Tag Archives: OrgDev

Management Inbreeding Retards Prosperity

If an organization’s people structure becomes too predictable and inflexible, it can enter into a season of decline. Regardless the legacy of success prior to the institutionalization of processes and preferences, its people can become inoculated to competitive shifts and a corporate “senility” may become omnipresent. Woe be the organization that thinks it can continue to enjoy today’s results tomorrow by only replicating what currently works!

  John W. Gardner, former chairman of Common Cause, likens the aging of a business model to the decline of the Westward frontier expansion. Vitality and enthusiasm give way to tradition and the dream dies with it. Once a management approach becomes entrenched, then, it is susceptible to challenges from every direction. If adjustments are not made, the “weak” are conquered by the “strong” (at innovation.)

The Boston Consulting Group used to do an annual survey to assess the total shareholder return of innovative companies versus their peer groups. Not only was it continually affirmed that innovative companies created greater returns, but the corollary finding was that reinvention of the business model yielded demonstrably higher results than simply changing products or services offerings. Prosperity proved evasive, then, for those management teams who had “inbred” in their perpetuation of what was familiar.

Frederick Kappel, former president of AT&T, during a lecture at Columbia University, cited six dangers of management inbreeding:

  1. People cling to old ways of working even though they have been confronted by a new situation.
  2. They fail to define new goals with meaning and challenge.
  3. Action is taken without studied reflection.
  4. Institutionalized contentment:Business becomes stable and secure, not venturesome.
  5. Old “wisdom” is passed on to new people. Older managers tend to adhere too rigidly to old ideas, to antiquated approaches and methods. Note, they mold the minds of young managers.
  6. Low tolerance for criticism acts to stifle independent thinking.

I remember hearing of a speaker at a turnaround conference who said that the antidote to such mismanagement lies largely in moving people around to different jobs on a regular basis. He argued that a type or rottenness took root when people held onto jobs (positions) for too long. He felt that giving people new challenges, rewarding the hungry “chomping at the bit” with opportunity to test themselves, was a way to keep the organization invigorated. By creating an atmosphere where people have the chance to perform, the whole company usually performs much better!

Spring Colds and Business Lethargy

Have you ever battled one of those seasonal colds that seems to set in just as the quarter changes? The kind that start out innocuously and, within a day or two, take over your body are the worst. With a stopped-up head, compounded by the medicine-induced slowdown of brain activity, perhaps a headache…you simply feel immobilized. Try as one might, even simple tasks require Herculean effort. Truly demanding focus–be it mental, emotional, or physical–wears out and leaves us exhausted.

In business settings, we can experience the onset of lethargy similar to the seasonal cold in cycles not unlike the changing of the seasons. Consider: when you finish your busiest season of the year, the week or so following can be extremely slow and unproductive; or a project comes to a close and your team is worn out; or your work group has just added a lot of new staff and some of your job is now done by others. While all of these situations seem to describe events that lead to a lack of work, what else can lead to job boredom?

Underemployment is a huge contributor to work environments in which employees (and management!) is under-motivated. How does this occur? Usually, when we take a position with an organization, we agree to a certain job description, rate of compensation and benefits package. However, we rarely talk about the career path, opportunity for advancement, and milestones that trigger promotion. If these items are discussed, they are discussed on the front end briefly because we read that we should. How can we keep the topic matter “front and center” throughout our relationship with an employer?

Much of it boils down to culture. Does your organization have intentionality/purposefulness about its culture? Is it “tuned in” to the needs of its employees, or only looking out for shareholder interests? While financial and accounting textbooks encourage us to only think about the “bottom line,” we all know that boring workplaces can be a downer and that culturally blase organizations lose talent, customers, and market share in the long term.

Either join a group that has a culture that values the employee, or be a change agent to help it become such! Speak with your supervisor, HR contact, etc about ideas that you have to enhance employee engagement. It has been our experience that, in many cases, executives have not only heard about progressive corporate cultures within their industry, but would like to have a reason to begin migrating in that direction. Keep in mind–“baby steps” are still walking! Perhaps you will be asked to join or facilitate an employee group to explore ways to make your office a better place to work. If so, you can escape the lethargy and begin to enjoy your avocation. Congrats to all who dare to embark on the journey from “medicine head” to lucidity!

Super Blues Day

When we are in a presidential election year, the first Tuesday in March brings a flurry of primaries and caucuses that are a strong influence in the nomination process. Often, the candidate who does exceptionally well on that date is propelled into a position of strength at the convention due to the results. The other candidates can be left “singing the blues” if their candidacy is negatively impacted by their showing. In many ways, business performance has its own “Super Tuesday” impetus.

The budgeting process in professional services firms can be likened to the Super Tuesday effort. Once per year, strategic planning leads to goal setting and the development of the financial plan for the upcoming fiscal year. Decisions are made to invest in recruiting, professional development, marketing, client development, client retention, and the other line items that constitute the operating accounts of the firm.

Champions of the first five listed disciplines are almost pitted against one another in vying for limited “discretionary” funds. The opportunity to articulate a business case for greater investment in the category of one’s specialty is a beauty pageant “won” usually by the fortunate individual(s) whose programs align with where the executive committee is motivated to invest. Those who do not receive the funding they would like are similar to political candidates who do not win enough states–their careers are not over, but they realize that they have suffered a setback that is visible to all.

To avoid the “bluesy” sense of winning and losing, firms need to become more savvy in the way they approach the process. Many firms with less than 50 total employees don’t have the luxury of having full time staff for even one of these very specific roles. There may be a generalist who oversees multiple categories (e.g. an HR director, firm administrator, or combo marketing and business development person), but not specialists with an experience base as deep as the billable professionals have in their own respective fields. What’s a firm to do? How about hiring the expertise on a fractional basis? In this modern age of telecommuting, contract workers, and flexible work environments, chances are high that one could secure insightful contributors without having to provide benefits or create a new full-time position.

The bigger challenge, however, is not simply getting professional (in their own field) leaders, but changing the strategic planning process to become more inclusive. Having these leaders participate earlier in the strategic planning process can yield great results for your firm. It may very well be that they would bring competitive intelligence about what other peer firms are doing. It is likely that they can sharpen one another’s areas by hearing what is of concern and passion. At the very least, they become more actively engaged stakeholders in the decisions that are made with regards to goals, budget and direction.

Avoid the post-budgeting blues by changing the way you develop your strategic plan and goals. Professionalize the management of your firm through intentionally building a team of smart leaders in the “back office.” Create the culture where your firm looks forward to your internal Super Tuesday season as a way to coalesce and build momentum!

Cultural Due Diligence Breeds Success(ion)

In a blog post (“The Human Side of Due Diligence”) of October 2011, Michael Bittle talks about the challenge of sizing up a company’s culture in the midst of a private equity transaction. Even if your team is savvy in its financial analysis, interviews customers and executives, and puts together airtight LOIs, he argues, you can miss the important undercurrents that are culture.  Too many companies are dressed up for a suitor, only to prove to look to good to be true.

A recurring drama plays out wherein performance swoons, key managers leave, and morale sinks as well. The investors scratch their heads and wonder what has happened. Enter the concept of the informal culture–what values, unspoken agreements, collaborative tendencies, etc existed prior to the transaction. Bittle argues that, in the heat of getting a deal done, that the quant jockeys often have neither the time nor the training to be extra discerning about these nuances than can be a company’s undoing.

In the Research Triangle Park, we are developing a national reputation for angel or venture-backed technology and life science start-ups that all aspire to make their commercialized product/service a household name. Along the way, they receive outside investment and some matriculate to a successful revenue path that ultimately leads to a liquidity event. Very few take an approach wherein the founders want to stay with the company as it matures. This can be good and bad. In the cases where the founder brought an academic mindset to enterprise, it is often better that professional management run the company longer term.  On the positive side, emotional bonds are built between employees 1, 2, 3 …and #50, #100, etc. These bonds create stability, a sense of community that can be disrupted by the introduction of outside ownership/management.

George Bradt, in an article in Forbes on February 8, “Corporate Culture: The Only Truly Sustainable Competitive Advantage,” takes the position that competitors, given time and money, can duplicate almost anything except culture. “In sustainable, winning cultures, behaviors (the way we do things here) are inextricably linked to relationships, informed by attitudes, built on a rock-solid base of values, and completely appropriate for the environment in which the organization chooses to operate.”

Organizational development principles can be brought to bear in the due diligence process if the consultant focuses on soft issues rather than concrete, easily measured ones. Whether an EQ assessment is administered to managers, or some type of DISC or MBTI with their direct reports, it can be helpful to understand who is the backbone of the company and how they may behave/make decisions. Transparency can drive smooth transitions if the former owners/executive team is willing to give the private equity/acquiring company access to employees earlier in the process. If people are made aware of the potential transaction and given an opportunity to design their own future, they are more likely to be/remain engaged in positive behaviors and outcomes.

Eventually, the first generation leadership will have to give way to new leaders, even if there is no transaction. The succession is more likely to be successful if the culture is aligned with the company direction through thoughtful interaction with employees and casting vision for how their contributions will continue to be needed. Such best practices are more likely to reinforce trust and a desire to build something great together.

Succession is Passing on Enterprise Capital

What Does It Look Like to You?

Usually, succession planning is done with the assumption that the family intends to pass a singular business to the next generation. But, in an article published in Family Business magazine (Summer, 2011, pp. 60-62), Greg McCann and Rich Morris encourage a different construct. Proposed is the thought that, instead of passing The Business down, the capital can be passed along. By capital, they mean:

  • Values
  • Knowledge
  • Professional Team
  • Financial Assets &
  • Family Legacy

Their perception is based on macro trends in the business world regarding innovation and the implications for privately-held (family-owned specifically) businesses in particular. Trends that are referenced include globalization, technology, and diversification. Combined, these trends necessitate greater innovation than ever before to stay competitive. “Traditionally, family enterprise has been thought of as three generations operating one business. In today’s marketplace, it’s wise to think about three business concepts for each generation to come.” (McCann & Morris)

What do they mean about three business concepts for each generation? The Family Firm Institute, in a study funded by FFI member Joe Goodman on family business longevity, found the following:

  • 10.6% of the families studied controlled only one business.
  • 21.3% of the families controlled five or more businesses.
  • Over the history of the participating families, they had owned an average of 6.1 firms.
  • The families added an average of 2.7 firms through M&A.
  • Over the history of the families’ business activity, their main industry shifted an average of 2.1 times.
  • Over the families’ history, they spun off an average of 1.5 companies.

If privately owned businesses can take note of these facts, different strategic plans will be developed. More focus on the entrepreneurial spirit of the founder, awareness of market shifts, adaptability, and resource stewardship will yield strong results that help make smooth succession a more realistic goal.