The Dangers of Fast Growth

 

At the Voice of Reason Consulting, Matt and I are always focused on growing our clients’ businesses. So last Sunday I was especially interested in reading Adam Bryant’s Corner Office article with the headline, “Why Fast Growth Can Lead to Trouble”.

I thought this would be especially interesting to the folks who know our work.

Having found his way in the world of start-ups, Matthew Prince, chief executive of Cloudflare, a cyber security firm, states that working at a start-up is almost like a drug. “There’s something very powerful about going from an idea on a piece of paper to enough money in a bank account to fund it, to building a team.”

However, in the process of growing, it became clear to him and his partners that with fast and significant growth, “a company’s culture can start to suffer because there’s nothing foundational to keep you stable.”

According to Mr. Prince, an organization should not grow faster than doubling in any 12-month period. He reasons that if one succumbs to the constant pressure to grow faster, there may not be any culture-keepers left in the organization. If this happens, I believe a company without a meaningful culture will not achieve its goals.

As always, I welcome your comments – do you believe it is a significant problem to grow a company too quickly?

Motivating people is both a science and an art!

Since the tag line for Voice of Reason Consulting is “We Turn Business Owners into CEOs”, I was absolutely drawn to an article about “The Science of Pep Talks” by Daniel McGinn in the July-August 2017 issue of the Harvard Business Review.

McGinn postulates that the ability to deliver an energizing pep talk that spurs employees to better performance is a prerequisite for any business leader, and I believe is also a key factor in judging a CEO’s performance as the leader of his/her company.

Motivating people is both a science and an art! According to the science (MLT- motivating language theory) most winning formulas include three key elements: direction giving, expressions of empathy, and meaning making.

The Mayfields, a husband/wife research team from Texas A&M University describe “direction giving” as providing information about precisely how to do the task, giving easily understandable instructions, providing good definitions of tasks, and letting people know how their performance will be evaluated. “Empathetic language” is showing concern for the person as a human being, and includes praise, encouragement, gratitude, and acknowledgment of a task’s difficulty. “Meaning-making language” explains why a task is important. This involves linking the organization’s purpose or mission to listeners’ goals.

Bottom line, a good pep talk—whether delivered to one person or many—should include all three elements. It’s the job of the CEO to know the context and the audience in order to determine the right mix of these three elements. Once leaders and CEOs understand these three elements, they can learn to use them more skillfully.

I urge you to read the entire article and let me know what you think.

 

“No” is Critical to Success

A few weeks ago, my partner Matt Plociak and I got together with two of our former Netlan employees, Rick Freedman and Charles Bernard who respectively for many years are very successful business owners and consultants in technology and sales.

Of course, it was great to see them, and since we share so many similar beliefs about marketing, sales, consulting, entrepreneurship, and business, we started to talk about the books that have inspired us, and lo and behold, we each had a reading list and assignments for our next get together.

First on my list was “Never Split the Difference: Negotiating As If Your Life Depended On It” by Chris Voss. Chris is a former FBI lead international kidnapping negotiator and is the CEO and Founder of the Black Swan Group, a consultancy that brings the lessons learned in hostage negotiation to business people who need to negotiate, persuade, or influence, which sounds like just about everyone.

I’m finding the book a fascinating and very informative read, and most recently I read A Black Swan Group blog entry by Derek Gaunt, on “Why It’s Important to Embrace No’”.

As a Sandler Sales disciple, I am very familiar with “Going for the No”, and I use it as a technique quite often in my approach to sales.  I was very impressed to learn that  “Going for the No” is actually used in hostage negotiation as well.

Derek’s point is that although No in any difficult conversation may be interpreted as an insurmountable obstacle, it is in fact the first step towards, collaboration, compliance or acceptance.

The folks at the Black Swan group believe that No is used for protection, or rejection, and it usually represents confusion and fear on some level. “Another interesting psychological aspect of accepting the No, is that it triggers reciprocity. Once people feel that they have protected themselves, they are often more willing to listen. They are not worried about what they have exposed themselves to by making an unintended commitment in saying Yes.”

So if hostage negotiators have no fear of No, and actually embrace it as a means to get to Yes, one can only wonder how effective it might be in the worlds of sales and business.  I know it works, do you?

25 Common Characteristics of Successful Entrepreneurs

 

Since Voice of Reason Consulting’s tag line is, “We Turn Business Owners into CEO’s”, you can easily imagine that I was quite intrigued with this video and article by James Stephenson listing the “25 Common Characteristics of Successful Entrepreneurs”.

Stephenson maintains that there are certain musts that business owners have to develop and implement for their business to succeed. I’ve taken the liberty to reorder the list in what I think are the most important traits to have.

I’m curious what you think. Must a successful entrepreneur have all of these traits at once? Which ones are most important? I look forward to hearing your comments.

  1. Do what you enjoy.
  2. Take what you do seriously.
  3. Invest in yourself.
  4. Take time off.
  5. Get involved.
  6. Manage money wisely.
  7. Master the art of negotiations.
  8. Get and stay organized.
  9. Plan everything.
  10. Follow-up constantly.
  11. Be accessible.
  12. Become known as an expert.
  13. Build a rock-solid reputation.
  14. Limit the number of hats you wear.
  15. Build a top-notch business team.
  16. Grab attention.
  17. Project a positive business image.
  18. Create a competitive advantage.
  19. Level the playing field with technology.
  20. Design your workspace for success.
  21. Remember it’s all about the customer.
  22. Get to know your customers.
  23. Become a shameless self-promoter (without becoming obnoxious).
  24. Sell benefits.
  25. Ask for the sale.

 

 

 

Private Equity Growth Indicators

A current theme that continues to occupy my interest is how private equity/venture and angel investors view businesses and judge CEO’s. In a recent post, I discussed a Stanford Business Graduate School study “How Do Venture Capitalists Make Decisions?” that showed that venture capitalists who are considering investing in entrepreneurial ventures, are most interested in entrepreneurs who are passionate, capable, experienced, and part of a strong team.

In this particular article in the Sales Benchmark Index Blog earlier this month, Matt Sharrers discusses the growth indicators a private equity firm expects. He points out that the end of first quarter is an ideal time for private equity firms to check each of their portfolio company’s growth rates, including sales and marketing performance.

According to Sharrers, private equity firms are most interested in implementing an agile sales and marketing strategy focused on results. Q1 is a decision making time to validate prior assumptions as well as the actual results, and most importantly make new decisions as necessary.

Leading indicators include whether sales and marketing are working in lock step and whether sales and marketing are enabled to hit their growth milestones.

Of course, private equity firms are very wary of red flags that exclude win/loss analyses, provide inaccurate market feedback, and show a lack of confidence in Q2 forecasts.

In particular, the CEO must demonstrate that sales and marketing are always in alignment, and there is always a clear plan to execute strategy and do it quickly. As I have often said, the CEO’s job is to provide value for the business, and you can rest assured that the job of the private equity firm is to ensure that value is being achieved.

What kind of CEO do you want to become?

 

As many of you know from my previous posts, I often comment on Adam Bryant’s pieces in the New York Sunday Times column, The Corner Office. I read the column weekly because I am fascinated by what drives business owners to become CEO’s, how and when and why did they become a CEO, what are their opinions, what are their management styles, how do they think, how and why and what types of people do they hire, and what are the trends they follow.

I was particularly intrigued with the headline of this piece about Tien Tzuo, founder and chief executive of Zuora, a software company for subscription businesses which was, “Don’t Expect Me to Manage You.

Obviously, every CEO has a different style and approach. Mr. Tzuo prefers being a leader, not a manager, and expects his employees to manage him. He says, ‘Don’t expect me to manage you. You have to manage me.” And, he doesn’t do performance reviews. “What I found was the one-on-ones just became this laundry list of issues. And I want most of the issues exposed in a team environment, because most of these things have to be worked out in a group setting.” He believes that if his team members want feedback, they have to ask for it, and then he’ll give them as much as they ask for!

I have to say I find Mr. Tzuo’s approach fascinating, and I’m not sure his leadership and management style is for me, nor can I, nor do I recommend that approach to my clients. I believe that a CEO must lead by example, and I also believe that the CEO needs to seek out his team members as much as they need to seek him or her out. Leadership and/or management is not a one way street.

I am always interested in what my readers think . What kind of CEO are you? What kind of CEO do you want to become? What kind of CEO do you want to work for? Please forward me your comments.

How Do Venture Capitalists Make Decisions?

The other day I came across one of my favorite newsletters from The Stanford Business Graduate School, and in particular the subject line “Do Funders Care More About Your Team, Your Idea, or Your Passion?” intrigued me to read on.

In a study co-authored by Stanford finance professor Ilya A. Strebulaev, “How Do Venture Capitalists Make Decisions?” The findings seem to indicate that Venture Capitalists who are considering investing in entrepreneurial ventures, are most interested in entrepreneurs who are passionate, capable, experienced, and part of a strong team.

The survey included 885 Venture Capital professionals at 681 firms, and asked the VCs to identify the factors that drove their investment selection decisions and ranked them according to importance. The abilities of a founder and his/her management team are the most important factors driving investment decisions, and even more important than the product or technology itself.

The average investor evaluates 200 companies a year and invests in just four. Each deal takes an average of 83 days to put together, which includes 118 hours of due diligence and Strebulaev says that “Venture Capitalists gauge an entrepreneur’s passion level by their commitment of time, effort, and money to their idea. “

The study was structured in a way that enabled researchers to better understand how different types of venture capital investors approach their decisions. They found that information technology investors tend to be interested in an entrepreneur’s management team, while health sector investors are more interested in products and market forces.

If indeed you have the time, I strongly recommend downloading the complete study HERE.

As usual, please email me your thoughts and comments. I guarantee you a response!

What is Fun at Work?

Shreya Gupta

 

I was perusing through the Sunday NY Times, Business section a few weeks ago and I was intrigued with the headline, “At Work, Focus on the Fun”.

(Read full article here

Reading past the headline, I once again read the statistic from a recent Gallup poll that two of three working Americans do not feel engaged at work.

Actually, I can relate to that statistic as I experienced that for a considerable period of my early work experience. And then something happened – I started my own Company with a partner, and my life and my work was never the same again.

What was it that made the difference? I think it was that I found what I did was not only challenging, but also incredibly interesting, and inevitably fun.

So what is fun at work? In my opinion, it is believing that what you do does make a difference, and that being fully engaged in the process of whatever you do does matter, and seeing the impact of your efforts, despite everything that can and does get in the way, can indeed be the difference of having fun at work.

The article makes some interesting points on how to make work fun:

  • Making friends and establishing comradery with coworkers
  • Breaking the routine
  • Shifting one’s mindset to focus on the positives of one’s jobs instead of the negatives
  • Making one’s goal the process of doing the job and completing all the necessary tasks

Most importantly, I agree with the statement in this article, “…that people feel energized when the process of doing something becomes the goal of doing it”. For me, I found this very satisfying and inevitably have made work more fun for me.

Once again, Veronica Rao was helpful in my gathering my thoughts to write this piece. And, as always, I do appreciate your comments and feedback.

CEOs Set the Tone

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As you probably know by now having read my posts in the past, I am fascinated about how business people become CEO’s, and what they must focus on if they are to succeed at doing their job.

The other day, I was reading Adam Bryant’s Corner Office column in the New York Times, (read article here) and I really resonated with Blake Irving’s (CEO of GoDaddy) comment that “…when you’re the C.E.O., you get to set a tone from your seat that’s different than if you’re working within an organization. That ability — to actually shape the culture, talk about the things we’re going to do, how we’re going to treat each other, what we want our values to be — is different. I didn’t realize it until I was in the seat.”

Creating a culture that motivates, and inspires people to drive the business forward may be equally critical to driving revenue if the CEO is going to be successful in increasing the value of the business, which should be the goal of every CEO.

As always, I look forward to receiving your thoughts and comments.

97+ Experts on Driving Small Business Growth

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Check out my article “Growth Means Turning an Entrepreneur Into a CEO”  alongside dozens of other expert contributors in Recalculating 97+ Experts on Driving Small Business Growth.  We were each asked to write special 1000-word contributions for the book based on our expertise.  Topics covered are: Leadership, Finance, Marketing and Sales, Human Capital, Operations and Technology.

You can purchase the book on Amazon in either Paperback or the Kindle edition HERE.

As I have often said in my talks, and as I conclude in my article, ” In my experience with hundreds of clients, I’ve found that whether one chooses or not to grow the business, the principles of systematizing, being deterministic, and increasing value for the business still hold true for any business, and becoming a CEO may not be a choice after all.”

I look forward to hearing your thoughts.