Sunday, October 3, 2010

6 Myths of Growing a Business

Verne Harnish of Gazelles included this list in his last email newsletter. If you don’t receive it, I highly recommend you get signed up. It is free and full of great content. I want to add my perspective to his observations. This is a great list for all of us to consider and think about. CEO type thinking – not what most of us typically do – but the kind of thinking we all need to do. We need to step back, get out of the day to day, and spend some think time on growth. It doesn’t happen accidentally. It happens when there is a plan, execution and discipline. So the listed items are Verne’s (in orange) – the running commentary is from me.

1. My margins will improve as my company gets bigger (normally the opposite happens).

There is a false perception that success comes with growth. That is not necessarily the case. In almost every merger or acquisition we have done, 1+1 does not equal 2, at least not right away. It takes time for economies of scale to kick in, for reduced overhead to cut costs, for improved efficiencies to drive more for less, and for cross selling new products and services to new clients to drive revenue growth. It is far from automatic. It is a lot of hard work and persistence. In my experience it is a 12-18 month transition if all goes well. That means you are able to overcome the biggest hurdle – culture conflict. Not all the new team will be instantly on board. Some never will be. Growth is good but don’t expect margins to jump just because you grow.

2. The folks running the big companies are smarter than us (truth, they are not -- your firms can easily beat the big guys)

Big companies are not smarter but they usually do have more resources. So the reality is that while they are typically slower and less nimble, they often do have much deeper pockets and more cash available which makes their ability to sustain difficult times or transitions better. We often struggle against big companies because they can outlast us – even doing the wrong things or a poor job – because they have mass. If managed properly they have a war chest of assets and cash that can help them weather storms that sink much smaller ships. So the key for us little guys is to be quick and nimble and beat them to the punch. That means we must be disciplined again to have someone doing CEO think – looking outside the day to day box to find the next opportunity – and then directing the ship to sail there ahead of the big guys. It doesn’t just happen by reading a trade rag or going to a conference. Someone has to think about it.

3. The company founder has got to go sooner or later, because the company is going to outgrow them.

Leaders don’t have to be replaced because a company outgrows them – at least if they are willing to grow at least as fast as the company. The problem many founders have is that they want to do the same things they did when they started. Keep their fingers in all aspects of the business, micro manage their people, make all the decisions, and control all the processes. That does not scale and does mean a collision will occur. But if the founder is willing to grow – to put on a new hat as the CEO and think differently – there is no reason he has to be replaced. That requires getting some training and coaching like he requires of all the rest of the staff. It requires setting goals and being accountable. It means doing things differently, but it can be done. It all comes down to a willingness and determination to continue to lead. A leader that does not learn will not continue to lead.

4. As CEO, you know what's going on in your business better than anyone else (you're really the last to know what's going on).

The CEO should NOT KNOW everything that is going on in the business. That is not his job. The CEO should think of most things happening in the business, provide support for the management team to execute those thoughts, and be the outside influence to keep the company moving forward. But a CEO that knows the business better than his team is not really acting like a CEO at all. This is a difficult transition for most of us to make. We have to move from being the center of the business to the center of the thinking. We have to move to being the center of the connection to the outside where new ideas and opportunities will come from. But we cannot hold on to the internal knowledge – that has to be passed to the management team.

5. Grow or die. (sometimes it's better not to grow -- remaining a "small giant")

This is an area that Verne and I may disagree on – although it is probably more semantics than anything. I find it impossible for a company to sit still. You are either progressing and moving forward or fall back. You can’t stay stagnant for long. I do agree that being a big fish in a small pond is a very viable option. We have tried to follow that strategy at HTS. Rather than grow into large markets, we have chosen to dominate smaller tertiary markets and drive our growth there. So growth can take many forms – you don’t have to add staff or locations or products or services to grow – you can just add more clients or go deeper with existing clients. There are many ways to grow. I do believe you need to be growing in some manner. It isn’t possible to stop time and just sit still.

6. Be a self-help junkie (actually, self-help is an oxymoron -- you can't help yourself -- the best business leaders have lots of advisors, consultants, coaches)

If you want to become a better leader for you company – you need help from others. Books are a great resource to learn new ideas but it is the discussion and sharing with others that brings those to life. There are many ways to do it – I personally believe a peer group like HTG is one of the best ways – but choose your approach and invest in some form of outside input. Actually combining several seems the most valuable to me. I like some group of community involvement like HTG mixed with some one on one consulting or coaching to get down to the real nitty gritty. In every case – the companies that are really knocking it out of the park are not living in a vacuum – they have continual input from others helping them learn to grow and lead.

Are you really growing your company? Or just fooling yourself? How about your life? Many of these same principles apply to life and legacy too. We have to really work at growth if we want to make it happen. The days of growth just happening because we open our doors each day are long gone. It is a very hard task to show continual year over year growth in any area. But bottom line is that it is a decision. You have to work hard to make it happen. You have to plan to be successful. It is a CHOICE plain and simple. It won’t happen accidentally – at least not for very long. I hope you will choose to work hard, plan and make it happen! HTG is there to help make that a reality in your life and company!

No comments: