Start-up CEO vs. Expansion CEO

Most company founders embark on a start-up journey with aspirations to see the company through to greatness while maintaining the role of the CEO.  However, the role of startup CEO and expansion-stage CEO differ greatly.  They require completely different skill sets, and it’s extremely rare for a founder to have both start-up and growth-stage skills.  A majority of founders end up recruiting replacements to take over the companies they created.  There is absolutely nothing wrong with that. It is a common reality that accompanies the shift from searching for a business model to executing and scaling it effectively.

A founding CEO must be tactical, hands-on, gets stuff done, where a professional manager CEO focuses on the vision/strategy, building a senior team, and guiding the senior team to execution.

Navigating a company through the expansion stage takes operational expertise. You have to know how to recruit senior managers who have specific functional expertise, and you must be able to establish an operating rhythm that gets your growing team working toward the right goals. As your company transitions to the next stage, you must transition with it, and as you do you are faced with three paths.

1) Adapt to the New Reality

If you are dead set on remaining CEO, then you need to pick up the new skills needed to address the blind spots and manage your company’s expansion. That means you have to augment those skills that got you where you are now: your audacity to do something new, your passion to inspire others to take risks, and the tenacity to create and disrupt markets. In addition, you need to focus on managing through others (this one can be the biggest challenge) and developing a rhythm for your team.

It’s extremely rare for a founder to have both start-up and growth-stage skills, and it’s even less likely that you can pick them up as you go. So, consider whether you’d hire yourself to run your company now that you are expanding — chances are, the honest answer is no.

2) Assemble a Skilled Team

Another option is to surround yourself with an executive team that brings the growth-stage experience and expertise your company needs.  For most companies entering the expansion stage, a sales and marketing-focused COO is the right choice.  However, if you need more cover on overall operations, financial forecasting, and legal matters, then a CFO makes sense.

When it comes down to it, companies aren’t run by highly effective individuals; they’re run by highly effective teams. Most successful CEO’s will tell you to surround yourself with the best people possible who are experts in the areas you are weak in.  This will allow you to focus on your strengths.

3) Transition into a New Role

The majority of start-up CEOs recruit their replacements as the company grows beyond $15 million in revenue. It’s that simple, and it’s usually the right choice. Work with your board to bring on a new CEO and transition into a new role. Don’t let your ego drive an emotional reaction. Put the company first, just as you always have, and you will come to the conclusion that it’s the right decision.

The basics of good leadership

Throughout my career I have had the opportunity to work with numerous senior leaders.  In trying to understand where I may be able to help them I typically ask “What are the three or four biggest challenges you’re facing in your business right now?” Even with an incredibly diverse sample of businesses, it has been interesting to see a clear pattern emerge of four specific issues that the vast majority of these leaders identify as the things that are holding their organizations back and keep them up at night.

1. Lack of a vivid and extremely well-communicated vision

Even though these leaders are passionate about the vision and direction of their company, they reluctantly admit that if you were to go just one or two levels below them in the organization, you would likely find very few, if any, employees that truly understand the vision, mission and core values of their organization. A major job of every leader, whether you lead two people or 20,000, is to relentlessly communicate an exciting and clear vision for the future of the organization. In one-on-one meetings, town halls, e-mails, voice mails, team meetings …  the goal is to help people clearly see where the business is headed and what they need to focus on to make sure you all arrive there together successfully.

2. Lack of open, honest and courageous communication

The inability or unwillingness to put difficult, uncomfortable and awkward topics on the table for candid and transparent discussion was identified by these leaders as a major inhibitor to their ability to build strong teams and get their organizations fully aligned. As Patrick Lencioni points out in his superb book “The Five Dysfunctions of a Team,” in large part this lack of openness stems from a fundamental absence of trust that leads to unwillingness by people on the team to be vulnerable and completely honest. However, the desperate need for courageous communication and high levels of transparency is powerfully demonstrated in Jim Kouzes and Barry Posner’s seminal book “The Leadership Challenge,” which undeniably shows that honesty is the single most important driver in establishing credibility as a leader. Especially in times of great turmoil like we are facing now, employees crave as much information as they can get about how things are going in the company and what they need to do to keep it moving forward. Where there is a lack of a well-communicated vision mission and values, you quickly see fear, politics, rumor-mongering rushing in to fill the void.

3. Lack of accountability

As a direct result of the lack of honesty and courageous communication mentioned above, one of the difficult conversations not occurring is a frank discussion about tolerating mediocre performance. After taking a good, hard look at their business, many of the leaders I work with realize that they have a few mediocre performers in key positions in their organization and that every day they leave them there is another day they are in effect saying to the rest of the company, we were just kidding about pursuing excellence.  The truth is it is not right to let a small few jeopardize the organization and destroy their own career because their leader did not have the courage to tell them the truth about their poor performance. Here is a test will bring this into sharp focus:  Think of a person in your organization that consistently delivers sub par work, turn things in late and has a poor attitude. … Now realize that, because they still have their job, this individual is the person who establishes the level of acceptable work for every other employee in your company. How does that make you feel?

4. Lack of disciplined execution

What percentage of the time do you think companies that have a solid plan for how to succeed in the marketplace … actually effectively execute to plan? The answer has remained the same year after year: 10 to 15%. That number is shockingly low.  What is even more devastating is to realize the monumental waste of talent, resources, opportunity and money that low number represents. However, the process for ensuring effective execution is really straightforward and simple. Just a handful of key steps need to be applied with vigor and total accountability. Leaders just have to be willing and able develop a culture of disciplined execution by establishing the systems, processes and checkpoints to ensure consistent flawless execution of all critical initiatives

At the end of the day, none of the things listed here are particularly new or revolutionary. Actually, I am sure that most of us will recognize them as well-established fundamentals for leading a world-class organization. However there is a huge difference between knowing something … and living it every day in your organization.

Focus Your Leadership

Successful business relies upon the ability of the organization to have a strong purpose.  That fact has never really changed regardless of economic or other unforeseen circumstances.

I find that some leaders tend to want to find someone to “blame” for their challenges.  If you’re looking for some concise tips to focus your leadership, here are eight from the wisdom of the late Peter Drucker:

1. Make sure that what makes a difference gets done.

2. Check your performance against previously defined goals.

3. Say no to things that don’t contribute to the real mission.

4. Know early when to stop trying doing something that can’t be done.

5. Organize travel and leverage new technology if it’s possible.

6. Have a maximum of two organizational goals at the same time.

7. Make sure the people around you understand your priorities.

8. Build on your strengths. Find strong people to do the other necessary tasks.

To fully digest the expanded wisdom of Peter Drucker, pick up a copy of The Essential Drucker or any of his books. If you are a practicing manager you’ll find them crisp, to the point, and genuinely useful.

 

 

Business Ethics – It’s not Rocket Science

“The truth of the matter is that you always know the right thing to do… the hard part is doing it!”

U.S. Army General H. Norman Schwarzkopf

Likewise, the answer to most business problems is usually obvious as well.

Consider this – when was the last time you were really stumped for a solution to a problem?  In most cases, the hardest things about solving the problem were the obstacles of personalities, politics, or cost.  Taken together, these obstacles usually make the obvious solution very hard if not impossible to implement.  These are failures of an organization’s values, guiding principles, and ethics.

Several years ago a friends of mine was moving her elderly mother closer to her home due to her declining health.  Her mom had sold her home and hired a moving company to move her furniture and transport her car via trailer from Boston to Florida (primarily to minimize the mileage).  When the moving van and car arrived, it was obvious that the car had not been transported but driven instead.  When questioned, the driver admitted that they had driven the car and not transported it as they had been contracted to do.

To help her out I called the moving company’s main office.   The representative asked what I wanted them to do about it.  My only reply was “What would you expect someone to do if it was your mother!” Shortly thereafter, the driver came back to tell us that they were refunding the cost of transporting the car.

When a customer calls about a problem with your product or service. You generally know right off-hand what the right thing to do is: either fix it, replace it, or refund their money.  But company management may complain that “if we fix every problem for every customer then how are we supposed to make a profit?”  Well, if your company’s product or service has so many customer problems that fixing them impacts profits, then fix the product or service!  It really isn’t rocket science!

If the only reason not to do it just like you would for your mother is the cost to the company, where do you think the savings to the company is coming from?  It’s coming from your customer’s wallet.  And if it’s not fair to your mother, what makes it fair to your customer?

The customer’s complaints (whether you like it or not) are a part of your company’s quality control process.  If you’re a proactive company, then you’ll have worked out all the bugs before they even became an issue with your customer.  Unfortunately in their rush for quick profits, many companies out there let their customer’s do all the beta testing for them.

One of the unintended consequences of making unethical or dishonest decisions in dealing with your customers is the message it sends to your employees: that you’ll mistreat them the same way whenever you think it’s in your best interest to do so.  If you don’t care about your customers, then how can you expect your employees to care about them or the company for that matter?

 

So here are some suggestions for creating an environment where people just do the right thing:

If a customer’s product or service failed the answer is simple and obvious; either fix it, replace it, or give them their money back.  If the customer broke it, then don’t!

Make sure your corporate policies, organizational politics, management personalities, and cost focus don’t interfere with the obvious solutions to most customer problems.

Generally speaking, if you have to ask yourself if what you are planning to do is the right thing, then it probably isn’t!

When deciding a course of action, the best question you can ask yourself is, “Would I do it this way if I were doing this for my mother?”

Obviously, no company or individual can live anywhere near perfection, but the real world test is how hard the company or individual decision maker is trying to do the right thing, and how quickly they’re trying to fairly resolve problems.  Remember, doing the right thing isn’t rocket science!

Undercover Boss

Every CEO should be an undercover boss for the day.  The information your managers never give you would amaze you.  On a recent episode of “Undercover Boss” a CBS reality show, the head of a US drive-through food chain broke his cover during filming and shut down a restaurant on the spot, because of how employees were being treated by a manager.

Early in the episode an employee named Todd told the CEO, Rick Silva that his manager treated staff badly and once threatened to take him outside and beat him for not working hard enough.  Todd said he was worried that Stevens would terminate him if he stood up to him, and he needed the job to support his mother.

Checking into these allegations CEO, Rick Silva went undercover.  After doing a little observation on his own Mr. Silva raised allegations to the manager, known in the show only as “Stevens”, about verbally abusing his employees.  The manager retorts that if he didn’t scream at the employees they would not listen to him. What training did he take? 

“I’m not going to let you continue telling me I’m disrespecting my crew. Have you been in the fast food business before?” the manager says.  Mr. Silva tries to maintain his cover, saying “no I haven’t”, but cracks when the manager continues to prod him over his supposed lack of experience.   He finally says to the manager that he does have experience.  Mr. Silva admits “I have been in the restaurant business for over 20 years and I’ve been in the fast food business for over 20 years. I’m the CEO for this company.”

Stevens’ jaw drops as Mr. Silva says: “Right here, right now, we’re going to shut the restaurant down.”

Mr. Silva reopened the store with a new general manager the next morning and sent the offending manager away for more training.  Personally, I would have fired the guy.  No employee should have to deal with a lack of dignity and respect.  But unfortunately, this manager’s style is more common than we would like to believe.  So think about doing your own internal observation, you may learn more than you want to know.

Creating a Sustainable Competitive Advantage

To survive and prosper, small and midsize companies must establish a marketing presence based upon a sustainable competitive advantage.

I often speak with company owners and CEO’s that want to grow their organizations, but don’t know how to take the next step.  It’s difficult when you’ve worked so hard to build your current business to slow down enough to look what’s next.

So where do you start?

Examine your Marketing Presence.  This is the message your organization communicates to its prospect and customer base.  Is your message effective?  To be effective, the message should be clear and simple — and contain the key attributes you want associated with your business.

What is your Competitive advantage?  The sum of those attributes that differentiate your business from its competitors. This is your core competence. You develop, build and enhance it through a clear understanding of your customers’ wants and needs. You implement it through a strategic plan (a directional compass) that can help you quickly adapt to changes in their wants and needs.

Is it Sustainable? Can it keep in existence, maintain and affirm the validity of, support the spirit, vitality and resolution of, encourage, endure and withstand. Only through your continuous understanding of what makes your business competitive can your business survive and prosper. GE’s former CEO, Jack Welch, once said, “If you don’t have a competitive advantage, don’t compete.”

Since it takes two — a buyer and a seller — to make a sale, the reason for establishing a viable marketing presence is for your business to be on the prospective buyer’s “short list” when the buyer is ready to buy. You want to be sure that your company is among those being evaluated when the prospect’s need arises.

When you think about your competitive advantage, consider that in your prospect’s mind your company “fits” into some category.  For example, you are either a “low-cost” or “value-added” supplier. A low-cost supplier is categorized as one who consistently provides a lower cost with acceptable quality. A value-added supplier provides a differentiated product or service that contains substantial attributes which command a premium price.

Likewise, you are either a “generalist” or a “specialist”. A generalist is categorized as having a broad scope — serving all types of customers in an industry or geographical area, offering a broad range of products or services.  A specialist focuses on specific products or services and dedicates all efforts to that one niche or market segment.

The key element in your thinking should be to make a difference. You must take the risk to create a recognizable choice from your rival companies.  Your worst error here would be to imitate rival companies or being all things to all people.

As you think strategically about establishing or re-establishing your market presence, consider this process:

Conceptualize your strategy — this is pure and analytical. Engineer general agreement to the strategy — here you are muddling over the practicality of what you want to do and sharing your ideas with others and getting their input.  You might also seek the help of a business coach during this period.

Prepare a mission statement and business plan — to discover and clarify what business you are in and how you plan to approach it.

Communicate the statement and plan — both internally and externally.

Live the plan — if all the steps feel right, start to implement the plan — but with the full expectation, knowledge and intent (this is really important) you will continuously adjust and adapt it to market changes.

The deceptive nature of flattery

The most common form of manipulation comes packaged in the form of flattery – it’s also the most dangerous. The veils of most “hidden” agendas are also
typically cloaked in flattery.  I have worked with many senior leaders who fall into this web and begin to really believe that anyone who disagrees with them or their idea is wrong, mostly because insincere flattery has fed their ego to no return.

The deceptive nature of flattery is that it becomes most powerful when it is given to those who thirst for it. Leaders who place their need for adoration
and acclaim above serving the needs of others are high value targets for those who would abuse the misplaced trust given to them. If you take one thing away from this post it should be this – the power that comes with a leader’s ability to positively influence others is only trumped by the power given away as they are adversely influenced by others.

The problem with the old saying that “flattery will get you everywhere” is that those with less than pure intentions not only believe it, they understand that
flattery has the power to influence, corrupt, undermine and deceive – they wield flattery as a lethal weapon against the undiscerning.

Before I go any further it is important to understand that praise and flattery, while often used interchangeably, are not synonymous. “Praise” is most commonly defined as: the expression of favorable judgment or sincere appreciation. “Flattery” is most commonly defined as: excessive and insincere praise. The naive, the needy, the impressionable or the ego-centric view flattery as genuine praise. Discerning people understand flattery may be
disingenuous, or false praise motivated by an agenda.  Here’s the thing – In times past it was a bit easier to discern authentic praise from false praise because the methods by which relationships were constructed was different. We used to build our relationships slowly and carefully based upon personal history and experience. Trust was earned over time through personal observations of a person’s character, actions and decisions.

In today’s digital world speed has influenced every aspect of our lives-perhaps most notably how we build our relationships and who we grant access to.
If you examine the speed at which people build their friends, fans, followers, and connections on social networks.

Personally, I prefer sincerity to flattery. It was Socrates who said, “Think not those faithful who praise thy words & actions but those who kindly
reprove thy faults.” What leaders need to become cognizant of is that flattery comes with the territory. The more influence you have, the more you’ll be prone to attract flattery. The question is, can you discern fact from fiction and can you handle it?

Well I realized things really haven’t really changed all too much as I read this quote from a letter written in 1520 by Martin Luther to Pope Leo: “The ears of our generation have been made so delicate by the senseless multitude of flatterers that, as soon as we perceive anything of ours in not approved of, we cry out that we are being bitterly assailed; and when we can repel the truth by no other pretense, we escape by attributing bitterness, impatience, intemperance, to our adversaries.”  Interesting, isn’t it.

Does your executive team act like a team?

Over the years I have worked with dozens of executive teams in several industries. One interesting thing I discovered is often those “teams” aren’t teams at all.

They are a group of individual senior leaders who meet on a regular basis to battle each other for limited resources: funds, people, time, praise, etc. They leave their meeting and evaluate how they did in the game: did I “win” today? Did I secure the resources I wanted and beat out my senior leader colleagues today? Each individual senior leader tracks his/her score and the game begins anew the next meeting or more accurately, the next day.

But I have seen the success when the executive team is truly committed to each other and the organizations success.  I have been lucky enough to be part of teams that were willing to put all their differences aside (even if temporarily) for a common goal.  I am a big believer in respect and values that are demonstrated by action at every level. When organizations don’t create value systems and then live and breathe them daily, values create themselves and not the good ones.  If the executive team or senior leadership does not act with “one voice, one heart,
and one mind,” the culture effort is doomed from the start.

To unlock the potential of your organization’s executive team, consider these four best practices:

1. Clear Purpose:
   The executive team must define its reason for being – beyond their relationship as direct reports of the president/CEO. The purpose statement clarifies why the team exists, who their primary customers are, and what they’re trying to accomplish as a team (provider of choice, employer of choice, etc.).
2. Team Goals:
   What strategic goals is the executive team trying to accomplish? Clarifying executive team goals helps define what a good job looks like at the end of their fiscal year. Performance goals might include employee work passion targets, customer service excellence, financial success, etc.
3. Values & Norms:
   Values defined in behavioral terms describe HOW team members should behave as they pursue their team goals. All effective teams create agreements around what a good citizen of the team looks/acts/sounds like. Values are typically too vague and lofty to guide day-to-day actions, so behavioral definitions solve that issue. Team norms emerge from the valued behaviors – norms are practical guidelines that ensure values are lived in team member interactions.
4. Values & Norms:
   With the team’s purpose, goals, and values formalized, the most important practice comes into play: holding team members accountable for these agreements. Accountability is not the sole responsibility of the executive team’s leader (typically the president/CEO) – it is every team member’s responsibility. Accountability conversations are not drawn out conflicts – they are conversations that inquire about a valued behavior or norm, asking for insights about demonstrated behavior that seems to be outside those agreements. They are sincere efforts to understand behavior and guide members to embracing their agreements

When these four agreements are in place, decision-making is easy. Executive team members easily understand their role in furthering the team’s purpose by cooperating, communicating, and focusing on the greater good.  Change your executive “group” to an aligned executive team and you’ll reap the benefits: less drama, less conflict,  more aligned action, better  productivity, and more fun!

Is your organizational culture what you think it is?

In my role I have the opportunity to work with leaders at all levels of all kinds of organizations. About half of my work involves leadership skill building and team process effectiveness; culture for the most part makes up the other half.

It is impossible for me to go into an organization without subconsciously (maybe consciously) assessing the culture of their work environment. I observe and listen for how people are expected to behave, to perform, to treat each other and their customers.

I often hear about practices and philosophies from the leadership that clearly is not in practice within the organization.  And I can say that you need to use a lot of diplomacy to tell the CEO, “I know what you’re saying happens, but it doesn’t happen that way”.  It’s hard to hear that you have tried to build something a specific way and that way is not happening.

Whether an organization has intentionally created their culture or that culture evolved by default, it does have a culture that is tangible and observable. If your culture was created by default, it is likely that unintentional values or norms exist. If you consistently see conflicts,
blame, poor performance, and frustration, your culture is eroding employee morale with every passing minute! Let’s look at two very powerful systems which may reinforce undesirable valued behaviors in your organization.

Rewards and Incentives

Whether you have formalized values and valued behaviors or not, rewards and incentive systems can cause distinct behaviors, some good, some not good. For example, if you desire a team culture but your organization offers only individual compensation, you will likely see “I win, you lose” behaviors by team members.

A few years back a client described the following inappropriate, incentive-driven behaviors by a salesperson. The company paid a very low base; over 70% of sales staff compensation was in the form of commissions. One salesperson negotiated with a few of his big clients to sell
them product at the end of each quarter. The sales person enjoyed commissions on these sales. Then, one month into the new quarter, he would process returns of that product and refund the client’s money. He was generating commissions on “ghost” sales. This went on every quarter. Everyone – the salesperson, the client, the finance team of his company – knew what he was doing and tolerated this behavior. Eventually the company changed the rules about commissions on product returns, but the damage had been done.

 Recognition and Messaging

Every time you publicly celebrate someone for a behavior or action, you are reinforcing that behavior or action. If you recognize a player for goal accomplishment but everyone knows that they’ve taken inappropriate short cuts (for example) to reach that goal, you are reinforcing undesirable actions.

Even praising the RIGHT behavior can have unintended (and undesirable) consequences. One client celebrated a staff member who learned the wrong materials had been shipped to a client. That person packed the right material and drove to the airport just in time for overnight shipment by UPS. Recovery was expensive but the materials arrived on time. The client celebrated this terrific proactive solution and such recoveries became more frequent. The client realized they needed to celebrate solving the “why do we ship the wrong materials?” problem more than celebrating the recovery!

You don’t have to be a CEO to create values clarity in your own workteam. If you experience unintentional values in your workplace, start setting values expectations now.

Company Culture always affects the bottom line

Zappos Chief Executive Tony Hsieh spoke at the annual Society for Human Resource Management conference this year.  He explained that before joining Zappos, he dreaded coming to work at his own company. It wasn’t fun to work there anymore
because the company culture went completely down the drain.

When he began his work at Zappos, he decided to make a change. Eventually, their company mission evolved from having the greatest selection of shoes online, to providing the best customer service, to having a dynamic and fulfilling company culture. Along the way he learned lessons to share with other organizations trying to do right by shareholders and employees at the same time.

“Our number one priority is company culture,” he explained. “If we get the company culture right, then . . .delivering great customers service or building a long-term brand or business will follow.”

Their culture begins with the hiring process. Potential candidates participate in two sets of interviews and they need to pass both in order to be hired. Often, they pass on very talented individuals that do not fit with their company culture.

The first set of interviews may inquire into the person’s experience and skills that would make them a good employee, while the second set determines whether they would be a good fit within the team. The second set includes questions concerning each of their core values.

Hsieh said at first, the company,  resisted drafting core values because it seemed very corporate and often they read like a press release. But, they asked the employees for their suggestions and a year later released the values.

To ensure that these values are taken seriously and integral in the company’s culture they must be committable core values. The company can fire people for not following the values, even if they are executing their traditional roles correctly.

For example, when interviewing, in order to determine whether one person would be able to thrive under these values, the company will try to determine whether they value honest relationships, transparency, embrace opportunity and are humble, among others.

Humility, the last value, is very difficult to determine, but after the interviews, HR will circle back with the shuttle driver who brought the applicant to the company offices and ask how they were treated. If they did not treat the driver with kindness and respect, then they won’t be hired, no matter how well they did on the actual interviews.

They also ask on a scale of 1 to 10 how lucky the potential hire is. Obviously, they don’t hire those with bad luck, he jokes. However, basing this exercise on a research study, after their answer they have them scan a fake newspaper for the number of photos. Within the newspaper is a headline that gives them the answer. According to research, those that answered that they were luckier found the headline. Luck is about
being open to opportunity, said Hsieh, an important value for the company and their employees.

“It actually doesn’t matter what your values are, what matters is that you have them and that you align your organization around them.  You may disagree with the values established by Zappos, but purposefully establishing a company culture works successfully
for many companies.