The Entrepreneur's Mentor

To Grow or Not to Grow

Every organization with which I work has "GROWTH" as part of its vision of the future. And of course, the conventional wisdom is that growth is good and without growth you are standing still while everyone else is moving ahead, thus you are actually falling behind.

But, while everyone agrees that growth is good, "everyone" does not define "growth" the same way. The definition is critical to the success of the company.

Top line growth may give rise to an impressive gross sales figure, but it may be deceiving if the bottom line hasn't grown at least proportionately.  Would you rather be a $5 million company with a $1 million profit or a $10 million company with a $1 million profit? How much harder are you working in the latter case for the same result? What is the benefit of the additional $5 million in sales?

Granted, there could be a strategic reason for growing sales at little or no profit for a short period of time. It may involve capturing market share; or it may involve moving into new product or geographic markets at a high initial cost. It may involve increasing overhead and payroll to take the company to a much higher level where profits will be greater.

But it could also be vanity, or lack of focus on the right numbers.

What if you could stay at $5 million in gross sales but get rid of all of the accounts that aren't profitable and replace them with accounts that are very profitable. You can grow your bottom line without your top line. You can grow your market share of the most ideal customers, the most profitable ones and the ones that have the most potential for profitable growth.

Some businesses recognize that they will lose their "souls" if they grow beyond a certain size. They value their culture and their "family" atmosphere and do not want to lose them. Or they don't want to take on the investments in new technology or facility or machining or inventory that growth would necessitate.

Growth can be into adjacent geographic areas- new territories. Growth can be into new product lines. It can be deeper penetration into existing customers.  It can be new customers.

So, just thinking about growth in a generic way is not enough. Know what you want to grow and what it means to your business to do it.

Subtracting by Adding

 How many of us have made that key hire that we have been waiting to find for so long and have made the mistake of thinking that we have found the last piece to the puzzle? Sometimes we assemble a team one member at a time in the belief we are building something solid. We then hire the COO, or Operations Manager or General Manager that we feel will tie the whole thing together.

Wrong!!!!

Do sports teams hire the General Manager after the draft and after the team has made its additions and subtractions for the year, and expect the new GM to wokr wonders with players he had no role in choosing? They usually don't.

Even if the last hire, who we will call the COO for example sake, shares the entrepreneur's vision and values, he or she may not feel the chemistry is right among the team members. Or he/she may get a different feeling about certain individuals. If we trust our COO then, he or she needs some leeway in creating their own team.

Does that mean we allow our carefully chosen employees to be fired subject ot the whim of the new hire? No, of course not.

But it does mean that we have to be willing to listen to opinions other than our own, and hear the reasons why the COO believes certain individuals don't fit the bill. We entrepreneurs may have been blind to certain traits of some of our employees who were with us from the beginning or were good at certain stages of the company's growth. Some can only grow so far and we fail to see that they don't fit the company's current needs.

If an individual's success is going to be based upon the quality of work coming from direct reports, he or she needs some leeway in choosing them and developing them.  There may be some "untouchables" that have  a strong history of performance. There may be some that hold too much institutional knowledge to let go right away. The COO needs to be apprised of the importance of trying to make it work with these folks.

On the other hand, the entrepreneur that has built a company to a certain point cannot just turn over full control to a COO and watch him or her dismantle what has worked well just for the purpose of asserting total control.

Some of us have waited for years for the time to turn over operating control to someone else so we have time to strategize and think about the big picture. But, we cannot do so without a strong degree of accountability in place. The COO needs to understand that any move made needs to be justifiable and run past you.

I have had a COO fire my lawyer and end other long term relationships to put his own people in place. I gave him the space to do so without asking for his rationale. In the end, the freedom I gave him came back to haunt me.

Don't sacrifice your judgment just to give a COO room to operate.

Don't let a COO get away from being accountable to you for decisions taken.

Don't sacrifice your operating principles or values for this key new hire that completes the puzzle.

It is your company and don't forget it.

Always consider options and consequences.

Don't turn the desire to give up running day to day operations into total abdication. You could easily lose your kingdom.

And be careful not to diminish what you have by hiring one person to whom you give the power to bring you down.  Don't subtract by adding.

The whole is supposed to be greater than the sum of the parts, not less.

What Are Our Weaknesses?

Entrepreneurs tend to be optimists. We don't see the obstacles between us and the goal line. We typically just see the goal line.

We don't want negativity around us. We want people that share our vision. In some way, we are almost encouraging people to become clones of us. And while it might be nice to have everyone aligned with a vision and a set of values., it is not nice and not helpful and not even sane to have everyone align on competencies.

One of the joys of being our own boss is to get to choose how to spend our time and what tasks we get to perform. In choosing  our areas of responsibility, we are, in fact, also choosing those areas that we are abandoning. We have either decided that there are some areas of management which we do not enjoy; or there are some areas to which we assign a lower priority. In either instance, we either delegate those duties or ignore them.

If everyone else in the company is just like us, that would mean there is no one to delegate to. And that would further mean that important items don't get accomplished.

I had one business where my general manager/COO was enamored with the position I had carved out for myself. It was a combination of visionary, rainmaker, proselytizer, customer relations and problem solver.  He wanted to be just like me.  Well, guess what? The business did not need two of me (I'm not sure it even needed one) but it certainly did need a COO who was detail-oriented, operations-minded and penny pinching. We needed someone who watched the numbers (because I certainly didn't want to be tied to a chair and a spreadsheet.) and tightened expenditures. I was out there boosting the top line to new heights and I was counting on up to get us to a bigger bottom line. Well, he didn't keep his eye on the ball and I didn't keep a close enough eye on him- until one day it hit me what was going on.

He was the one with the MBA. He was the one with the background in the business I had purchased. And yet he wanted to be me. What was wrong with that?

The entrepreneur can choose to wear a number of heights. We all have closets full of hats. But, there are some that don't fit us and we have to make sure that somebody else is wearing them, and wearing them well.

I don't particularly care for finance. I recognize its utmost importance but it is just not my cup of tea. But for a business of mine to be a success, I have to have a strong, skilled, passionate finance person to look after our numbers as if they were just his/hers. While I and other entrepreneurs can probably be a jack of all trades, we are really only masters of a few. Make sure the other hats are being worn by folks that have the competencies and the attitude to master their areas.

In every large corporation, the C level has a number of executives-COO, CFO, CIO, VP Sales, VP Marketing, VP HR, etc. Which hats do you wear and which ones do you give to others?

Even if we know what we want to be doing, we also need to know that we do it well. While what we are good at usually becomes what we want to be doing, that is not always the case. We must make sure that we are competent and have the competencies for what we are spending our time on. We need to look at ourselves and be honest and objective- and we need to ask others who will give us an honest opinion.

We can't be blind to our faults and our weaknesses and thus debilitate our businesses.Where the right hats and make sure they fit. And be just as sure that the others in your company have hats that fit.