good Governance, When Does Culture Come Ahead Of Revenue?

by Elisa Spain1 Comment

Opt 4 July 20

A few weeks ago in my blog about Leading Isn’t Easy, I talked about the hard choices we sometimes must make as leaders. Especially those choices where neither outcome is a good one.

As we continue this series on Governance Design, I am reminded of my 2014 theme for my Vistage groups, “All That Matters Is Culture”.

For this reason, once we define our business objective, for me the most important question is, “What are the cultural implications of our goals?”. If we are intentional about our culture, and ruthless about enforcing it, everything else will follow. And it isn’t easy.

Sometimes we have high performing employees who don’t fit the culture. So hard, to say goodbye to someone who is getting the job done, sometimes, doing it better than anyone else, brings in the big deals but just doesn’t fit. She may be a bully, or he may cut corners or spread negative energy.

When it is an employee, we can often rationalize to ourselves that the performance of the team will improve when the person who doesn’t fit is gone. The net result will be higher performance overall.

But, what if it is a customer who doesn’t fit the culture? Here we are talking a real dollar impact if we separate. This brings us back to Leading Isn’t Easy.

Recently, I had to make this hard decision. It became clear to me that a long time member of one of my groups didn’t fit the core values of the group. This member contributed in many positive ways and yet, I knew that to take the group to the next level, it was time for this member to go. After a few sleepless nights, we had the Fierce Conversation, and I have already begun to see the change. What I realized was, to achieve the business objectives and the long term growth, the temporary dip in revenue was worth it.

 

Elisa K. Spain

Is Governance Leadership?

Is Governance Leadership?

by Elisa SpainNo Comments

Opt 3 July 13

This week begins a new series on the topic of governance in growing businesses.

Governance is not a term typically used by business owners and business leaders. Rather, we hear this term most often in the context of corporate boards, both public and private.

Yet, Wikipedia defines corporate governance as, “the system of structures, rights, duties, and obligations by which corporations are directed and controlled.

  • Governance provides the structure through which corporations set and pursue their objectives, while reflecting the context of the social, regulatory and market environment.
  • Governance is a mechanism for monitoring the actions, policies and decisions of corporations in alignment with the interests among the stakeholders.”

In short, governance is the DIME method that I have talked about previously. Design, Implement, Monitor and Evaluate.

Beginning with “D – Design”.  In my experience, businesses initially develop without much regard to design. And as Vistage speaker Jim Alampi reminds us, while bootstrapping works up to a point, as businesses reach critical milestones of growth, what we were doing up to now, doesn’t work anymore. At this point it is time to pause and ask two sets of questions:

First, the 5 key internally focused questions:

  1. What are our business objectives?
  2. What are the cultural implications of these goals?
  3. What are the financial implications of these goals, revenue, expense, cash and capital needs?
  4. What structure and infrastructure, i.e. key functions and processes are needed to achieve our objectives?
  5. Who on our team is qualified to fill the key roles? Who may not fit? Who will we add?

And, equally important are the 5 key externally focused questions:

  1. What is happening in our industry? Competition, innovation, regulation?
  2. What is happening amongst our customers? Growth, consolidation, innovation?
  3. What are the gaps that provide opportunities for us?
  4. What are the threats to our continued growth?
  5. What diversification opportunities exist?

 

Elisa K. Spain