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Leadership

Posts tagged Growth
Having What It Takes - To Lead at Scale
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You may have heard the expression, companies scale but people don’t.  Well, there is some truth to that saying.  The reason is that to be successful at growing a company, you need to be a strategist. 

Founding executives of early stage companies often start off as doers.  They have a specific skill or expertise in areas such as product development, sales, technology or finance but may lack the business savvy to help scale a company. 

Sometimes the sense of camaraderie amongst the original team members hinders the ability to make the difficult personnel decisions necessary to effectively and efficiently grow a company. 

Beyond Managing Your Business Area

As an executive in a growth company, you need to keep the company as a whole in mind. For example, in addition to understanding and updating the current technology offering of a company, a company’s technology lead must be well versed in business strategy:  staying current with new technologies; understanding how they apply to business strategy across geographies and sectors; determining if it can generate a competitive advantage; making complex decisions based on return on investment, and justifying major technology expenditures. They must have knowledge and experience with analytics, organizational design, and infrastructure.

The same holds true for the lead finance role in a company. As a company scales, this role becomes more than a steward of finances and manager of cost reductions.  The role assumes more strategic responsibilities, looking at the business with a value creation lens. They become a partner with the CEO in finding new opportunities, working with capital markets, assessing strategic financial risks and rewards, and managing external stakeholders.  They will need broader experience including operations and information technologies and be a contributor to the company’s competitive advantage.   

Leadership Skills

You can’t be the same leader at scale as when your company was smaller. The skills needed at the expansion stage are quite different.   As an executive team member, you should have more of a business orientation versus a functional orientation.   You’re not expected to be strong and decisive, to instinctively know the right answer to every question.  Your expected to have business acumen and leadership skills; to be a good communicator, collaborator, strategic thinker, multi-tasker, crisis manager, and change catalyst.

Additionally, you must hone the ability to ask good questions, listen and make connections.  Hal Gregersen, Executive Director of MIT Leadership Centre and author of “Questions are the Answer” states,  “When any leader is operating on the edge of uncertainty or the edge of the unknown, questions really are the answer” as questions are the precursor to creating completely new answers, new solutions.

Leveraging Questions

Hal Gregerson interviewed 200 creative and successful business leaders for his book and all of the leaders were exceptional at landing on their feet and asking the questions that other people weren’t asking.  He notes that “The biggest questions we ask often demand the biggest level of uncertainty, and fear, and anxiety that we can imagine”

Peter Drucker, known as the father of management thinking, would jump-start strategic thinking by asking “What changes have recently happened that don’t fit ‘what everyone knows’?”

To succeed in growing and scaling companies, leaders must adapt their approaches, grow their skills, and elevate their role as a strategist.    They need to become more of a leader than a doer.

 ArtScience Group is a boutique consulting company that provides executive coaching, executive peer exchanges, and team facilitation.  Learn more at ArtScience Group.

 

 

 

Fast vs Deliberate Growth - Brian Chesky Gets it
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I recently spoke with a co-founder of a computer software company who described a 7-year journey involving multiple rounds of funding that enabled the company to grow from $2M to $150M in revenue in the first 5 years.  Fantastic!   Unfortunately, 2 years later that trend of rapid growth was nearly reversed and his diluted shares were penniless.  

His message to entrepreneurs was that fast growth facilitated by large increases in investment capital is not necessarily a good thing. This co-founder realized that while the availability of investor funding is important, so is monitoring cash flow, implementing prudent hiring practices, establishing priorities for customer acquisition efforts, identifying new or expanded market opportunities and having a strategic plan for growth.  He also came to the realization that capital partners are not always adept at running a company. 

Below are some key takeaways and recommendations:


Build Your Team Wisely

This includes hiring people with the right experience in a timely manner.  The VP of Finance for your $2M company may not be the appropriate person for your fast growing, national company. Delays in hiring a strategic CFO because your cash flow positive and your current financial person is handling  “it” can lead to bad spending habits and put your business at risk.  A management team that does not have the larger financial picture, lacks the ability to foresee potential cash flow constraints. Early detection of cash flow discrepancies allows your teams to make the necessary adjustments to strategies and operations to keep growth on track.


Carefully Shape Your Board of Directors

A company’s Board of Directors should include members with a broad base of business experience as well as those with specific industry knowledge.   Board members need more than just capital to invest in a company.  They must possess sufficient operational experience to be able to ask prudent critical questions:

  • What if the distribution channel doesn’t happen?

  • Where are the risks operationally?

  • What is the ROI from research, marketing, or IT activities?

  • Are sales objectives reasonable?

Periodically Evaluate Your Strategies 

A mantra from investors to grow big fast, get market share, go overseas and to go deeply into certain verticals needs a step by step action plan that includes careful and regular evaluation. Close tabs during expansion on customer-market fit, customer experience, projected vs actual sales and revenue will help you determine when growth needs to slow down to be sustainable.
 

Realize Strengths and Weaknesses 

A Founder who is a strong sales and marketing professional may lack the experience to manage the day-to-day operations or to work within the confines of a budget.  Acknowledge your limitations and take steps to ensure they do not become blind spots that critically impact decision-making. Take the time to ask the critical questions of others whose expertise and knowledge you depend.
 

Avoid Inflating Your Valuation 

A company’s valuation is a snapshot in time. Many factors influence investor decisions, some rational, some irrational. Too high of a valuation can make your company susceptible to market changes that can negatively impact your valuation. While each funding round results in the dilution of ownership percentages for existing investors, a down round further increases the dilutive effect, potentially resulting in a disappointing return on investment.

Rapid growth can create stress and distort judgments, resulting in a refusal to face facts until it is too late. Too much money, too fast, can foster a lack of discipline in critical areas in your company, leading to financial crises even as the money pours in.


Pause and Be Deliberate 

A more deliberate approach to growth comes from Brian Chesky of Airbnb. Speculation about Airbnb having an initial public offering in 2018 has been high. However, Brian Chesky recently announced a decision not to go public in 2018. His rationale is that Airbnb needs to pause and be more deliberate and measured in its growth. He recognizes that organizations need to spend time carefully navigating the challenges of growth, which in the case of Airbnb include regulatory challenges pertaining to collecting and remitting local taxes, and legal challenges with short-term rentals in certain locations.

Brian Chesky stated  "The vast majority of people are saying that you should take your time and do whatever you need to do on your timeline. Because companies have struggled in the public markets, and it's a defining thing. So they've all said be responsible, take it slow."

While going public is generally viewed as a means for increasing a company’s capital for growth and expansion, there are often a lot of other factors that come into in play for a company to be successful. It sounds to me like Brian Chesky gets it.

No Values?
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When someone is described as having “No Values”, it typically has a negative connotation. It usually indicates that the person has no moral compass or scruples - that you don’t know what to expect from them.

The same holds true for a business or organization.  Without clear values that define a company’s operating principles, it becomes difficult to recruit top talent, to lead existing employees, or to explain the special sauce that differentiates your business from others.

Why Values?

As more people are on boarded and a company grows in size, employees want to know what to expect from the executive team, managers, and their colleagues.  Are people dedicated to providing a great product/service or are short cuts and go arounds the norm?  Are the processes in place respected or randomly ignored?  Do people own up to mistakes and learn from errors, or do they seek excuses and scapegoats?

As a customer doing business with a company, you want to understand what to expect from those delivering a product or service.  How does working with your company make a difference?  Is this difference consistent across the board no matter whom you are dealing with in the company?

Values are the foundation of a company.  They are the core of what makes the company tick.  They form its personality.  To be authentic, values should come from within.  Picking company values from another company’s website, may get you a list of values but they may not resonate and be actualized by employees.

Developing Values

To create a list of values, look within your organization.  Think of the people who have made the company to date and the characteristics and traits they possess that have made a difference.  Begin the discussion with your executive team who sets the tone for the rest of your organization. What do they respect about each other?  What values are important to them?  Often values are ingrained early on from our experiences and from the people closest to us.  Sharing what values are important to us and how they are demonstrated leads to an authentic list of values from which to build.  It also allows for stories to evolve that bring life to values.   

Once you have a core list of values, share them with others in your company. Provide actual accounts of how they are demonstrated in your organization on a regular basis.  Seek feedback on the values and input on where others have seen them in operation. Then, narrow and refine your list to a reasonable number, preferably 5, and bring them to life with a brief narrative that clarifies their importance in the way you operate.  But, don’t stop there, identify ways to recognize these values in day-to-day internal interactions and in the interactions with customers, suppliers and partners. 

By dedicating time to discuss and recognize values, you send a strong message that values are taken seriously.  Regularly recognizing the values creates a mutual understanding and alignment in the way people work, allowing more time to be spent focusing on the growth objectives of the company.

What strategies have you used to make your values come to life?  We would welcome your thoughts at info.ArtScienceGroup.com.