Feeling disillusioned? Feeling overwhelmed and apathetic? How about ‘out of control’ as if you’ve lost your way. Having a hard time finding focus or solid ground on which to stand?
Welcome to the next generation of business!
Most small businesses can relate. For so long, business leaders and entrepreneurs have relied on their ability to work through problems, to see and create solutions with results where many have failed. This ability is essential to any successful venture and is often the root for why someone would take a leap into leading, running, building, managing, risking, starting a small business.
Has it been too easy?
Unfortunately, for the past 25 years, the solutions for business problems have not needed to be highly precise or accurate. Often, just making a decision created a modicum of success.
The reason solutions could be successful without precision is due to economic wealth being so great that solutions rarely created a negative economic outcome. The economy was so good that it was hard to make such bad decisions that a company would fail. Success seemed fairly ‘easy’ compared to today.
This perceived success has created one of the greatest issues facing business leaders. Whether a leader is leading a small or large company, the issues of the past 18 months have caused each to question their ability to make great decisions, to create great solutions where success does significantly influence the viability of the company – business life or death decisions and solutions.
Can the experts help?
So, the business leader looks to ‘experts’. They look to bankers, economists, the media (unfortunately), accountants, business consultants, operational experts (six-sigma types), lawyers, government, organizational designers, private equity, venture capital, business brokers, etc. Each of these has an interesting perspective, and possibly a facet of a solution. But interestingly, each of these have lost their way as well. None of them have a full understanding of the systemic nature of a business.
They are scrambling to understand ‘what’s next’.
The singularity of their solutions do not work in and of themselves. Since no one idea or person has ‘the formula’ or ‘the answer’, people start to feel lonely, unhealthy and they feel like the outline at the beginning of this post. They start or continue bad behaviors or habits like not reviewing financials, isolating themselves (hunkering down), become passive, become too aggressive; they will do anything they can do to prevent dealing with the real issues.
People are looking for hope. What people need is a new path and a new goal. The goals of the past no longer work. The way decisions were made no longer provide solutions that truly help.
We need to reset our perspective. We need a new direction.
Build a better foundation
Before I describe the First Step and the Real Goal, let’s outline a few of essential required attributes. These attributes are: humbleness, listening and authenticity.
Due to the success of the past, many business leaders have a sizable ego. They believe they are in control, they believe they know, they believe they should be able to figure this out. Stop trying. You can’t. The sooner you realize that, the better. Be humble and open yourself up to ask for help. Be open to the second attribute – listening. Go ask questions and truly listen. Don’t steer, don’t interpret to justify you. Don’t go looking for evidence to support your verdict.
Your motive in asking is to get great information, information not skewed by you (hopefully data driven where possible). If you have too much difficulty doing this or if the people in your business system cannot trust the change in you to open up authentically, then solicit help to show this attribute.
Lastly, embrace authenticity. Be consistent, listen to what people mean not what they say. Ask ‘Why’. Ask’ How’. Say ‘that’s interesting – share more’. Give people freedom to share authentically with you by being authentic with them. Truly hear them, repeat what you hear them saying and don’t, by all means, judge or assign value or show emotion to what you hear.
Just be real. And make sure you tell them ‘why’ you’re asking.
The start is getting real
Let’s get to some more meat. The First Step is – discover and embrace reality. Sounds simple but it seems to be the most difficult step for any business owner/leader to take. It requires the attributes above. It requires them to realize they can’t do it. It requires them to hear stuff (bad and good) about their leadership, outcomes about their decisions, and a potential reality that the company is failing.
This is much like a check-up. Imagine if you walked around all your life without going to a physician. At some point, something is going to happen where you will encounter catastrophic outcomes you can’t control unless you discover reality (go to the doctor) and embrace reality (label your real condition). Doing this activity will either:
- provide you with great support that your business and leadership is great, or,
- identify where your business and leadership has shortcomings.
The shortcomings may look like lack of sales, lack of funding, lack of good people, lack of customers who understand, lack of bankers who understand, a lack of funders who will not provide money because they don’t understand, lack of completed products or projects, lack of something. Many of these you may be aware of but often, the business leader’s view is significantly skewed and he or she is not aware.
Go and discover reality. Once discovered, embrace it before creating solutions.
The real goal is to be healthy
Keep your eye on an authentic goal – The Real Goal is to be healthy. Too often the goal of the business leader or owner is to be in control, provide and keep the current lifestyle, keep the same status as when times were good. Get past this quickly.
This is about business 101. Provide needed goods and services at a good price with a good experience. Make sure you are viable (positive monthly cash flow) and have a good balance sheet for your company. Don’t rely on the bank or investors for working capital until you are very healthy. Validate the relevance of the goods and services you supply, validate this with your vendors, your customers, your employees. Be humble, listen and be authentic. Define healthy for your business and focus.
Your ability to discover reality, embrace reality and set a goal to be healthy will give you the most important foundation for you now – it will give you a framework for a plan to get healthy. And it will be a plan steeped in reality, a plan you helped create with the people around you, a meaningful plan owned by you and your organization. It will be a well founded plan with options.
It will be a plan that will give you hope!
–Ken
The Foundation is Built on Authenticity
A meaningful trait people desire during a down economy is authenticity (I believe this is true for an up economy as well only it is easier to mask in good times). Let’s have someone look us in the eye and tell us truth. Let’s have them expose information and motive transparently. Let’s have them state their ideas but not their solutions – yet. Let’s have them ask for our participation for this will affect us significantly.
When time is essential, let’s have authentic leaders lead with trust.
In companies, in politics, in personal relationships, people are desirous for authentic leadership. Never before have we had so much information but so few with the qualities to interpret and use information in a meaningful way. If ever we’ve needed authentic leaders, it is now.
Thriving in the new era of Transparency
Authentic leaders are those who are motivated purely and can discover reality. They are sound in their knowledge and understanding about their business and lives. This soundness serves to provide a foundation for which they can operate. Leveraging this foundation, they use well founded abilities to oversee their businesses or lives based upon transparent information.
Authentic leaders are those who can dialogue. They engage and ask people to participate. They know they don’t know everything but they trust their ability to understand reality and learn. They trust their motive. They use dialogue to build trust and relationships. They use dialogue to discover reality about their business and those things which impact it. They use dialogue to create high quality meaningful experiences. The relationships they build produce commonality about how to weather good times and bad. They keenly understand the difference between hype and accurate meaning (they are hesitant to buy into their own hype). They understand they are in the same boat with their employees and families.
Making Better Decisions
Authentic leaders are those who can make high quality decisions. They have honed skills to listen, gather information, and interpret while validating using multiple sources of feedback. They have contextual awareness and understand the importance of the timing of decisions. Discernment is core and habitual. They can balance the tension between multiple forces and motives.
Authentic leaders are, well, authentic. No pretense here. Their motive is consistent and explicit. They hold themselves to a level of accountability they expect from others. They expect those they serve to hold them accountable. They will cut of themselves instead of protecting their own lives (they are sound in business and their personal lives – notice I’m not saying conservative). They know what they should know and they seek to understand that which they don’t know. They are confident they will listen. They are confident they will learn. They will serve.
Winning in a Down Economy
In today’s economic condition, basic economic principals reign – working capital and cash flow are king. The authentic leader will work diligently with his resources to understand the clear financial and business position of the business. They will work hard understand true risk.
Hoarding capital and being maniacal about cash flow and margins are essential. Unfortunately, too many companies do not have a business engine that can produce the required working capital and cash flow. Hence their great need to depend on debt. The authentic leader will understand if their business is on the side of the fence that can hoard capital and maximize profit or if they are on the other side of the fence where they must create less than desirable solutions to survive in this environment.
If the leader finds himself on the side with less desirable options, hopefully the leader will work to create authentic solutions (including the possibility of changing his or hers own lifestyle to cut burden on the company). Hopefully they will work to harness the power of people as a team to hunker down to save the company and employees’ jobs. If they find they cannot save the company, hopefully the leader will communicate reality well with all people involved so that these people will not be blindsided and unprepared.
I remember when Lehman Brother’s CEO, Richard Fuld was called in front of Congress and asked if he saw the failure of Lehman coming. His response is that of a gambler, someone with an addiction and in denial. He says that he had hope to the very end. And he will always wonder until his grave why Lehman wasn’t bailed out. We can’t afford leaders like this. We need authenticity.
Don’t hide from measurements
In addition to understanding the fundamentals of the business, leaders need to understand essential leading indicator levers which provide insight to some significant wave. Just like a tsunami, water is first drawn out to sea, we must understand these levers so we can take action quickly. These levers may be measuring AR turnover to see if key customers are not paying any longer or if they are just paying late. The leader must understand the only way to discover the deep meaning of this aspect of a business is through great relationships with people – employees, vendors, customers along with great information.
I recently had a conversation with a good friend who works for a large commercial developer. The conversation surrounded a new investment the firm created focused on short term returns. The company is having difficulty selling this investment because people can often discern inauthentic products. This product was communicated with hype. Customers are looking for authenticity. Under the covers of this company, the product was created to develop liquidity because lending has dried up. They don’t have needed working capital or cash flow to manage their current projects. Most importantly, leadership has not communicated this to staff. Instead they created pressure to sell a meaningless product which will hurt long term relationships and the core business. Additionally, they have stopped paying bonuses without any information to staff from leadership. In lieu of information, people speculate and people create their own story.
Authentic leaders provide authentic stories which stand the test of time. By the way, one of the core owners of this firm was overheard sharing that he is ok losing his home in the Hamptons, or his ski home but the one thing he cannot let go of is the private jet. The motive is pretty clear.
After understanding reality and core levers to oversee the business, the authentic leader will have a foundation in place to create multi faceted plans. These plans will differ based upon the reality of a business. For a healthy known company flush with capital with healthy margined cash flow, they can have multiple plans from protectionist to opportunistic. For the company with less desirable options, fewer authentic solutions exist. These options may be related to speaking with the employee base, core vendors and finance partners to create mechanisms to salvage the company.
Hope is not a Strategy
Hope is never a foundation for an authentic leader. I find it hard to comprehend how the NBA can cut 9% (or about 80 people) of its corporate workforce citing the current economic pressures. Granted, it is possible the NBA was bloated with people but 9% is hard to fathom. I’m estimating here, but 80 people at $50k per year is $4,000,000 per year. The mid level exception for one basketball player is $4.5 million. I sure wish we’d see more authentic leadership choosing to cut their own lifestyles instead of cutting employees only source of lifestyle (note: I’m not a believer of big government redistribution of wealth and I want people to have the right to choose but I’d sure like to see more people choosing social responsibility versus self serving entitlement).
Lastly, the authentic business leader will drive their company to provide higher quality experiences with their employees, their vendors and their customers. Often, quality doesn’t actually cost any more to produce. Have you ever eaten at a Chick-fil-a? Have you ever noticed what every employee says when you say ‘thank you’ or complete your order? They simply say ‘my pleasure’. They say this regardless if the store is next door to the owner or 3000 miles away. Do you believe it cost them anymore to require this of their people? I doubt it. However, I’ve seen the faces of people who enjoy being served and hearing the words – my pleasure – after they’ve been serving others all day. The overall experience increased but the cost of providing the increased quality was insignificant. Authentic leaders will drive increases in quality experience knowing this will increase the opportunity for the company to weather any storm.
Summary
In short, this is what I’m doing. Hoarding capital, maximizing margined cash flow. I’m making sure our people understand our core operational values. We’re providing focus to increase quality across the entire business. I spend quite a bit of time dialoguing one on one and in groups being diligent to provide consistent authentic messages. I’ve focused on lowering the number of vendors (within balance and risk tolerances) we use to build higher quality vendor relationships we can leverage in any negative case. I’m focused on building great relationships with our people, our customers and vendors in preparation for any hard conversation we may need to have. I have regular conversations with executive staff to better articulate and understand essential leading indicator levers – particularly those which indicate negative outcomes.
Lastly, I’ve communicated with staff that in the case of extreme negative conditions, I’m the first person to have my pay lowered or eliminated. No one else will be asked to take lower pay or be cut until my pay is lowered or eliminated.
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